BizJournals Portfolio

Welcome to the Big Time

With many U.S. firms and investors on the prowl for ripe acquisitions, a sale exit strategy has never been so important. But how do startups go about making themselves attractive to established companies?

My Favorite Mistakes My Favorite Mistakes

Anyone who has started a new business knows that missteps are part of the game. But knowing what the most common errors are can help companies avoid them, or use others' mistakes to create opportunities.
Read More

Young Jobs in the Balance Young Jobs in the Balance

Millennials are more aware that the best way for them to succeed may just be entrepreneurship. But as some struggle with finances and resources, they're turning to "sidepreneurship" and learning along the way. Read More

The Millennial Payoff The Millennial Payoff

Millennials are gaining respect in the startup and entrepreneurial space, but what they have in enthusiasm and multitasking, they lack in follow-up. How to make it work when dealing with clients. Read More
millennial entrepreneur

Warren Buffet wants it. Google wants it. So does Starbucks CEO Howard Schultz. Some of the largest, most influential U.S. companies are looking to acquire small and nimble startups as a way of using up their cash reserves and staying relevant at a time when the pace of innovation is growing exponentially.

Investing in companies, rather than creating or launching new product lines, makes sense at this stage of the recovery, industry experts say. And when it comes to research and development, many companies are looking to buy the technology outright rather than trying to reinvent the wheel with a competing product.

So how can startups—especially those helmed by young entrepreneurs—position themselves to stand out in a crowded field and become attractive acquisitions?

“Don’t claim to be the next Facebook, Twitter, Foursquare, etc.,” advises Tina Wells, CEO of Buzz Marketing Group, based in Philadelphia, and a member of the Young Entrepreneur Council. “The success of these companies is not an ordinary happening, and investors won’t take you seriously if you over-promise and under-deliver.”

But keep in mind that we are living in a "Facebook Nation," says Miriam Quart, CEO of Madison Avenue Consortium, a virtual marketing and public relations company in New York. “What Millennials lack in experience, they make up for in their digital-space prowess. And that fits well with big, established companies who lack the cool factor of digital and social-media intelligence.”

And speaking of social media, startups should tap whichever platform (and it’s best if it’s multiple) they’re most comfortable with to create buzz around their companies. “Investors follow trends, and they want to invest in the Next Big Thing. If your company has solid buzz around it, it is more likely to stand out,” explains Benish Shah, vice president of Strategic Digital Media at Global Executive Board, also in New York.

Shah also says that having a strong point of view for your company, as well as knowing who your target market is, are both essential to making the right impact. “Smart companies invest as much in the people behind the startup as they do in the company itself. Remember that an idea is only as good as the people behind it.” And when it comes to appealing to the right buyout target, showing others that your company taps into an underserved market is key.

Even before the big players come sniffing, startups should make sure to have their books in order, advises Quart. “Established companies want to know that the business is in good health. Not only are the players interested in the business concept, but they’re also looking to see where the company makes its money.”

Don’t be afraid to get advice from high-level CEOs, and contract out for a CFO who will advise on numbers that are realistic and achievable, says C.J. Scarlet, chief rover at Clayton, North Carolina-based Roving Coach International, a newly global employee-engagement company that provides coaching at all employment levels. "I contacted the CEO of a startup that is now worth billions and got half an hour of his time to ask questions about how he achieved success." As to the help from the CFO, "For about $500 a month we have a CFO on retainer, and the banks we’ve met with have been blown away by how 'big' and professional our company looks," she adds.

For startups that are thinking of going global from the get-go, Scarlet advises to work either with U.S.-based companies who have offices overseas. If you choose to work with a company that's headquartered abroad, contact the U.S. Department of Commerce. "They can help you to set up overseas offices, identify and vet potential clients, and even help you garner media attention in other countries," she says.

And once startups feel confident about their people, their strategy, and their revenue streams, perfecting their six-word pitch is essential, says Wells. While industry experts will banter around the 60-second and elevator pitch models, “after working with numerous startups over the years, I’ve found that the companies I could explain in six words or less had the most success. There is a science to keeping it simple.”

Sam Horn, who coaches clients on how to instantly engage potential clients, investors, and business partners, swears by the “eyebrow test.” When pitching, “watch the person’s eyebrows. If they rise, they’re interested. Get people’s attention—and keep it—by using a real-world scenario that’s universal or by asking questions they don’t know the answers to. They’ll be intrigued and want to hear more.”

If failure strikes—and for 99.9 percent of startups, that’s all but a guarantee—remember that you can’t be everything to everyone. “Focus on owning your market, even if it’s small,” says Wells. “Big companies and investors like to see consistency and growth. What you may consider a small growth rate, they can consider a proven track record of success.”


Get more business intelligence from Portfolio.com:

  • All Aboard the SXSW Bus: Put a bunch of entrepreneurs together aboard buses bound for Austin's South by Southwest festival and you're sure to come up with at least some ideas for new ventures.
  • The "Jobless Entrepreneurship" Recovery: Unemployed Americans are turning to entrepreneurship more than ever before, but while more individuals are starting businesses, they're often opting to go it alone, rather than creating companies with the target of hiring.
  • Would You Eat at Saucy Balls?: One of the would-be entrepreneurs on NBC's new reality show America's Next Great Restaurant came up with quite the expressive name for his prospective chain of Italian eateries. It's a lesson one branding expert says others should follow.


Romy Ribitzky is an associate editor at Portfolio.com.

Comments

If you are commenting using a Facebook account, your profile information may be displayed with your comment depending on your privacy settings. By leaving the 'Post to Facebook' box selected, your comment will be published to your Facebook profile in addition to the space below.

Connect With Portfolio.com

Come on, like us—you know you want to.

Follow us and if you're an innovative entrepreneur, we'll return the favor.

Today's top stories, conversation starters, and the back nine business bites.

spotlight on

People & Ideas

Whisky To-Go-Go

Now there's a company that let's you taste your knowledge of fine blended Scotches by mixing a whisky of your own. Read More