When is the right time for a start-up to be acquired?
It’s an interesting and complex question because, for one, a purchase offer is something many entrepreneurs dream about given getting rewarded for your entrepreneurial efforts is a very good thing.
But deciding when and if to be purchased can be difficult, challenging and heart-wrenching. If you sell too early, you can leave millions of dollars on the table. If you hold off too long, the offers could shrink or disappear. Just ask Friendster, which turned down a lucrative offer from Google before seeing its stronghold on the social networking market disappear.
The “when to sell” question struck me this week in reading about two high-profile companies. GroupOn, which turned down a $6-billion offer from Google last December, will complete its IPO this week. In many respects, it’s an event that has lost its lustre given how the company has stumbled and bumbled with how it does its books, and how the service is no longer a novelty.
As much as everyone likes to celebrate an IPO, it is hard not get the feeling it would have been better if GroupOn had accepted the Google offer.
The other example is DropBox, which apparently turned down a takeover offer from Steve Jobs. Drew Houston, Dropbox’s CEO, believed the company had the potential to become a bigger company, while Jobs thought Dropbox was a ”feature, not a product.”
Did GroupOn make a mistake by not accepting the Google offer? Did Houston blow it by turning down Jobs?
Truth be told, it is hard to tell because there are so many variables in play. The decision to sell or not to sell can come down to things such as a gut feel, the needs of the business, or the interests of your investors. This is why it can be so difficult to take a deal or walk away.