In my post “The Missing Ingredient: Strategic Marketing to the ‘Money Guys‘,” I tried to make it clear that the process of marketing and selling your company to investors or acquirers looks a lot like the process for marketing and selling your products to prospective customers. It takes real work to get a prospective customer to buy your product and it takes even more work to get a prospective investor/acquirer to buy your stock!
This post lists some of the marketing tactics and strategies that you should consider.
First, Identify Your Goals
As with any strategy, clarifying your goals up front will help you to focus your initiatives and determine how you are doing. For example:
- Complete a round of
at a by
- Sell the company at a
- Generate relationships with 10 fund managers who track the company regularly and are a good fit with the company
- Generate relationships with 4 VCs who are good targets for the company’s future rounds and have quarterly update calls
Clarifying the goals of your marketing program will help you focus your efforts on meeting the goal.
Then, Identify Your Best-Fit Targets
Like the process of targeting the right prospective customer segments, you need to do some research to identify the “money guys” who might be right for your company.
For example, if you are working on a U.S. expansion strategy for your technology company and you are at the growth stage, the logical focal points are investors located in the U.S. who either have a stated strategy of investing in growth technology companies or have a portfolio that includes companies that were growth technology companies at the time of their investments. If you need help with the starter list of investors to do your research, you can find many directories through a search engine for most types of investors.
If you are at the point where you are considering your exit strategy of being purchased by a strategic acquirer in the next few years, your targets would probably be the technology companies interested in purchasing a company like yours. If you need help with a starter list, research the companies that have acquired similar companies to yours and then add the large companies that sell products related to yours. Your board, investors, and advisers will also have views on the list. Also, see if you can network into a VC or banker who does M&A advisory for companies like yours and ask them for some free advice and help on the list.
At OpenView Venture Partners, we focus on Software and the Internet and solely on the expansion stage, but I can’t begin to count the number of companies that inquire about the possibility of us doing early stage investments, real estate investments, oil & gas investments, and many other things that are outside our focal points. These companies have not identified their targets and they are just wasting their time (as well as ours). Periodically, I also get a mass e-mail with a massive number of VCs listed on the “to” line…not only are the e-mails bland, but the companies also don’t even bother to “BCC” their targets! I delete all of the e-mails that look like a mass notice and try to reply to the e-mails that look like the sender took some time to craft a targeted note.
Besides the direct targets, it is also useful to have some targets who influence your “money guy” targets. The most valuable people are CEOs (or other senior managers) of companies that your targets have invested in or purchased, and bankers and/or board members of the targets. You can also get some really good ideas by doing LinkedIn research where you will find out to whom your targets are linked and how you can reach them.
Having a narrow target list is extremely important, as it will allow you to really invest the time into connecting with the best targets, understanding your targets and customizing your pitch to their interests. Over time, as you better understand your targets, you will most likely swap some of the lower priority targets with new ones that might have a higher priority. Nevertheless, you should always have an ongoing target list!
Next, Figure Out the Specific Fit with Each Target
The step where most companies fail is in the lack of true understanding regarding the fit between the company and the “money guys.” This is important both ways. From your perspective, choosing investors that have the best fit with your culture and plans and who can help you achieve them is extremely important. The right fit with your acquirer will both maximize your valuation and, perhaps, give you a good home to continue executing against your vision. From the “Money Guy” perspective, each has priorities, goals, and processes and the more you can understand your targets, the more successful you will be at finding the best fit targets and the better you can communicate how your company aligns with their needs. This can give you a competitive advantage.
Then, Connect with Your Targets.
The best way to get to your targets is through a referral from someone who your target knows and respects. Again, LinkedIn can come in handy here, but you should also check with your board, investors, advisers, lawyers, bankers, friends and anyone else that you know who is well networked to help you get introduced.
Another great way to connect with your targets and their influencers is to get invited to attend, better yet present, at one of the many great conferences that bankers and other industry participants put together regularly. The conferences are attended by many of the people that you want to meet and these people are there because they want to meet people like you. Also, some VCs have parties or other gatherings. Work up an invitation to these events by either directly contacting them or working through your network. These events also have an added benefit in that they increase the awareness of your company to your community of investors and buyers. The more awareness and interest you have in the community as a whole, the greater the interest and perceived value will grow in your company.
If you can’t reach your targets via another means, put together a short e-mail that describes your interest in connecting with your target and why you think that you would be a good fit for them. The more tailored to your target the better and the briefer and clearer the better. Tell your target that you will follow up with a phone call a few days out and then do just that. Hopefully, if there is a good fit, you can work this first conversation into a meaningful relationship over time.
Finally, Build Relationships!
Great transactions generally come about because the perceived results from the transaction are attractive to both sides AND there is a mutual trust that both sides will work hard to create those results. Both are important and you need to build a relationship for this to happen.
If your transaction is an investment, the relationship between the investment team and your company’s senior management team is key as is mutual due diligence to make sure that both sides fully understand the alignment between the people and organizations. Also, some investors like to spend time getting to know a market sector and/or track performance over time vs. planned performance to determine if a management team can execute against a plan in order to build the trust in the management team (this is particularly true with investors in larger and/or public company investors).
If your transaction is a strategic acquisition, then the acquirer will generally have a team of people that need to get convinced that the transaction makes sense, as each of them have jobs on the line if an acquisition performs poorly. To help minimize the risk and maximize the potential outcome, many acquisitions start with a partnership relationship of one kind or another to allow a possible acquirer to test the value of the company with its customers and also to build a better understanding of the company and its management team. Because of this, it would be highly beneficial for you to try to build your target relationships into partnerships that might lead to acquisitions. Essentially, good partnerships help to build value in the minds of the acquirer’s management team.
There are also several other marketing tactics that you should consider that support the development of a relationship:
- Take the inbound calls that you get from VCs, Bankers, and acquirers and take the opportunity to pitch what you are doing. At a bare minimum, it will help increase your awareness in the market, but it might also increase your understanding of the “money guys” and markets and might even lead to a transaction.
- Make an effort to stop in and see your targets when you are in the neighborhood. Most of your trips have open periods and filling them with meetings like this is relatively easy to do.
- Send out an e-mail update every 3-6 months to your target list. The more ongoing traction you have, the more interested your targets will become.
It is possible that investors and acquirers will find you without doing all of the work that I outline above. Certain rock-star CEOs and/or a lot of company buzz in the product markets could lead to inbound interest, for example. In my view, finding your luck is better than waiting for luck to find you, so I recommend at least considering and executing some of the ideas on the list. The better you execute, the more you will find your luck!
If you want more ideas for selling your company, the M&A team at Pacific Crest Securities recently released an excellent white paper “The Eight Rules of Sell Side Technology M&A” that I highly recommend.