I’ve already mentioned that, toward the end of Year 9, StartupVille failed in an attempt to sell itself to a competitor.
And in Year 10, we’re in dire straits. In May, we get word that it’s going to be the end. We’re down to about a month’s worth of funding for payroll.
Suddenly, a semi-miracle happens. A really, really big software company — let’s call this place MegaSoftwareCo — took a liking to us. One of the guys on our executive team had been working like crazy to get anyone at all interested and finally had a good hit.
Their offer, while actually coming in lower than the one we rejected just a few months prior, is still an offer in the teens of millions. (Not a typo. teens. Tens would have been a lot better.) Some people at StartupVille think this is a lowball offer, but most people recognize it for the lifeline that it is. We grab hold.
With clear and firm interest from a serious buyer, our venture capitalist backers help to secure a bridge loan to cover the time it takes for the potential sale to form. The loan covers six months, taking us through the end of November. This time is necessary because while MegaSoftwareCo is interested in StartupVille’s product, they immediately make certain demands in terms of new features. The process of improving the software to meet MegaSoftwareCo’s requirements is called remediation and we commence work on it immediately. The scope of work includes, among other things, stuff like adding accessibility features and fixing security vulnerabilities identified by a code scan.
In the meantime, I give several presentations to MegaSoftwareCo’s representatives about the current structure of product support. A bit later in the evaluation process, I also sync their people up with some of our clients directly, so end users could discuss the value-add of using the software on a daily basis. This was where providing good support to the customers really paid off — they were more than happy to say nice things on behalf of our company. I have to say, I felt pretty good about this contribution to the fire sale efforts. It was, unarguably, useful work.
October arrives before we know it. Our bridge loan is running out and we’re pressing MegaSoftwareCo to commit in writing. We’ve delivered a few versions of remediated releases and finally, on our third try, we provide a version that is completely acceptable to them; they can offer this for resale according to their own compliance standards.
It’s done. The purchase becomes official on December 1st, right when our loan runs out. Our new company agrees to keep us all on board for at least three months. They’ll even sponsor the H1-B visa guys, no problem. Some HR rep visits our site to give us the lowdown and provide reassurance. She says that in all likelihood, we will all be asked to stay on as full time employees indefinitely, to be absorbed into the massive entity that is MegaSoftwareCo. This is how it works with most other software acquisitions. It makes business sense for them to retain the folks that understand the product.
At the end of it all, our executive team made a small amount of money on the sale, and our VC backers recouped a portion of the money they’d been dumping into StartupVille over the past seven years.
Due to the bridge loan, which further diluted employee shares, not a single person made a dime on the sale outside of the executive team.
Still, all things considered, most of us think it’s a pretty awesome outcome.
We throw a party and close the year out, knowing that beginning in January of 2010 we’ll be reporting for duty in a new location, for a new company. StartupVille has been officially merged into a larger entity.
Last note: MegaSoftwareCo had purchased my first company, SoftwareCompany, just a few years prior. I was going to start that sentence with something like “In a bizarre coincidence,” but then I realized it’s not all that bizarre at all. Big companies acquire small companies all the time, and the bigger they are, the more aggressively they pursue smaller fish to eat.
Still, it’s funny to think about — had I stayed with SoftwareCompany the entire time, I still would have ended up at the same place.