Why acquiring and integrating companies is hard, and what to do about it

With the recent announcement of Terminus acquiring BrightFunnel, this led me to think about the challenges of integrating acquired companies. Multiple studies have shown that the majority of acquisitions do not meet their financial targets. Having previously led several acquisitions and integration efforts, I personally know how hard integration can be! Here are a few key things I learned (through many mistakes) to help drive a successful integration.

Focus on Key Deal Drivers

First, focus integration on key deal drivers with clear performance goals. It is easy to quickly get lost in all the detailed processes and activities that occur, but ensure focus on the key sources of value (and they vary by deal) and align your time/resources appropriately. Deal value could be from things like a cost reduction, a technology integration, an opportunity to cross-sell, or entering a new market. To keep that focus, make sure to track key metrics that tie back to that deal value and proactively highlight if any adjustments need to be made. Customers are also watching; it is worth reinforcing that deal value to them by communicating the vision and benefits they will see. To that point, be careful to not lose sight of the core business. Use integration as an opportunity to innovate within the core business versus focusing solely on integration as a standalone thing.

Focus on Culture

A common challenge is culture. Whether it is startup companies or large corporate entities, acquisitions can quickly go sideways here. Make clear decisions early on how much you want to keep the entities separate/together and timing (there are pros and cons to each). Diligently prepare for Day 1 by identifying and retaining key talent (often a big reason for an acquisition) as well as ensuring all the “little things” are quickly resolved to avoid employee frustrations. Things like computers, access, benefits, pay, titles, etc. can all quickly blow up if not addressed. Just remember, over-communicate and when you think you are over-communicating, communicate more! In the absence of information, people will assume the worst and this is accelerated if the acquired company is in a different location.

acquiringAT.jpg

Just Remember,

over-communicate!

Focus on the Right Team

To help address culture challenges and hitting key deal drivers, ensure the right team is in place. There should be one clear “leader” of the post-merger integration efforts and they should be almost exclusively focused on this task (especially early on). This is often a good chance to challenge a high-potential employee, allow them to be exposed to a lot of areas, and then transition to a new role when integration slows down. Even with one integration leader, both the acquirer and acquiree companies should have representation. Acquired companies can quickly feel like they have no say if not involved in the decision making process. People often assume culture is represented by norms (and that is partly true), but a big part of culture as it relates to integration is how companies make decisions. Some are consensus driven/unilateral, some are quick/slow, some are data driven/gut feel. It is important to sync how decisions are made.

Focus your Decision Making

Which leads me to my last point; have clear workplans and performance tracking with a central decision making process. There is one central spot where the entire team can go/meet to see the vision, how things are tracking, document what decisions are made, etc. A lot of false information and rumors can arise, and it is critical to have a central place of alignment as well as meeting cadence to get on the same page. This also allows you to celebrate quick wins and build momentum, and ensure accountability from all the functional areas that need to work together.

There are many more complexities of integration, but achieving clear focus, addressing culture, putting the right team in place, and centrally coordinating execution can help go a long way to ensuring your acquisition becomes one of the few to successfully achieve your targets!

This the first post in a series meant to help navigate the struggles of integration. Check back soon for Part 2. 

The Real Meaning of Strategy in Startups

While setting a strategy and aligning a team to execute that strategy are critical to growing a business, strategy is a word often used in business that means a lot of different things to different people. I was once doing a strategy workshop with a company and we asked several leaders the question: what is your strategy? Some defined strategy as a company presentation/process, others a list of goals/metrics, while others described strategy like an action plan of initiatives. While those are all important, the best company strategies I have heard are simple and focused. In a startup environment with limited time and resources, initial focus is paramount. Ultimately, a focused business strategy has two key components:  where to play and how to win.  

Where to play

Putting together an analysis of a huge addressable market may look good on paper, but is that really actionable? What is the right niche/customer segment that would truly be delighted by your products? It may vary by customer need, size, geography, product, etc. Properly doing research and testing to define your true target market is critical to ensuring you are focusing your efforts in a specific area versus boiling the ocean of trying to meet all needs of all customers in the entire market. This is also especially important in a startup, where you need to quickly test ideas and achieve scale with minimal resources. Have you properly defined your target market?

How to win

Too often companies get caught in a “me too” game and try to win by having more feature/functions. In the long run, truly successful companies have a unique competitive advantage that earns them the right to win. This could be a unique cost position, proprietary data or analytics, customer support, company culture, etc. Having that true differentiation that your target market values not only helps you stand out from competitors, but truly makes your sales process easier and aligns your internal team on why you win. Have you properly focused on what differentiates you in the market and proven that differentiation is valued by your target market?

lou-levit-1940.jpg

These two components go hand-in-hand and often require multiple iterations to get the right fit.  Do not be surprised if your initial path requires pivots or changes over time to get right. The benefit is once you have these tuned, you are in a position to delight customers and fend off competitors. Once this is defined, you can go further into aligning the organization and executing the strategic plan, but we’ll save that part of the discussion for another day.

As I joined Atlanta Ventures, we spent time talking through both of these.  For us, “where to play” is focusing on SaaS entrepreneurs in the Southeast.  “How to win”, is truly serving entrepreneurs, providing more options to earlier stage startups, our unique partnership with the Atlanta Tech Village, and our experienced team.

Strategy is defined by the Oxford dictionary as “A plan of action designed to achieve a long-term or overall aim.” Hopefully your team has a clear view of that aim, and an actionable plan of where to play and how to win to get there.

Community is the Keystone to Success in the Startup World

We’ve all heard it before:

  • Build good community

  • Surround yourself with good community

  • Get into a good community

But what is the hold up? Why is it not happening?


Here’s a few hard truths about Community:

1. Community is dang hard to execute.  

Am I right? Yes! We are living in a digital age, where you can sit in your house with no one around, but be “online”. You can communicate with people all day, but never see anyone or physically talk to anyone.  *Note, I am a big fan of online communities, no shade throwing here. They are a tremendous asset to the startup community, it’s just a reality.   

2.  Genuine community takes time.

Who has the time to be “in” community? The pressure is greater than ever to succeed in “Startup Life” and you need to grind out the next MVP, ASAP!!!!!! Who has time for coffee, grabbing a beer or to sit around and just shoot the breeze?  

3. Community can be messy.

Especially in the professional world. Are you friends with your coworkers? Do you even have any coworker or are you grinding it out on your own right now? Do you confide in your coworkers about the the struggles you’re facing or do you have to “keep it real? It’s extremely hard to find a balance in those relationships.   


Let’s step back for a moment and take a look at the definition of community:

Community.png

What do we see?

Common interests. One place. Together. Unified. Collective. Fellowship with others. Same values and responsibilities. Designed to serve the people of a particular area. Joint ownership.

We see that when you bring people together and really unite on a common interest and take ownership of that connection, real community is cultivated.

 

Community is the keystone to success in the startup world.

Yes, you need to have a good product, nay, a great product. Yes, you need to hit the market at the right time in the right place. Yes, you need a great strategy.  BUT without the foundation of solid community to hold it all together, your company will never be the next Google, the next Salesforce, the next {insert stellar company here}.  

Let’s face it.

priscilla-du-preez-234138 (1).jpg

Community is tough

but community is necessary.

So how do you get/build/cultivate/find community?

Step 1: Start.

What are you waiting for? Why are you still waiting to go/seek/find it? Get out the door, off the couch, away from your monitor and start.

Step 2: Pick one thing and just do it.

Not sure where to start? Might we suggest you attend an event? Find something you’re interested and you will naturally find people there that are interested in it too. A common ground is the easiest way to start building community.   

An easy place to find out about events is your local coworking spaces events pages (see an example of one here in Atlanta), check out Eventbrite, or check out a Meetup.

Step 3: Talk about it.

Everyday. Discuss it. Tell people you’re seeking real community. Do not be afraid you’ll look weird or be shunned because you are seeking genuine community. The reality is that people you tell are seeking the same exact things.


This is just the beginning. Community can happen.

With some investment and genuine desire for change, you and your startup will soon be on their way to a more fruitful and healthy community.

Check back soon for more tips on building a solid foundation for community in your startup, your life, and your team.

3 Big Ideas When Launching Your MVP

Starting from scratch is hard.

An entrepreneur has to figure out what to build, and resources (both time and money) are limited. In order make the journey a little bit easier, here are three big ideas to keep in mind when building a Minimum Viable Product (MVP).

1. Figure out the minimum feature set, and get that in the hands of users as soon as possible.

Beware of scope creep, but don’t be afraid to build and test many ideas. In my experience launching MVPs, it has always been tempting to make things future-proof. Unfortunately, striving for perfection in the early stages is not advised -- things may change quickly depending on customer feedback, and it always hurts to abandon a masterpiece. Spending more time building product and features is more important than perfecting the glue that holds it all together.

Cloud technology and other software services can also help speed up development cycles. Personally, I’ve used AWS, Heroku, SendGrid, and MailChimp -- all have free-tier pricing or startup credits.

2. Look to establish authentic demand.

People in your network are great first users, but make sure they are representative of your target users. We’ve found that friends and friends of friends can be extremely polite. Solicit real, authentic feedback, and be weary of asking leading questions.

Start thinking about actual usage or engagement metrics. This doesn’t have to be complicated. We’ve previously used a daily email with a table of users sorted by last activity. Beside each user, the number of widgets (or whatever your product does) they’ve created was shown. This should evolve as the product/company does; these metrics can validate customers’ success and help predict (and prevent) churn in the future.

What a user is doing (or not doing) with your product will inform if their feedback is realistic and aligns with received value.

3. Get customers on-board with the post-MVP vision.

Early adopters should get value from the MVP, but it won’t be perfect. Help them understand why they should stay engaged. Having early adopters that align with your vision will help in building new features and future iterations.

jeshoots-com-219386.jpg

Help users understand why they should stay engaged

They may also be able to refer you to other potential customers. We’ve had an MVP customer introduce us to one of their vendors. That vendor became a partner, and introduced us to another customer. That customer eventually would go on to write a testimonial and case study, which helped us establish credibility in the market.

Building an MVP should help determine if an idea is viable -- it does not have to be expensive, perfect, or complete. Help early adopters see your vision, iterate on their feedback, and validate the value of your product.

"You’re selling the vision and delivering the minimum feature set to visionaries, not everyone." -Steve Blank
Alternatives to Avoid the Monthly Invoicing Time Suck

So you’ve started your business (preferably an LLC early on to benefit from some of the flow through tax-wise). 3 months in, you and your co-founder have signed your 1st paying client; excellent! You’re negotiating payment terms, and the advocate asks if can they do monthly invoicing.

Although the frequency of receiving payments monthly isn’t an issue, the added time that comes with following up on 12 receivables from one client can leave you spinning your wheels. Here are a few suggestions to avoid the time suck:   

1. Counter  

Although you may be a bit short on leverage, this is the time to counter with quarterly, semi-annual, or annual-with-a-discount billing.  

Ideally you’ll want to spend most of your time working on the business, and the last thing you want is to turn your one client into the accounts receivable equivalent of twelve annual clients. Time is precious in a startup.  A bonus of receiving a larger chunk of cash up front will allow you to invest in other areas of the business faster.

2. Alternative Payment (i.e. credit card)

This accomplishes two things, receiving payments sooner, and it aligns with the clients outflow needs. Although receiving roughly 3% less of the MRR is not ideal, it’s absolutely worth it to receive payment easier, quicker, and with less touch points (as far as receivables are concerned). Having cash on hand to run your business might literally be the most important thing for your business, so keep companies like Stripe, Chargify, Recurly, Quickbook Onlines payments in mind.

3. Push, but don’t let the deal fall through

Honestly, sometimes a client unwilling to do monthly credit card and threatening to walk away from the deal solely because of it could be a red flag. Sometimes there may be legitimate constraints depending on price or their control structure, but be diligent in asking the right questions.    

didier-weemaels-36055.jpg

Be diligent

Ask the right questions

Things to consider before accepting monthly invoicing:

  1. Make sure you’ve at least countered and offered an alternative

  2. Consider the Industry standard for your type of service billing

  3. Your position in the space
    AKA have you been around for a while and can leverage that authority or are you just starting out and don’t have as much wiggle room.

Overall whether it’s client one or client 100, you’ll want to structure things early on to where you’re receiving payments quicker and easier, so you can focus primarily on providing the greatest value for your clients.

 

5 "Must-Haves" When Building a SaaS Company Today

Since starting WideAngle five years ago, the SaaS landscape has changed dramatically. Competition is fierce. User experience is a must-have. Seamless onboardings a requirement. Buyers want “one-solution” and “not another log-in.” Integrations become critical -- which likely stray away from your core product offering. Customer acquisition costs rise every day. Clogged inboxes make your message and story harder to hear.

Depositphotos_75393947_l-2015.jpg

Bottom line:

it’s hard out here for a SaaS founder!

Yet, companies are thriving. It is still and will be a good time to be in SaaS for awhile, and that’s straight from the Godfather. So without further ado, let’s dive into 5 “Must-Haves” when building a SaaS company today -- particularly if I were building it in Atlanta or the Southeast.

1. Get the founding team right. Having a strong team is an easy piece of advice to write but a hard piece to execute. The best co-founders meet on their individual journeys. For example, Tejus (WideAngle CTO) and I met on Twitter back in 09’ and always stayed in touch virtually. I’ve also known successful partnerships that met at worthwhile community events. When you’re looking for a co-founder it’s important to put yourself out there in the community and attend events you’d want your future co-founder to attend.  

2. Find a Pain Point in a Large Market: the market you enter will determine 1) how much luck (or unluckiness) you’re exposed to 2) how much grit and hustle is required to get a customer 3) the initial trajectory of how fast you grow. The third point determines your momentum and as you’ll learn through the journey, strong momentum is vital.

A good example of a well-timed market to enter would have been Account Based Marketing (ABM) two years ago. Atlanta Ventures company, Terminus has grown tremendously year over year because it helped form and mold the ABM market. I’ve highlighted the role of the market in detail here.

In other words, how fast is the stream when looking at the variables of startup success.

When one looks at WideAngle’s stream, I believe it is the corporate crossfit of management. For example, if someone who owned a crossfit gym and tried to sell me on joining, I wouldn’t do it because I don’t crossfit, bro. However, I do enjoy working out 4-5 times a week and getting a good sweat in -- but crossfit is not really my cup of tea. However we almost all know a crossfit warrior who wakes up 6 days a week at 5:00 to make sure they get their 5:30 work out. It’s a smallish stream but very loyal and dedicated fan base -- like WideAngle.

3. Map Your Initial Go To Market with Your Natural Abilities - Chris Dixon and David Cummings wrote about Product/Founder and Founder/Idea fit years ago and it still holds very true today. Here are two examples I’ve seen. If you’re a sales and marketing focused founder, you’ll want to adjust your go-to-market strategy and play into your strengths. Meaning, you’ll be able to wine and dine, hustle or bustle leads into using and paying for your product. If you’re more of a product focused founder, belaboring over the first time user flow into seamless onboardings will be essential to your success. Understanding your strengths and weakness as a founder first will help identify what is the best go-to-market approach starting out.

4. User Experience Must be 10x The Incumbent: it’s getting harder and harder to sell software that is not easy to use, unless you’re the incumbent. There are two major reasons your UX must be brilliant: 1) to combat the sales friction (and grind) early stage startups face 2) your buyer’s standards of experience are rising everyday. Our buyers have spent the last 6-8 years on Facebook and Twitter, 4-6 years on Instagram. They are getting used to well designed, easy to use software. Back to point 1, if you’re not a name brand, getting someone to find you, trust you, champion you (often times at the risk of career advancement), and then finally buy you, is a beast of an effort. Try to reduce the friction with your product.  

5. Keep a Long Term Vision - when you start a company, keep a long term vision. The journey lasts at least 5 years and can extend to 20 or more.  Make every decision with these time frames in mind.