Each week, we read about small startups that have been bought by big businesses. Cisco illustrated how prevalent this practice has become recently when it created a startup, only to announce plans to buy it the same day. Insieme Networks will provide software-defined networking (SDN) solutions for networking clients.
In recent years, multimillion-dollar buyouts have become the big dream of smaller to mid-sized companies. In the early days of the Internet boom, these types of buyouts frequently turned average Joes into millionaires overnight, as big corporations sought to become innovators themselves through acquisitions.
The Internet leveled the playing field: It enabled young, enterprising inventors to come up with the very software and hardware solutions the consumer market wanted.
One of many instances of this was eBay’s recent purchase of U.K. courier network company Shutl. The service was founded by Tom Allason, a London-based entrepreneur who began his career while still in his teens, making fake IDs for other students.
According to CrunchBase, Allason formed Shutl in 2003 with the goal of connecting retailers with local courier services. eBay reportedly bought the company to move its eBay Now service into the London area, and provide same-day delivery for its customers there.
A deal like eBay’s purchase of Shutl is a win for both parties. Assuming a company is interested in selling, it wins by partnering with a much larger company. The purchaser wins by acquiring an existing, proven technology rather than having to build its own solution from the ground up. The only group that doesn’t win are anxious employees, who are often nervous that their jobs will no longer be necessary.
So how does a startup prepare itself for the big buy? As business coach Michael O’Connell told Australian website BusinessesforSale.com, a business owner should prepare for the big sale from the start. By forming a company with an eye toward a potential sale, entrepreneurs focus on creating a valuable business, rather than treating it as though it were only a job.
One way to increase your chances of a buyout is to create a unique, high-quality product that captures the attention of consumers. Unfortunately, in today’s competitive market, that’s much easier said than done. Prior to seeking financing, entrepreneurs should conduct meticulous research: They should review similar trademark filings and search the Internet for signs that similar ideas may be on the horizon.
By the time your idea gets to market, it’s possible you may find yourself in competition with several others just like it, and some of those similar ideas may be launching under the umbrella of someone much more powerful.
Once you’ve determined your idea is indeed unique, it’s time to apply for a provisional patent. Protecting your idea as you bring it to market will free you to spread the word as much as possible. Even then, you may find that others are quick to copy your concept, altering it just enough to avoid an infringement lawsuit.
Whether or not you encounter copycats, pursue your idea with passion and originality, and you may be on your way to an offer. Many startups aren’t actively seeking a buyout when it happens. They’re simply serving their existing customer base and expanding under their own business model.
Listen to feedback from your customers, tweak your business accordingly, and focus on growing your business. In time, if what you’re doing is true to your original vision, success will follow.Powered by Sidelines