How to turn $5m into $100m in 18 months

Here's a view into the bizarre economics of mergers & acquisitions.

Suppose you're a startup with $5 million funding and a couple of dozen clever engineers.  You set your engineers loose on creating a killer 1.0 product, which takes them a year and a half or so.  Now a fast-growing Hot Public Company decides they really want a product like this, and they are doing a build vs. buy analysis.  What's it worth to them to avoid having to build the product themselves?

Judging an M & A beauty contest

Yesterday's post gave advice to sellers on how to improve the odds of winning an evaluation that uses a comparative business case, based on an M&A process my friend Bob is running right now.  The comparative business case is one of the more common tools buyers use to analyze potential deals; unfortunately, in this case at least, it's also one of the less helpful.  This post turns to the question of  how a buyer should be looking at the decision in front of them.

Winning an M & A beauty contest

A friend today related over lunch a choice he's currently facing: which of three competing startups to acquire.  How does he think about this choice?  Here's a great chance to see Design For Exit principles in action.

Let me lay out the scenario.  Bob (I'll call him) is the newly-appointed business development exec for a unit of a Big Company.  His business unit needs a key technology to integrate into their product, and they'd rather buy it than build it.  The business unit's technical evaluation has narrowed the field of many small companies to a short list of three choices.