To Be Or Not To Be Acquired - That Is The Question

07/12/19 • 37 min

The guys talk about their experiences with offers to acquire Honeybadger and go over some common structures of acquisition deals (hint - most don’t involve walking a wheelbarrow of money out of your office and never returning). They also chat about things that you should think about if you are presented with an offer to sell your company.

Links:
GitHub

Tropical MBA, Before the Exit

MicroConf

Honeybadger

Full Transcript:
Starr: 00:01 It's happening in me. I'm going to remember you silver lady, so don't you worry.

Josh: 00:08 You'll find her some day.

Announcer: 00:10 Hands off that dial. Business is about to get a whole lot nerdier. You're tuned in to FounderQuest.

Starr: 00:21 Somebody tweeted a while back and somebody referenced us and said that we should talk about this. You know, you should run your company like you're going to sell it. So then I thought, "Well maybe we could talk about sort of acquisitions in general, maybe weave it back and forth."

Starr: 00:33 So Honeybadger has had a couple of fairly serious acquisition talks, none ongoing right now, none that panned out obviously. We're not going to name names because I think it might be illegal for us to because we signed stuff. The first one was with a private equity firm that specialized in sort of smaller companies and taking these companies built by developers and then bringing in business people and figure out how to grow them. And then we had another acquisition talk with a pretty well known company in the developer space, and that would have been kind of a strategic thing because they were kind of trying to bring something to the market that was very similar to what we did. And sort of both of those eventually fell through because we just couldn't really come to terms.

Starr: 01:15 But I think we learned a lot while we were pursuing these because starting out I knew about acquisitions, like what pretty much I imagine anybody knows about acquisitions. It's like, "Okay, you sell a company, you make a ton of money, and that's like your happy ending." But it's really a lot more complex than that. Unless you happen to win the lottery, it's not necessarily like this huge, "You're going to be rich and set for the rest of your life event."

Starr: 01:40 Yeah, so I don't know. What do you guys think?

Ben: 01:44 I think that last statement is key. Our business has grown steadily, but not exponentially right? So, if you're sitting on a rocket ship you could probably have one of those acquisition events where you're set for the rest of your life because they're buying based on the future value of the company. They are not just based on what you've done so far, they are based on what they think you could do with them, combined with you. If you have had this exponential growth event, or if you can show that happening with their added resources to yours, then you could probably pull that off. But in our case, that wasn't really the scenario, right? We were growing steadily, the acquirers were interested in us because they knew that it was a reasonable business that could continue to grow, but not that it was expecting like this phenomenal growth. Yeah, so in our case those numbers weren't going to be crazy high numbers, but they were still nice numbers.

Starr: 02:47 I feel like this is kind of a theme in our podcast, in that the way that most people probably think about acquisitions is focused on the VC model of startups and fundings and acquisitions. In a lot of our episodes we're like, "Okay, this is the VC way of doing things," but that's not like the way for everybody. The sort of VC acquisition model that everybody has in their head is, "Okay, you start this company. Your company has a ton of growth and it targets some market that is adjacent to a big, big company. And that big, big company doesn't have their eye on this sort of little market. Maybe they don't realize how much opportunity is there, but then this little plucky startup comes and exploits that, gets crazy growth, and now you have this little company who is kind of edging in on the territory of a bigger company. And so the big company buys the little company in order to get access to that market." I think that's the most common approach. I mean sometimes the bigger company buys you because you've developed some crazy new technology that they couldn'...

Links:
GitHub

Tropical MBA, Before the Exit

MicroConf

Honeybadger

Full Transcript:
Starr: 00:01 It's happening in me. I'm going to remember you silver lady, so don't you worry.

Josh: 00:08 You'll find her some day.

Announcer: 00:10 Hands off that dial. Business is about to get a whole lot nerdier. You're tuned in to FounderQuest.

Starr: 01:40 Yeah, so I don't know. What do you guys think?

Previous Episode

What Does The Ideal Remote Office Look Like?

This week the guys talk about their office equipment and remote workspaces which range from working in a winery to building a standalone office in a backyard. They also go full old cranky developer mode on the new office paradigms and warn the youths of back issues stemming from working on couches and bean bags. Don't get them started on open floor plans or unassigned desks! Learn what has, and hasn't, worked for each of the guys on their quest for the perfect coding space.
Links:
FogBugz
Joel Spolsky
Joel Spolsky's Blog - Bionic Office
Hint
ErgoDox
Regus
International Residential Code
Full Transcript:
Starr: 00:00 So you just got out there and you reached a moment, you reached a point of decision, and you decided I'm just going to keep going.

Ben: 00:07 That's right, yep.

Starr: 00:08 Yeah, all of us I think dream of that.

Announcer: 00:10 You are in a maze of twisty little passages, all alike. Time to start a fire, crack open a can of Tab, and settle in for FounderQuest.

Starr: 00:22 And sometimes it's like you go out to buy some milk for your child, or whatever, it's like I'm just going to keep driving. Just keep going. Really. No, I love my child.

Josh: 00:33 Before I became a father, you always hear those stories like, dad went out for a pack of smokes, never came back, and I'm like, "How could people do that?" But now that I'm a dad, like I totally get it.

Starr: 00:43 Yes, it's not ...

Josh: 00:46 I mean it's still wrong.

Starr: 00:47 It's very wrong, but it's like I understand the sentiment a little bit better.

Ben: 00:53 Of course, my keep going moment just happened to be when I was doing a loop, so I don't know what that really says about me, but ...

Starr: 00:59 Oh, that's deep. We're getting really into the weeds now.

Ben: 01:03 So how's your shake coming, Starr?

Starr: 01:06 It's coming pretty well. Maybe we should ... Should we talk about offices work environments and then we can save it for the podcast? Save it for the-

Ben: 01:14 Oh, yeah. That's a good plan.

Josh: 01:15 This is the podcast.

Starr: 01:18 Holy shit, Josh.

Josh: 01:19 Did I just blow your mind?

Starr: 01:21 You blew my mind.

Ben: 01:22 Because we just fix it all in post around here.

Starr: 01:28 We do. Yeah, actually since we're restful, wouldn't we fix it all in put?

Ben: 01:36 That's deep, man.

Starr: 01:37 Yeah, that's a bad ... That's like a combo, like a dad joke or something. All right. So today I think we're going to talk about offices and work environments, which is, I mean we don't really have offices here at Honeybadger headquarters. Honeybadger headquarters is more of an idea than a place, I think.

Starr: 01:57 Each of us has our own customized work unit in the place of our choice. We all set it up to achieve maximum efficiency. And so I thought it might be fun to talk a little bit about that. It's like what do we like in an office? What don't we like in an office? Do you think we'll ever have a big Honeybadger open floor plan office?

Ben: 02:21 No.

Starr: 02:22 No?

Ben: 02:23 Never, no.

Josh: 02:24 If we had an office it definitely wouldn't be open floor plan.

Ben: 02:27 Do you remember the business and software forums back in the day with Joel, and he had this ... When he wrote his blog, he had some awesome stuff about making an awesome development environment, and he had this one about his office space. So they had office space, I think it was in Manhattan, and he went into great detail about how they made it perfect for developers and he just-

Starr: 02:52 I realize that. I remember that.

Ben: 02:54 Do you remember that blog post?

Josh: 02:55 Yeah.

Ben: 02:55 And he talked about how each developer had their own office, with a door, and I believe all of them had exterior light, like they all had an exterior window. And I remember him describing it. They had to angle the walls in a certain wall so they could all get a little sliver of window. Anyway, reading that-

Starr: 03:13 This was at FogBugz, so Joel Spolsky, FogBugz.

Ben: 03:13 Yeah, that was FogBugz, yeah. Yeah. So after I read that I was convinced, yep, that's the way to go, that was the gold standard right there. So I determined that I would never be happy in an open space ever again.

Josh: 03:27 Well, I currently am in an open space because my other company, Hint, which is a software, Ruby consulting shop. I'm the only one who likes closed off...

Next Episode

We're Going on Summer Vacation!

The guys are taking a few weeks off from podcasting to enjoy the fleeting Pacific northwest summer. They'll be back in late August or early September, fully rested and ready with hot takes to warm you as summer turns to fall.