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Ask HN: 250MM Acquisition Instead of $10MM?
13 points by AcquisitionNoob 8 days ago | hide | past | favorite | 14 comments
I'm finishing development of the flagship product for my new sole-founder fully-bootstrapped startup in the USA (no outside funding). I currently have enough knowledge about business, relationships, accounting, etc. to take this startup to an acquisition valuation of around $10MM USD in 5 years. In other words, I can sit and write down all of the detailed steps that I would execute over the next 5 years in order to make that happen. I can do that because I have enough knowledge and indirect experience to come up with those steps by thinking really hard. This knowledge and experience comes from running an ongoing small software engineering consultancy with a revenue of a few million per year. Actually identifying and then executing the steps for a $10MM valuation will be a challenge for me, but I believe with high confidence I have the capability to do so.

But here's the thing: I think someone else could take the same product and write down the steps to turn it into a $100MM or $250MM acquisition instead of a $10M acquisition. Same starting point - very different ending. And I predict, very different steps.

ASSUME that it's a successful product that COULD result in a $250MM acquisition. My problem is three-fold:

Problem 0: I'd like to perform the steps necessary for a $250MM acquisition;

Problem 1: I don't know (and can't derive by thinking really hard) the steps necessary to make that happen;

Problem 2: I don't know the subject areas to study and learn in order to be able to derive the steps for Problem #1.

This is a problem of education, not a problem of intelligence or capability.

So, I would like to Ask HN: What specific subjects should I learn that would lead me down the right path? Which of these subjects should I do a deep-dive, and which should I do a shallow-dive? Please help me solve problem #2 so that I can solve problem #1 myself, so that I can then execute and solve Problem #0 myself. (Any non-trivial suggestions for Problem #1 are also welcomed)

Also, am I even asking the right questions in this post? Am I correct to focus on education, or should I focus on something else such as building new kinds of relationships (if so what kind)? What sorts of questions should I be asking instead of the ones in this post (and what are the answers to those questions)?

Thanks in advance to all that reply!

> I'd like to perform the steps necessary for a $250MM acquisition;

OK, first, perform the steps for $10M.

The steps to get to 250 do not begin differently than the steps to get to 10. So first get to 10. While you are on the way, research getting from 10 to 100. While you are on that path, research getting from 100 to 250. The best growth patterns I've been a part of always had that approach - have a long-term vision, but execute one step at a time.

It's sort of like saying how do you beat Manchester United? Just kick the ball into their net a few times.

The steps are all the same. You kick the ball accurately. You show up for practice. You improve. You do a post and pre match analysis.

The only difference is how well you do those steps.

I think what a lot of newbie companies do is they try to be too clever. A newbie football manager thinks they can beat a superior team with better tactics and then neglects the training. The newbie startup thinks they can plan and growth hack to success and then forgets to find real customers.

If you haven't done a $10M or even $1M acquisition before, are you sure you know what you need? But ok, I'll bite, lets assume you do know.

You're saying "acquisition price", but let's just call it a valuation. Sure, they aren't exactly the same thing, but it's a fair enough proxy.

So, first off, take a look at what you're building. Can you list companies that would want to purchase it for $100M+? How many companies are in that list? Now, look at the financials of those companies, how many acquisitions have they done that are in the range of $100M? What did the companies they acquired at that price look like? Why did they pay what they paid?

Now, look at your product, and the potential market size, do you see similarities between companies that have been acquired by your target acquirers? Is the market you're targeting even big enough to offer enough value to these potential acquirers? If it is, how large does your company need to be to get that acquisition value? Or what edge does your company need to have?

Based on the information you have on this search, you now know what companies you may be targeting, what they've bought in the past, and you can start building relationships with these companies.

I'm going to suggest that almost no company gets bought without a relationship in place. It doesn't mean that you're partners, but you're unlikely to get a call in the middle of the night from a stranger asking to buy your company. It just doesn't work that way.

Acquisition valuation can be based on multiple factors, typically the acquiring company would be looking at either:

A) potential value - if the tech is innovative and novel but the company is not necessarily making a lot of profit, they may have a business plan to leverage the tech to generate more profit

B) actual value - the tech and company is mature, profitable and has an actual ROI value that can be calculated based on sales, revenue, margins etc.

They would also include:

C) team value - the company has a strong team and the value of the management and employees is considered

These are areas I would consider in your plan. In terms of what to learn, I would focus more on building a successful product that helps your customers, than focusing on the acquisition exit goal. You will have time to figure out how to get there when you've proven that you have a valuable company.

$100m+ acquisitions are rare happen by luck or done by unrelated entities.

It's essentially legal money laundering with pre-negotiated kickback-style relationships where all parties are on the same side of the table regardless of how it looks to unaware.

So having connections - OR hiring someone to facilitate the transaction via pre-existing connections can greatly accelerate the process.

Stop thinking of it in terms of selling a business but focus on growing the revenue or selling the product. In other words make something people want, 25 times more. The obsession about acquisition price before you even have a product shows you're more interested in making money for yourself than helping others solve a problem. If you sufficiently help others solve their problems you'll likely to be rewarded accordingly.

So if you plan to build a product and charge $10/mo you'll need to have 30,000 active users to sell the company for $10m using a common 33-month revenue multiple. So once you have 30k customers add 720k more to get to $250m.

"In other words, I can sit and write down all of the detailed steps that I would execute over the next 5 years in order to make that happen"

Unless you're already making $1 million in ARR, your cockiness is already a sign that an acquisition probably is unlikely to happen. Many founders who get their startup acquired almost always have this feeling of "Wow, I worked hard, but there were definitely no guarantees and a lot of luck involved". Sorry, but there is no guarantees in startup life.

I recently talked with founders who went through acquisitions, inculding ones by megacorps. They might have insight into how to navigate through this.

Can you send me an email (my email is in my profile) and I'll try to connect you if they're open to this?

I must talk with one of them in a moment, would you like me to mention this?

I can also try to connect you with people from the puchasing side (people who operated, and executed, multi-billion dollar acquisitions and companies)

Someone could take it make one call and sell it for 250m. You could sell it for 10 m. Someone else could get 50,000.

I think you are asking the wrong question. Your questions should be either:

How do I get the guy who can sell it for 250m to sell this


How do I become the guy who can get 250m.

If you think someone can build it differently to get to 250m find out who and bribe,hire,copy and learn from them.

A $250mm sale is lottery type sh+t. u can't plan it. 1:1mm odds. you're naive. $10mm is realistic while still highly unlikely. like 1:100 odds. just build a SaaS that makes $3mm a year (e.g 5k customers paying $49 a month or 300 that pay $1k a month).

Alan Kay said that the best way to invent the future it's imagining and work the steps backwards. So I would probably imagine what's an 250mm acquisition and start writing notes of how one would look like and then imagine all the steps back to the present.

You're overthinking this. Ship products, get customers.

they said u need at least one cofounder, I'm thinking about being solo founder too, is that good or should I find cofounder first?

Accounting, Corporate Finance

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