YouSaid · the spoken record

Blake Irving

lines on the record: 31
first: 2022-01-26
most recent: 2022-01-26
sittings or episodes: 1
sources: podcast

Every line below is reproduced as it was said and linked to the record it came from. Nothing here is summarised or generated. Directory · Search · Corrections

“They can manage their team to get through the actual integration, which is a tough thing to do. And so I do think selling a company, if you want the integration to be successful, leaders should be there. And they should really, really focus on the personnel and the integration problem.”
2022-01-26 · a16z Podcast · M&A, Before and After: What Founders Need to Know · IDENTIFIED FROM THE TRANSCRIPT · source
“Sad reality is the majority of acquisitions fail. My suspicion is it has to do with actual just a team level integration, right? The white blood cells in the organization are going to come out. There's going to be, you know, clashes on strategic alignment. I mean, you're cramming two totally different organizations together, and that's a hard thing. You know, I share a board seat with John Chambers. Cisco is our number one competition. I think he's probably the best executive ever in our industry for M&As. He's the best, the best, the best. They've bought so many companies, made them successful at Cisco. And we were chatting about it after a board meeting one day. And he said, you know, Martin, out of, I think it was 127 acquisitions we did, I'll tell you what makes the acquisition successful. And it's like the strongest indication of if it's going to be successful is that the founders stick around. That's the leader stick around. And if they stick around, then it's likely to be successful. I suspect one of the reasons is the founders and the leaders are there.”
2022-01-26 · a16z Podcast · M&A, Before and After: What Founders Need to Know · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, so we actually kept our sales team until I left. So four years, we did give it up once to Europe and then that failed. And so we got it back. So that was good. The trick is you can't operate alone. You have to cooperate with the core sales team because they make it the intros to the accounts and they help the sales. And so we were pretty much added alone the first couple years. And then we started cooperating with the core sales team. And that's when things really took off. And so was successful, but it required a lot of cooperation from the core sales”
2022-01-26 · a16z Podcast · M&A, Before and After: What Founders Need to Know · IDENTIFIED FROM THE TRANSCRIPT · source
“So, the simplest way to think about it is if you have a sales team that's used to selling to compute folks, and now you're like, go sell the networking folks, they're just not the right team. Maybe a little more complicated. If you have a team that's used to selling to a mature market, you know, like this is a mature market with a mature product where you're basically just order takers and like most of the discussion are around financials, right? Just because it's like it's about discounting because everybody knows the product. And now you tell them to sell a challenger product. Oh, this is an evangelical sale. It's not a discussion about numbers. This is a discussion about value or whatever it is.”
2022-01-26 · a16z Podcast · M&A, Before and After: What Founders Need to Know · IDENTIFIED FROM THE TRANSCRIPT · source
“Large companies, sales teams often carry many products, and they are already used to a certain type of a buyer. And if you sell to a different buyer and or your product is more difficult to sell and the customer is like a different adoption curve, it's very, very hard to get an existing sales team to sell it. The fact that we're able to control our own sales team, we had a bit of a different buyer, which is kind of network insecurity, which wasn't the core VMware buyer. Like 100% of their quota was our product, allowed us to really build out sales. And so again, these things are situational. If you're in B2B and you do have a direct sales motion, a sales team, I think keeping your sales is one of the absolute keys to being successful post-acquisition.”
2022-01-26 · a16z Podcast · M&A, Before and After: What Founders Need to Know · IDENTIFIED FROM THE TRANSCRIPT · source
“So, in order to sell Nasira, we actually had multiple companies that we were kind of thinking between, and then we decided VMware's the best strategic fit. We decided to go to VMware. So I called Diane Green. So Diane Green, of course, was the founder of VMware, was the CEO of VMware. And I said, Diane, you know, listen, we're being acquired by VMware. Do you have any advice or anything I should know? And she said something to me at the time I didn't understand how kind of, you know, spot on and prophetic was. She says, Martine, no matter what, don't give up your sales team. You must keep your sales team. I'm like, why is that? So not really knowing why when we were actually finalizing the details of the deal, I basically said, you know, with the CEO of Steve Melaney, we're like basically, like, in order to do this, we keep our sales team for at least a year. Steve may have known why we were saying that I had no idea why we were saying that, but it turns out that I think the difference between acquisition being successful and not was the fact that we kept our sales team. And the reason is because in”
2022-01-26 · a16z Podcast · M&A, Before and After: What Founders Need to Know · IDENTIFIED FROM THE TRANSCRIPT · source
“This hugely is dependent on the org and the situation. There are some acquisitions where the company that's being acquired doesn't get touched, right? Like salespeople stay in place, P&L stays in place, they're separate. So for example, VMware bought a company called Airwatch, and they basically didn't touch it. There are other acquisitions that are basically mergers, right? They're like, okay, here's an existing OR, then we're going to go ahead and squish you in that org. We were a merger. There was an existing networking team that we got squished into that was actually larger than those. Those just tend to be a lot more difficult. And then, yeah, I mean, there's massive trust issues. You know, there's arguably inequity issues, right? Like, let's say two teams both were working for four years on the same thing. One, you know, sold a company for a whole bunch and the other one has to go ahead then adopt their technology or work with them or partner with them, right? I mean, that's kind of a tough thing to manage. And so having gone through it, actually not twice, if an M&A happens the first.”
2022-01-26 · a16z Podcast · M&A, Before and After: What Founders Need to Know · IDENTIFIED FROM THE TRANSCRIPT · source
“I mean, you've got managers that are used to managing one way and subordinates that are used to be managed a different way. And these don't always melt, which causes a lot of infighting and a lot of clashing, like breakdown in communication. You've got to align processes, all of that stuff that happens, you know, and that stuff. You also often have these other dynamics where like if, let's say, a large acquisition happens, the company that gets brought in just made a whole bunch of money. So you have a bunch of individuals that made a bunch of money that got brought into the new company and there can be like some dynamics as a result of that. And this is just kind of, you know, especially the team that's acquiring is also working on the same things. And so, I mean, I think it's a very significant people management and culture management issue to make these things successful. And that's not even talking about like the business alignment or the product alignment or the architectural alignment. All of those are things as well. But I think first and foremost, it really is a people problem.”
2022-01-26 · a16z Podcast · M&A, Before and After: What Founders Need to Know · IDENTIFIED FROM THE TRANSCRIPT · source
“The hardest thing about an MA, in my experience, on the other side, once you do it, is actually the team integration. You can have two totally different cultures. Like in the case of Necessaria, like Necero is kind of like a commune, right? Like when we started the company, it was a bunch of academics. We were all fairly senior. Many of us had PhDs. We were all core researchers. So we had this very senior, very flat team. We made decisions through consensus. I mean, it had just a certain culture, which worked well for us, right? And when we got acquired, we got put into a 350 person org that was like a military. So it was like very top down. And both of these cultures totally work, right? But there's absolutely no valid judgment I'd like. The military is a great efficient culture, you know, like having a commune can be a very creative culture, but mixing them together is tough, tough, tough. And so I actually think that a lot of the complexity in M&As is okay. So you've got it done. Now, how do you do these integrations?”
2022-01-26 · a16z Podcast · M&A, Before and After: What Founders Need to Know · IDENTIFIED FROM THE TRANSCRIPT · source
“100% in enterprise, there may be three important networks. There's LinkedIn, GitHub, and Slack. As far as I can tell, as far as I kind of real big networks, and all of them have demanded massive premiums on acquisition, for example, this reason, you're not just buying into, to Blake's Point, which is correct, a cash flow. You're buying into a strategic asset. You know, it's a network of people, right? Slack's got one of the top brands and the top communities and the top networks in the industry. GitHub, the same thing. It's the entire developer network. And LinkedIn is the professional network. So yeah, absolutely.”
2022-01-26 · a16z Podcast · M&A, Before and After: What Founders Need to Know · IDENTIFIED FROM THE TRANSCRIPT · source
“The way a good example of that, Martin, that we saw recently was Salesforce by Slack. Slack was a publishing company with public market cap. But there were a lot of analysts and in the media, a lot of people were saying that. Salesforce overpay for a slab. But I got to believe the value of slack to them was a lot more than what they publicly paid for the company, including the large premium. So that's a real good example of what Martin was saying.”
2022-01-26 · a16z Podcast · M&A, Before and After: What Founders Need to Know · IDENTIFIED FROM THE TRANSCRIPT · source
“Is a very large number, right? And so if you provide some strategic value that augments that, it can very easily compensate for whatever the acquisition price is, right? So in the case of app dynamics, which Cisco bought for $3 billion, I believe it was, like the lift of the stock price was far above that. So again, it's not a straightforward discussion between, oh, you make five million in error or 20 million, therefore you're worth this. It's like, what can you do for the large company? And because these companies have such high market caps, the lifts can be enormous. And so again, you know, if you're a founder and you're in the position for strategic acquisition, you should feel comfortable knowing that you're worth a lot more than you probably think that you are to the company that's acquiring you.”
2022-01-26 · a16z Podcast · M&A, Before and After: What Founders Need to Know · IDENTIFIED FROM THE TRANSCRIPT · source
“For the venture world for startups, the most interesting buyers are strategic buyers because they're buying into the same reason you started the company, which is a dream or a vision. I often have this interesting conversation with founders where they're like, listen, we're making no money at all. They won't pay very much for us. But the reality is that that's not how they think about it. In fact, I've actually got two anecdotes on this. The first one is I remember, you know, when we were selling this here, I remember Ben Horowitz, and it was a great deal. And it turned out actually to be a great acquisition for VMware as well. But I remember him telling me saying, hey, listen, you're going after networking, which is a $40 billion market. They're doing a future option on all of networking. So, you know, a billion dollar option under a $40 billion market, like that totally makes sense, right? So it wasn't like they're looking at the finances. They were actually looking at the market you're going after. There's a second one is companies also view a change to their stock price, which is their market cap.”
2022-01-26 · a16z Podcast · M&A, Before and After: What Founders Need to Know · IDENTIFIED FROM THE TRANSCRIPT · source
“Their portfolio companies. What I've typically found with PE firms is that they don't pay as much as large strategics, and they tend to be much more disciplined type of buyers. So if I were selling a company, my preference would always be to sell to a large strategic where there is a large strategic value that you can monetize as a seller. The third type of buyer could be another private company. So you could have a private to private type of merger. Typically private companies will buy small teams. We call that acquires, or sometimes a private company might buy a meaningfully sized private company to just get to a larger scale.”
2022-01-26 · a16z Podcast · M&A, Before and After: What Founders Need to Know · IDENTIFIED FROM THE TRANSCRIPT · source
“Generally, there are three types of buyers. So, one is large strategics, and the strategics tend to pay the most for the target. There could be some revenue synergies. There could be some cost savings. So you can really increase the revenue base of the target by having the target become a part of the larger company. The second type of buyers, which tend to be less relevant for venture-backed companies are PE firms. And the reason why I say that is PE firms typically buy very mature companies or they take public companies private. And a lot of the VC-backed companies tend to be too small to be a standalone target for PE firms. However, the PE buyers does make sense when they have an existing portfolio company that could be a strategic buyer for a VC-backed company. So basically you're doing a tuck-in of a VC-back company into”
2022-01-26 · a16z Podcast · M&A, Before and After: What Founders Need to Know · IDENTIFIED FROM THE TRANSCRIPT · source
“We've talked about the different MA scenarios based on the stage or performance of the company, the motivations of the founders, and even where they are in their careers and age-wise. So what about the other side? How should founders think about the different kinds of potential buyers and the motivations that are driving them and how that affects a potential deal?”
2022-01-26 · a16z Podcast · M&A, Before and After: What Founders Need to Know · IDENTIFIED FROM THE TRANSCRIPT · source
“Or I'll give you a 1% chance of making $200 million. Like, what would you do? You probably take the $50 million, right? Now let's get back to fiduciary duty. But your duty to the shareholder is the highest shareholder dollar. The expected outcome is actually higher if you don't do it. It's just the chances are lower. So so much of the complexity of these discussions comes down to the chance that something's going to happen versus the actual outcome. So it's the risk-adjusted outcome and it's not maximizing the expectation. It's maximizing something else, right? It's saying like, listen, shareholders probably don't want this to go to zero in 99% of the cases. They probably want it, right? And so there's a lot of gray area for these discussions to have. If we really cared about expected outcomes, we'd all start energy companies because that's a trillion dollar market, right? Except for it just turns out like they're really hard and the chances of...”
2022-01-26 · a16z Podcast · M&A, Before and After: What Founders Need to Know · IDENTIFIED FROM THE TRANSCRIPT · source
“So Blake is totally correct that a lot of it is the motivations of the founder, but it's not just a motivation. It's also like, what's the risk tolerance and the practicality of money, right? So expected outcome is the size of something times the probability that it happens, right? If there's a 1% chance that you sell for $100 million, then the expectated outcome is $1 million. So it turns out the highest expected outcome is almost certainly not selling, right? Because you could potentially be a Facebook or whatever. You could be a $100 billion company potentially, even if the probability is low, but there is a chance, right? So it's almost always that the expected outcome is hold, hold, hold. The problem is a 1% chance of something happening just isn't practically useful for a founder. Like if you had a choice, if you're like, okay, I'll give you a 50% chance of making $20 million.”
2022-01-26 · a16z Podcast · M&A, Before and After: What Founders Need to Know · IDENTIFIED FROM THE TRANSCRIPT · source
“Take on greater risk, run the business, and maybe they are bigger dreamers. And because of that, they may not want to sell the company because they may want to run it for a much longer period just simply because they're younger. Whereas if you're a founder, that's found a couple of other companies. For you, like if the price is right, you may want to sell it because you may want to retire or you may want to do something else such as being advised to a bunch of other scarves. So you may just have different motivations.”
2022-01-26 · a16z Podcast · M&A, Before and After: What Founders Need to Know · IDENTIFIED FROM THE TRANSCRIPT · source
“So, one thing that we don't focus on, which I think is incredibly important, is founded psychology and their motivation. So oftentimes founders, when they make decisions to other company, it's very personal. So one of the personal reasons why they might want to do that is based on their financial and economic background. So as an example, if you're a first-time founder and you have an opportunity to sell the company and you make a lot of money, you might make a decision to sell the company because that might be a meaningful amount of money to you versus a founder that may have sold the company in the past and has enough cash in the bank. And that founder may want to take the additional risk of not selling a potential holdout to build a business to potentially sell at a higher price on the road. The other thing is age. What I found is that younger founders, especially if this is the first startup, they are willing to”
2022-01-26 · a16z Podcast · M&A, Before and After: What Founders Need to Know · IDENTIFIED FROM THE TRANSCRIPT · source
“And let's say they bought somebody else like the number two or number three player. So we were easily the market leader at the time, right? Like we had the brand, we had the team, we basically created the technology. And so why would we have sold? It was a huge market. We were effectively uncontested. So why would we have sold? Well, the reason is, is it turns out that in order for us to insert, we needed a cooperation of a company like VMware. They owned the majority of the market at the time, right? But if they wanted the wallet that we were going after, which it increasingly looked like they would, then it was quite likely they would acquire somebody else. And then it would be very hard for us, right? You know, we probably had months of discussion every time an acquisition offer came in. And then the decision to sell, it was not a simple one. And even then, I mean, this is pretty serious stuff. It's a super complicated, big stake, serious stuff.”
2022-01-26 · a16z Podcast · M&A, Before and After: What Founders Need to Know · IDENTIFIED FROM THE TRANSCRIPT · source
“Nasira, we had acquisition offers almost every year of the And when we decided, and the number just kept increasing. And even when we decided to sell it, which was, you know, it was a huge price. I mean, we were still a very young startup, it was a 1.3 billion dollar price, a 1.26 billion dollar price tag. And even then, the majority of the board didn't want to sell because we knew it was a huge market and we were the leader. So then the question says, why did we sell? You have to understand that an M&A can change the landscape itself, right? And so that would make it much, much more difficult for us to execute. Now, would they have bought somebody else? We weren't exactly sure, but they may have. So let's say that we decided.”
2022-01-26 · a16z Podcast · M&A, Before and After: What Founders Need to Know · IDENTIFIED FROM THE TRANSCRIPT · source
“So, how did this play out for you? You co founded NICERA and were acquired by VMware, and you also co-founded an earlier company that was acquired. How did you and your co-founders and investors think through these issues?”
2022-01-26 · a16z Podcast · M&A, Before and After: What Founders Need to Know · IDENTIFIED FROM THE TRANSCRIPT · source
“Acquire more value if they bought somebody else, then that would diminish your value, right? And so it's better to be in that position than somebody else. Or it could be that somebody offers a very good risk adjusted value, meaning, yes, maybe if you did it for 10 years, you could hit that value, but there's a lot of risk to it. And so there's always a very complicated calculus every founder needs to go through on this question. And in my experience, having faced it myself many times is no simple answer.”
2022-01-26 · a16z Podcast · M&A, Before and After: What Founders Need to Know · IDENTIFIED FROM THE TRANSCRIPT · source
“Is like one of the more significant questions a founder faces at any point in time. The goal from a founder standpoint, and in fact the board's standpoint, is to maximize shareholder value, right? But that's this kind of fairly simplistic sentence for a very, very complex landscape. And I'll give you some examples of why that is. So say, for example, like you're doing well and you think you're going to do well, but there's another company, a public company that's also doing very well, and you can sell to that public company in exchange for the equity of the company. It may be the case that the actual shareholder value would go even greater because you're now selling to a larger company who's also doing very well. It also may be the case that there is a company that has an incumbent that has a very strategic position and whoever they acquire, they can king make. And so even though if you stayed independent, you would”
2022-01-26 · a16z Podcast · M&A, Before and After: What Founders Need to Know · IDENTIFIED FROM THE TRANSCRIPT · source
“Okay, so that gives us the landscape of the different types of MA scenarios and how they affect price. Let's move on to the next step and think about actually making the decision on whether to be acquired or not. So let's take an example of a company that's doing well, has some strategic value to a potential acquirer, and is being, quote, acquired rather than, quote, sold, which frameworks should those founders be using to make this decision?”
2022-01-26 · a16z Podcast · M&A, Before and After: What Founders Need to Know · IDENTIFIED FROM THE TRANSCRIPT · source
“One of the reasons why you want to have this commercial relationship for a couple of years is as a seller, what you want is you want the buyer to take a pricing risk. What I mean by that is you want the buyer to pay a price that the buyer feels uncomfortable with. And that's when you know that you're maximizing your sell price. And in order for any buyer to do that, they have to have internal champions. Internal champion could be an EVP or general manager of a business unit that is sponsoring the acquisition. And unless that person has the conviction based on historical commercial relationships, it is going to be very difficult for that person to pound a table and take on the pricing risk that the seller wants. And so this is exactly the reason why you want to have that pre-existing commercial relationship.”
2022-01-26 · a16z Podcast · M&A, Before and After: What Founders Need to Know · IDENTIFIED FROM THE TRANSCRIPT · source
“With large strategic, they shouldn't think about whether they can sell themselves to this particular company down the road. What they should really think about is how can this commercial relationship help me scale my revenue faster than I could on my own? And if this relationship down the road turns into something more strategic, then that particular company could have that eminent conversation down the road, but it should really be focused on commercial strategic relationship. And if it turns into something that's more strategic in nature, we could all have that conversation down the road.”
2022-01-26 · a16z Podcast · M&A, Before and After: What Founders Need to Know · IDENTIFIED FROM THE TRANSCRIPT · source
“Putting yourself in a position where you could be acquired actually takes a lot of work. So a lot of times people think that you can just hire a banker and then you can just sell the company, but that's often not the case. What you have to do is build a pre-existing commercial relationship with a strategic buyer many years ahead of and actually having any M&A discussions. And for buyer to feel comfortable about making the acquisition, feel comfortable about paying a really good price for the target. They have to feel like they know the company really well. They have to feel like the integration of the target with the buyer's existing customer base is going to be pretty seamless. And so without having this level of comfort, it is going to be very difficult for any buyer to pay a meaningful price for the target. And by the way, when companies have this conversation, commercial conversation,”
2022-01-26 · a16z Podcast · M&A, Before and After: What Founders Need to Know · IDENTIFIED FROM THE TRANSCRIPT · source
“Potentially sell themselves because an IPO path is not an option for them. The third option is a company getting acquired when a buyer approaches the target, when the seller isn't thinking about selling the company and the buyer offers to acquire the company generally at a pretty good premium to what the company is worth. And the company has a fiduciary duty to its shareholders. And if the offer is compelling enough, the company has to take it seriously and the company may or may not decide to take that offer. And the reason why you want to be acquired in tech versus getting sold is if you're being acquired by another company, generally the price and terms are going to be much more favorable if you're trying to sell yourself generally something isn't working out and oftentimes it could be somewhat of a distressed sale.”
2022-01-26 · a16z Podcast · M&A, Before and After: What Founders Need to Know · IDENTIFIED FROM THE TRANSCRIPT · source
“I would say that there are three primary reasons. One is a company gets funded and they're looking for product market fit and they realize that product market fit just isn't there. And it is pretty clear to the management team and investors that the company just can't get the next round of financing. And at that point, if the company is not going to be able to finance itself, then the company only has one choice, which is to sell the company. The second case is the company could have enjoyed limited product market fit. Maybe the company scales to 30, 40, 50 million dollars in revenue, but the company is starting to see its growth getting stalled and it becomes evident that the company may not be in a position a couple of years down the road to be a public traded entity. So the company has some limitations on how fast and how big it can get to. So that could be a good reason for the company to”
2022-01-26 · a16z Podcast · M&A, Before and After: What Founders Need to Know · IDENTIFIED FROM THE TRANSCRIPT · source