acquisitions

Will Canadian Tech Be As Hot in 2012?

By Mark Evans in Startups No Comments Tags: , , ,

As many Canadian shoppers head out the door to battle the crowds for Boxing Day deals (a strange and bizarre activity in my opinion!), it is interesting to look at back at how many Canadian high-tech companies were snapped up this year.

According to Techvibes, there were 34 high-tech companies acquired – two each by RIM, Google, Zynga and Salesforce.com. The total dollars that flowed to Canadian entrepreneurs and investors was more than $2-billion, fuelled by mega-deals for Kobo, Radian6, Coradiant, MKS and Algorithmics.

Without a doubt, it was an awesome year for anyone involved in the high-tech, startups, entrepreneur and venture capital sectors. After being an M&A wasteland for many years, Canadian technology finally attracted serious and much-deserved attention, which will hopefully encourage more acquisitions and, as important, provide Canadian entrepreneurs with the cash to do it all over again.

An Anomaly or the New Normal?

A key question is whether 2011 was an anomaly or an indication the Canadian high-tech landscape has evolved. In 2011, there were several established and fast-growing companies purchased such as Rypple and Radian6. There were also many emerging startups snapped up such as Zite, Tungle and Pushlife.

With so many high-tech cash acquired, did it flush out the most attractive M&A target or is there another wave of attractive startups on the horizon?

My take is it’s probably the latter given the number of interesting startups that were funded this year, many of them businesses making revenue as opposed to ideas requiring capital to be nurtured.

Buy vs. Build Alive & Well

At the same time, the buy vs. build landscape is still very much alive and well. In a fast-moving world, companies such as Google, Zynga, Facebook and Twitter don’t have time to develop new ideas and features internally so buying technology and, as important, teams/people has become standard operating procedure.

The key issue for Canadian startups is how much capital they’re able to get before the buyers coming calling. If Canadian startups are well financed, it will give them more time to gain more traction, customers and sales to attract a higher valuation. If they’re not able to attract growth capital, many startups could get snapped up prematurely and, as a result, leave a lot of money on the table.

While there was a flurry of seed financing (less than $2-million) this year, I would argue the Canadian high-tech landscape will not be able to take the next step forward without players who can provide startups with $5-million to $10-million. There are small signs of activity, most notably OMERS’ $180-million fund, but it’s just a drop in the bucket for what’s needed.

As someone who spends a lot of time working with startups, it was an exciting and busy year. To me, it was the year that we really walked the walk as opposed to just talking the talk. For too many years, Canadian entrepreneurs talked about the possibilities and the problems they faced; in 2011, they started to make things happen in a major way.

So, what do you think? Is 2012 going to be as active and exciting for Canadian startups? Who do you think are the most attractive acquisition targets?

For more thoughts on the year that was, Jevon MacDonald has a post on StartupNorth encouraging startups, entrepreneurs and investors to “get to work”.

When is the Right Time for a Startup to Sell?

By Mark Evans in Startups 3 Comments Tags: , , ,

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.

Why Multi-Billion Dollar Deals Are Rejected

By Mark Evans in Google, M&A No Comments Tags: , , ,

The Web was abuzz last week amid news that Groupon apparently dismissed a $5.3-billion offer from Google. That’s an awful lot of cabbage for a two-year-old company that has taken the world by storm and, in the process, attracted a slew of competition.

While Groupon hasn’t said anything, the speculation is it’s either holding out for a better offer, going to raise some more venture capital to continue its explosive growth, or intent on doing an IPO next year.

The other scenario is Groupon’s founders aren’t ready to sell. With explosive growth, it must be a thrilling and fascinating time to be at the helm. It’s a once-in-a-lifetime opportunity to ride a tremendous wave to see how far it can go. Why bail just when things are getting really, really interesting?

This is the approach embraced by Mark Zuckerberg, who has maintained control of Facebook despite offers that would make him an instant billionaire. At some point, Zuckerberg is going to take the money and run, but there’s no need to do it while he’s still enjoying the experience of running a company taking the world by storm.

While there are, of course, pressures from investors who want to realize a major return on their investment, entrepreneurs have a different on the world. Whether they make $1-billion or $2-billion or even $100-million, they’ll be rich beyond their wildest dreams. To them, it becomes something that is not about the money; it’s more about the experience and the excitement of being at the right place at the right time, and basking in the spotlight that comes along with it.

Once someone sells a business, the party is over. Sure, an entrepreneur can stick around for a a couple of years to manage the transition or complete an earn-out agreement. At some point, however, most entrepreneurs get told to take a hike, or they decide to leave because being the head of a corporate unit isn’t what they like doing.

While many entrepreneurs may go on to another success ventures, very few of them ever get to enjoy the same thrill that comes with starting and running a mega-success. It’s a magical and magical existence that you don’t want to end because it’s so exciting and fun. If they can pull it off, some entrepreneurs want the ride to last rather than simply taking the highest bid.

Let’s see how long Groupon can hold out and, at the same time, hold on to their dreams.

How Focused Should Startups Be On Being Acquired?

By Mark Evans in M&A 3 Comments Tags: , ,

I was talking to an entrepreneur recently who made an interesting comment about startups: They need to be focused on potential acquirers as much, if not more, than making sales.

His thinking is that the end-game is being acquired so a key part of positioning and building a start-up is being focused attracting the attention of buyers looking for good acquisitions. In the four startups that I have worked for, getting sales was a major priority because being acquired seemed so far away.

For many startups, this is an approach that makes sense because attracting another customer means getting to live for another day, paying your employees, and building a solid foundation for the business. While many entrepreneurs may dream about the pot of gold at end of the rainbow, getting acquired is a lot like winning the lottery – if it happens, that’s great but you need to create a viable business to improve the chances of attracting a buyer.

Another key consideration for startups is getting into markets where there’s opportunities to establish a foothold. Unless they can come up with a significantly better mousetrap, it doesn’t make sense to start a business that already features plenty of competition.

Not that this stops entrepreneurs from trying. The search engine market is perhaps the best example of how startups continue to think they can topple Google. And does the world really need another business-focused social network?

In an ideal world, entrepreneurs come up with an idea that is different or attacks a problem in a new way. At the same time, it solves a point a pain or makes something a lot easier or cheaper to do. If a startup can seize one of these opportunities, there is a fertile opportunity to build something interesting.

So where do acquisitions fit into the scheme of things for startups? As much as you want to build something to last, entrepreneurs also want to build something to pass to someone else for a check with lots of zeros on it. So, how much focus should entrepreneurs put on potential buyers when planning and building their companies?

If you’re trying to do more than build a business that just pays the bills and lets you take a nice vacation every year, it probably makes sense to create a “bucket list” of potential buyers, even if the chances of being bought are slim, if not non-existent.

But having a wish-list of buyers could provide some strategic and tactical guidance as the business is being built. It could take your startup into directions that may not normally be part of the mix but in the long-term could be the right moves. This isn’t to suggest startups should be fixated on potential buyers but it should be a consideration as part of long-term plans.

What do you think? Should startups be focused on potential acquirers? is there a downside to doing this?

Is There Anything Google Won’t Buy or Offer?

By Mark Evans in Google 4 Comments Tags: , , ,

According to TechCrunch, Google is looking to buy Yelp for $500-million, a move that would boost Google’s presence in the local search and directory business.

Maybe it’s just me but over the past few months, Google’s strategy to take over the world is becoming more evident. If it’s not acquisitions (60 and counting), it’s new (and free!) services such as Google DNS or the recently-unveiled Goo.gl URL shortening service.

This may sound naive given that capitalism is capitalism but does Google need to own everything and offer every online service? Doesn’t it make sense to leave some scraps for competitors so that there’s still some competition?

Don’t get me wrong, Google offers some terrific (and free!) service but the bigger it gets, the more nervous it makes me because it doesn’t seem healthy to have one super-dominant player – even one that professes to not be evil.

Rather than just talking the talk, I’m going to walk the walk by giving up Google for a week to see what life would be like if Google suddenly disappeared.

More: Boomtown suggests Google could also be interested in moving into the real-estate search market by buying Trulia.

Anyone out there not use any Google services?

$100 Million for Twitter. Now What?

By Mark Evans in Social Media No Comments Tags: , , ,

According to the Wall St. Journal, Twitter could raise as much as $100 million from a group of seven investors that includes T. Rowe Price, Insight Venture Partners, Spark Capital and Institutional Venture Partners.

It was originally thought Twitter was going to do a $50-million raise but clearly there was so much demand that Twitter decided to take the cash on the table. The deal reportedly gives Twitter a $1-billion valuation.

So the $100-million question is: what does Twitter do with all that money given it still has about $30-million in the bank?

The most obvious option is Twitter can continue to aggressively grow its users without having to worry about pesky things such as a business model or generating revenue. It can strengthen its infrastructure and systems to support hyper-growth, which will, in theory, create more revenue opportunities down the road.

Another option is acquisitions, although to date this has not been part of Twitter’s corporate DNA. That said, there are some attractive targets that could be picked up that would barely leave a dent in Twitter’s cash reserves. Some of the leading candidates include Tweetdeck, Seesmic and TwitPic.

So what do you think Twitter will do with $100-million?

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