Dear SaaStr: How Do You Know if a Potential Acquirer is Really Interested, Or Just Kicking the Tires?
Well, first off — you can’t. Not without engaging.
And at some level, there isn’t any real difference between early stage due diligence and tire kicking.
Acquisitions don’t happen out of the blue. They almost always take time. In my first start-up as a co-founder, it was a multi-year process. At my second, it was arguably a 5-year process. Of competing, getting to know and respect each other, seeing the market change and grow, customer adoption, etc.
The potential acquirer that just wants to kick the tires today may well turn out to be a real acquirer X months or years down the road.
Let me give you an even more specific example. About 12 months before we were acquired by Adobe, we had a deep dive meeting and I shared almost all our metrics. Of course I kept some secrets but I shared how our business model really worked, including the nonobvious parts.
Two days later — two days — I read on TechCrunch they had launched a competitive product. No heads up. No mention of it at the meeting. Just read it right there on the ol’ TechCrunch over my morning coffee.
That seemed not that cool to me. But the reality is, in web services — nothing is THAT confidential. Once your product is out there, you have customers, etc. … with a little work, I can figure out most of what I need to know about you. And any product ultimately can be copied.
And in that story, the competitive product failed, and 12 months later, we were bought for a big sum.
So my learnings and lessons are: just share. Not the really secret stuff. But everything else. It just saves time. And even if they are your competitor now, or going to be … you don’t know how things will change down the road.
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Jason Lemkin, Khareem Sudlow
