Built to Exit

Originally posted on StartupNorth.

Image by konstriktionIs a company that is built to exit the same as a company that is built to flip? Not in my opinion. Understanding how to build a company that is attractive to a potential acquirer can help entrepreneurs understand how to build product suites, acquire customers and pick technologies.

Possible Exits

Entrepreneur.com list five (5) possible exit strategies:

  1. The Modified Nike Maneuver: Just Take It (basically preferred shares that pay a huge dividend)
  2. The Liquidation
  3. Selling to a Friendly Buyer
  4. The Acquisition
  5. The IPO

For me, #3 and #4 are almost identical. And #2 is not something you should aim for just staring out. Liquidation is something that happens at the end of your business. Whether it is something that happens in bankruptcy or other it is not a useful model when you are trying to grow a business. So if you merge #3 & #4 it leaves you 3 realistic exit strategies. This is not rocket science.

  • Operate profitably
  • Get acquired
  • Go public

We know what the IPO market for tech companies looks like. That leaves companies with 2 choices. Build a profitable business or get acquired.

When I talk to startups everyone seems to think that acquisitions are a dime a dozen. That even based in Toronto, Montreal, Ottawa, Waterloo that they are prime acquisition targets for Microsoft, Google, Oracle, Cisco and other Valley companies. Which surprises me! Sure all of these companies have done Canadian acquisitions, they are the exception and they are done for very specific reasons.

Why acquire a startup?

Benjamin Kuo talks about the takeaways looking at the acquisition deals done by Google, Microsoft and Yahoo. The other companies that have done a lot of acquisitions include Oracle and Cisco. Summarizing the 2007 Microsoft acquisitions including Multimap (mapping), Global Care Solutions (healthcare), Palarno (enterprise chat), AdECN (advertising network), aQuantive (public traded – advertising tech), TellMe Networks (mobile voice solutions), and Medstory (health search), he concludes:

Key takeaways from this, at least if you want to be acquired by Microsoft: you really need to expect to be in business for at least seven to 10 years; you need a lot of traction and a product that people have been using for awhile; enterprise software is hot, consumer web services are not; and you need to have a fit to their strategic plans.

Companies get bought for a variety of reason:

  • technology;
  • customers;
  • people/talent;
  • the scale for monetization offered by a corporate giant.

It starts to make a very short list for entrepreneurs about what’s important regardless of the type of exit you’re looking for. You need to have technology, customers, the right talent and a path to monetization. Companies are looking for technologies that solve problems with shared customers and that round out their offerings (then there is a the whole question about do we build it or buy it). They are looking for great teams of engineers, sales people, designers, i.e., the talent. And often large public companies bring a scale and access to market and manufacturing that are just not available to startups without huge amounts of cash. 

Does this all sound familiar? It’s pretty similar to investment criteria. There’s nothing wrong with building defensible technology that solves a problem for customers with a team of rockstars on a common technology platform.

Comments at http://www.startupnorth.ca/2009/06/11/built-to-exit/

Community lifecycle

Gordon makes reference to the customer lifecycle to as a method for thinking about the participants in community activities. Bruce Clay and Janet Ryan elaborate on the buying continuum:buying-model

  • Reach – Claim someone’s attention
  • Acquisition – Bring that person into your sphere of influence 
  • Conversion – Turn that person into a paying customer
  • Retention – Keep that person as a customer
  • Loyalty – Turn that person into an advocate

This model is tied very tightly to customer purchasing behaviour and presents a model for marketing to customers. It applies to community, but a lot of metrics are different. Most of the metrics are tied to purchasing behaviour. 


Early in the launch of TorCamp and DemoCamp, reach was a primary goal. By identifying key people who I wanted to participate, i.e., in social marketing speak the influencers, you just create vanity links to them. The other big challenge early in starting DemoCamp was fairly nerd-oriented using only RSS and a wiki for the initial planning and organizing of events and activities. This probably reduced the understanding of what the community was about and the ability for non-techies to join in the conversation.


  • Advertising
  • Blogging in particular vanity linking for key influencers
  • Commenting on other blogs
  • Participation on other sites
    • Twitter
    • Facebook
    • Flickr
    • Slideshare
  • Common Tagging
  • Podcasting


This is making the content accessible and understandable to a large audience.

The efforts here

Tactics and Tools

  • Low cost and low effort event registration
    • Free for new attendees, pay what you can
  • Open participation format


In the TorCamp and DemoCamp world, conversion is less about creating paying customers but about getting people to an event. This has included a very simple mantra of “build it an they will come”. By drawing a line in the sand, i.e., finding a venue and hosting an event the idea was this was an actionable item that people could begin their participation.

Tactics and Tools

  • Low cost and low effort event registration
    • Free for new attendees, pay what you can
  • Open participation architecture
  • Mailing list signup
  • RSS subscription
  • Shared event calendar
    • Make it easy to find out when events are happening


In the case of DemoCamp is pretty simple, get people to return to a future event.

Tactics and Tools

  • High quality content and invited presenters
  • Personal connections to existing community members
    • Community ambassadors
  • Shared event calendar
    • Make it easy to find out when events are happening


Loyalty is a challenging activity. As part of the DemoCamp activities this has been embraced by 2 primary activities, “tell someone that you think should attend the next DemoCamp” and it’s “the derivatives that matter most”. We focused on the early DemoCampToronto events by making sure people were encouraged to invite others. Also embracing events and groups that are separate from the original vision including CaseCamp, MoMoCamp, FacebookCamp, DrupalCampToronto and others.

Loyalty is what drives reach.

Tactics and Tools

  • Create advocates and evangelists that invite others to the event
  • Blogging, photos, podcasts, etc. using common tagging by attendees
  • Create new events using similar format and DNA