Is buying out a better option? Not always
There always will arise a point in a company’s history when the investors would be staring at a possible lucrative buyout deal. There are multiple eventualities that can occur, the company can take the deal and hope to grow organically, or know their worth and choose to walk away. It is a very fine line and requires absolute confidence and awareness of self-worth for the company to take either of the options. We bring this point out in the face of the never-ending Snapdeal and Flipkart merger rumours.
The same can be said for the Snapchat-Facebook face-off or even when Facebook was being lured by multiple suitors of the likes of: Friendster, Google and many other venture capital firms. In fact, Zuckerberg was so intent on taking his company public that he focused purely on acquisitions and hiring the best talent he could find.
In 2005, a year after Facebook received the initial offer from Google, Viacom wanted to purchase Facebook for $75 million and offered Mark Zuckerberg $30 million for his share of the stock. But Mark Zuckerberg knew there was interest generated about his startup and wanted to see how the industry would react.
In 2006, Yahoo wanted to buy Facebook for $1 billion, but Facebook’s board took 10 minutes to reject the offer and walked away with a clearer vision in their mind. Time Inc also offered them a billion dollars, and then Microsoft wanted to buy them out with $15 billion. Throughout all this Mark Zuckerberg stayed put, the offers made him determined and gave him the momentum to succeed. He only took strategic advice, input and minority stakes as investors wanted to participate. Selling out was never an option.
Shutterstock CEO Jon Oringer had a similar story. The New York-based stock footage company had generated interest from multiple buyers, some offering seven figure sums. With a clear vision and path in mind, Jon wanted to see his company grow beyond what anyone foresaw. He knew the industry well, and learned that there was no competitor that could come close to his platform’s quality and lineage. Well, it sure did pay off for Jon, who’s now worth a staggering billion.
Rohan Shenoy, CEO of Build-Inn, had an interesting insight with regards to venture capital funding. “There are various reasons why we decided not to raise VC money at an initial stage. Accepting funds before figuring out how to make a business profitable on its own seemed like a big risk. We did not intend to hire and spend on things which would not help us in the long run. Before scaling up and spending heavily on resources, we wanted the business to be profitable.” For Rohan, it wasn’t a game of easy-in and easy-out, it was more about building profitability and subsequent growth.
Sunil Goyal of YourNest ventures had an interesting perspective in the matter. According to Sunil, all that matters is the problem that the startup is solving. Investors often wait patiently for even up to 18 to 24 months and watch an entrepreneur, before deciding to invest.
Therefore, it’s not a simple yes or no answer and it certainly takes full-rounded knowledge of the nuances and immense perseverance to see it through. But if you can’t grow your business without raising funds you should absolutely do so. Investors like to see confidence, when a startup asks for seed capital and it’s a long-term decision that you need to take into account as a startup CEO.