Thread by @EvergreenMEP

Startups <10m ARR rarely do M&A.

At $2m ARR we bought a competitor 4x our size. We became a full scale software company overnight.

It wasn’t easy but it was possible. Here’s how.

It started when we were the acquisition target.

I set up quarterly check-ins with competitor CEO’s. And I openly shared data.

You have to give to get. So give your information and ask for advice.

My intent with these calls was to get acquired, not be the buyer.

That’s where the story gets interesting.

I built a good relationship with the CEO of the target company. And he expressed interest in acquiring us.

My plan was working!

But, we were growing 100%+ and they were barely growing.

That’s a problem.

At 4x our size our own growth wouldn’t be enough to make the combination compelling. And they would be in control.

The next step is where a great board can be the difference maker.

“Why don’t we just buy them?” asked a board member.

Too big, no money, blah blah was my answer.

“We treat it like it’s ours now. We built the deck, create the model and start pitching.”

This made sense to me.

We needed to an interested and slightly crazy investor however.

But first we needed the target company to agree.

So I asked the other CEO what he thought.

He hemmed, he hawed, he asked me how I would pay for this. But he was open. Their sluggish growth was bothering him also.

We negotiated very high level deal terms and I asked him for 30 days to get it funded. He agreed.

This insane plan may actually work. But now we need a big check and the clock is running.

I also had been doing quarterly calls with reputable VC’s in our space.

Having these relationships was critical. They knew me, knew the business and were tracking us.

So I made some calls.

First call, bingo! Sent the deck, the model, the negotiated terms (no formal term sheet existed yet).

Within a day we were on calls with the target CEO working on the term sheet.

This was actually happening. Now it gets real.

Term sheet got executed and into DD we go.

Now we have a big VC to lead the deal and drive the diligence.

I still had to get my board aligned but that proved easy. This was there idea!

And I needed to get my small 15 person company aligned.

They were my tribe and we were about to step up.

So we meet every week as a company and I provided full transparency.

This was a crazy plan and they needed to know it. We needed to do our day jobs but prepare for something much bigger.

Full transparency was the only was to achieve this. We built the integration plan together.

So, after a lot of turbulence we got the deal done within 60 days.

It was rough.

We went from $2m > $10m ARR overnight. 15 people turned into 80. And I was running the place.

Culturally the businesses were very different and this would become a major problem (for another thread).

We were the dog who caught the car, holding onto the bumper for deal life.

We were able to stretch and make this happen for a few reasons:

- We had an incredible board who thought strategically. Building the right board was important to me when we began and it paid.

- We had built relationships before we needed them. We freely shared our data with competitive CEO’s and VC’s.

When the time came to make it happen, we could leverage these relationships. You have to give to get.

- We provided full transparency inside the company to get everyone’s help. We were small. Hiding the reality would help no one. And it’s a whole lot more fun.

- We got the right partner who could provide time leverage. Getting money proved easy. But we needed experience in bringing a complex deal together.

M&A can be super distracting, but also transformative.

If you’re in a space that rewards size (not all do) then it’s a path to consider.

My advice: Build the relationships and openly share your data. You never know where some insane idea will take you.

Hope you enjoyed the story!

✅ If you enjoyed, please share. Retweet from the first tweet so it can be found.

✅ Follow me @EvergreenMEP where I ✍️ daily actionable tips, insights and personal experiences on #StartUps and the #FoundersJourney.