Summary:
Selling a startup to a big company is not always a simple decision, even with a multi-billion dollar offer.
Factors to consider include the seriousness of the offer, strategic fit, employee and product impact, and financial valuation.
Jyoti Bansal, founder of Harness, learned this firsthand when Cisco acquired his previous company, AppDynamics, days before its IPO.
The acquisition involved multiple offers and required careful consideration of the interests of all stakeholders.
Wiz, a cloud security startup, declined a rumored $23 billion offer from Google, believing it could achieve greater value by staying independent.
The decision to sell or stay independent involves trade-offs, and both paths have potential risks and rewards.
When a Big Company Comes Knocking: To Sell or Not to Sell?
You might think that selling your startup to a giant like Google for billions of dollars would be a no-brainer. But, as Jyoti Bansal, founder of Harness and former CEO of AppDynamics, discovered, the decision is far from simple.
Factors to Consider:
- Seriousness of the Offer: Is the offer just exploratory or a concrete deal? For a private company like Wiz, it's likely to start with exploration due to limited public financial information.
- Strategic Fit: What's the rationale for combining the two companies? Is it exciting and compelling?
- Employee and Product Impact: Will the acquisition lead to job losses or product discontinuations?
- Financial Valuation: Is the offer a good value for shareholders?
The AppDynamics Story:
Bansal experienced this firsthand when Cisco made an offer for AppDynamics just days before its IPO in 2017. The negotiations involved multiple offers, and eventually, Cisco acquired the company for a price significantly higher than the IPO valuation. Bansal acknowledges that even with the offer, it wasn't an easy decision, as he had to consider the interests of investors, executives, and board members.
Wiz's Decision:
In the case of Wiz, a cloud security startup, Google's rumored $23 billion offer was significant, but the company ultimately decided to stay independent, believing it could achieve greater value by remaining private.
The Risks of Selling:
Bansal notes that while the deal made his employees millionaires, he sometimes wonders about the potential of AppDynamics had it gone public. The years after the sale were a boom period for B2B SaaS, and it's possible the company could have reached even greater heights.
The Risks of Staying Independent:
On the other hand, Wiz may face regrets if it doesn't reach the value it could have achieved with the big money from Google.
Ultimately, the decision to sell or stay independent is complex and requires careful consideration of all factors involved.
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