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Hi everyone my name is Teddy warty with inside venture partners today I wanted. To talk to you about something a little bit unconventional which is around doing ma as I start off yourself. So basically startups acquiring it are startups and this is not just about like you know some thing you do in a later stage when you erase that you know hundred twenty million dollars at PJ from show Pat had done but uh something you know you can do at the. Series a stage when you're doing small IQ hires to build out your team but before that just want to give you quick instructions and backgrounds I used to be an CTO and operator co-owner of a start-up spent six years building that made all the. Mistakes you can possibly ever do but somehow we got acquired by a public tech company and since then for last five years I've been investing in European application-layer SAS companies such as show pad calibra pipedrive auto mile big move inin and a number of others and something with insight so we are new york-based. Global venture and growth equity investor we've been around for 20-plus years raised over eighteen billion dollars and Counting and we brought our focus is broadly software which we define. Mainly as b2b and enterprise software with some b2c thrown in we invest mainly in the growth stage so I think series B Series C but also do some things earlier as well as some later. Stage buyouts and finally we've been investing in. Europe for quite a long time and some of our success stories that have made it all the way to IPO include mine cast delivery hero hellofresh and Anse mutters so on this topic so how like what are the things like what would you consider why would why would I. Start up be buying another startup so the conventional high-growth playbook is that you know the only good growth. Of this organic growth and you know acquisitions should happen at the very late stage and be focused on cost-cutting and so forth so we. Think a little bit differently if you want to get to a hundred million dollars ARR which is the goal for. A lot of people although that journey doesn't really end there there are many ways to get there so acquisitions could be for a. Number of reasons first one is just kind of building out your team so acquiring talent there's so many teams out there who are great you know great people but maybe their business hasn't taken off the ground that well having them join you instead. Of shutting down shop can be a great outcome for for both parties and usually you see these things happening like on the engineering side people are acquiring machine learning and you know AI team for example another one to think about is geographic expansion let's say you wanna. You know open that and you take an. Engineering location let's say you want to open that a pack sales location acquiring. Something earlier stage might be a good way of getting there the third one is product expansion so let's say you've realized that you know you're on a good track but you know let's say to the competitive pressure or whatever reasons you really want to have. A broader suite that you go to market with that's a good reason to buy something early and kind of grow it from there instead of always building yourself and finally of course you know if you can buy air are cheaper cheaper multiple than your own multiple it might actually make sense in certain situations. But be careful not to be too opportunistic so what do these deals actually look like so in most cases there's. A pretty heavy equity component so you could be something like you know you pay out the existing investors or a business but you have the founders or the management team of the target role equity to. The combat entity and that kind of sets the incentives and kind of you can't get a new co-founder or a team member. Or multiple of those to your business and contraindications would include large amount of venture funding so those pesky venture investors often feel like they want to get their money back so you know if you see the IRS's company that's like 10 employees and raised like 30 million dollars. It might be harder to make it work at least. In a way that everyone kind of walks away recently happy and these things are a win for sellers as well I mean some of you might be in a situation that you you'll be. Acquired by under startup and I. Kind of want to emphasize that these things are win-win so for the. Seller it's about you know taking some cash off the table actually participating a much more meaningful a bigger upside with lower risk so more upside and lower risk is usually a win for for the other party as. Well so you might say that you're so focused on core growth how would you ever manage an acquisition and. Then you know integrating that so I would recommend to focus on minimizing distraction that's the number one thing and then realizing value from day one. So I have a checklist of things that you might want to consider first one would be office location. So you want to think about something let's say in your primary location to begin with or at least if you are you know acquiring something that's in a different city or country think about you know very simple things. Like are there direct flights because this might. Affect things how do you make things work second one would be management and cultural fit other is a management team. And the employees like a cultural fit your business is their values fit do you think this you know they. Work the same way you really don't want to distract your business by by buying something that might cause chaos and a lot of friction between your team's third one would be sales motion if your product something that you can plug and play and have their sales rep sell immediately you know is their product. Something that plugs to yours and that's like extremely important thing because. You don't want to be kind of a dual brain company for a long time one other thing would be telling pickup so if you think about your own hiring plan let's say you're you know you wanna you need to hire their CMO in the next six months what an. Acquisition might actually get you a great CMO that might be a. You know a good reason to move forward on the other hand if you're doubling up on a lot of talent the management team members you know it might be a challenge to make things work and you know have a bit of a different approach finally. One of the most important. Things is product integration so can you integrate the products to make the offering into a single solution that like makes coherent sense and you know if you can't is it still okay actually many situations it's okay there are suite of products and you know you can do value capture at the account level so you know you might be selling. To complete separate products but the same buyer and that might actually still work quite well so the perfect world you want to integrate but it's not always necessary anything so let's take an example. Case we some of you might have seen PJ CF show pilot on stage a bit earlier today so so they bought a company called learn core and the way they thought about it was that show padded cells in one platform focusing on content and they got some pressure on consultation industry some comments about analyst and. And kind of questions from the. Customers that it would make rate if. You product a lot training and protein component so shop I went out and found his target learned core and managed to do acquisition and the motivation there was around of course the product combination the two products are much more valuable as a combination than they were separately situation wise they were both in Chicago good cultural fate. Animation team didn't have a lot of overlap so it was a no-brainer net front as well and finally the talent pickup was really helpful and tech side so sure but had struggled hiring certain types of engineering talent which learned core had so that worked out very well for both. Companies and you know after some. Lengthy negotiations both businesses came out with a you know great experience and then are very excited about building the company forward so you know the session is called VCS pitch founders so I of course have to tell you about how inside can help here so at inside we. Did 50 acquisitions for a portfolio companies just during last year and we are probably on a run right of doing the same. Thing this year so we've seen a lot of things of different sizes so what we can do start from. Planning so building a strategic plan for M&A. What are you looking to buy like what directions are you are you looking for and then our pretty broad analyst pool can help source those opportunities look for everywhere in the world. And kind of feed you with a pipeline of any opportunities you can think about this as like an outsourced Corp dev team and then. In terms of engaging those opportunities it's sometimes much easier if it's an somebody from inside who's reaching out to the target you know trying to see if there's a bill to be made or very very. Interested in discussions then you know you just acquire going directly so when you get ahead in the process and you find a target that you want to do then of course supporting on deal structure a negotiation is very important we hear so many benchmark of deals so so we can you know help you pay the right amount and. Structure things in a way that makes sense and on the execution side helping with planning diligence making sure that you you know take all the boxes and you know as you're doing probably the first time that you don't make any any rookie mistakes and. End up buying something that you didn't intend to financing is a big component so for example when shop went to buy lunch or you know there was a big cash component to the deal so we very flexibly offered. Additional equity financing to show Pat at. The kind of market terms without them having to go out and race yet another round so having the equity financing on tap is a big value add for businesses that go about buying large companies and finally integration is the. Most important thing so we've done a lot of integration work we created handbooks we've kind of like gone through all the processes you must think about when he when you put companies together because that's like really where the rubber hits the road of the stir you know do you realize those synergies and do. You make those visions work so in a few closing notes so M&A is an acquired skill so it's good to start early and it's good to start small so you know starting early means that you might want to do that small occupier of like that to pursue startup. Which is like some small piece of technology and just get it done and you get the feel of how to run through the process and to integrate things because at some point that's your larger company you might be wanting. To buy a company for let's say 50 million dollars. So it's good to practice this muscle and cultural fit I would say is the most important thing of all of these elements and it should never be overlooked it's almost like you know what I think series a start off most mostly die for two reasons one is. They run out of cash and the second one that there's founder drama and things fall apart so if you just like gotten through the founder drama bit and cross the chasm when you're adding a. New management team or a new Pro founder a business you don't want to like trigger that drama for yourself again so just be very careful that. You have great kind of fit with the people you'll be working with for the next five plus years and finally one would be of course recommend working with an investor partner who. Was done it before and has your back both in terms of. Financing but also in terms of just. Backing a coherent M&A strategy thank you.

 


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