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Ask HN: How do you go about getting your startup acquired

7 points by throw_away_1781 ↗ HN
I run a small consulting shop focussed on building mobile apps (iPhone, Android, BlackBerry). Luckily I have been able to work with some of the best startups in the Bay Area. My team is less than 5 and geographically spread out, while I live in Bay Area.

Unfortunately, we are not making a lot of money, but are able to work with well known up and coming startups. We will be a good acquisition candidate for any company looking to augment their mobile capabilities.

Having never done any business before, I am wondering how we navigate the waters and send feelers about our intent to be acquired. I also have questions on how you put a value on the team and how to go about the process. Also, issues I should be paying attention to, in order to make my company more attractive to potential buyers.

7 comments

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generators
I hope you are not mistaking "hired" for "acquired".

that said, your value proposition is "the team". a group of people familiar with each other and working with each other. so, the value of company directly depend upon how each member is committed to work after the company get acquired.

throw_away_1781
All the current members would be committed to working for the new company. "Hired" is probably the right word, but with a huge bonus, which you typically will not get by directly going for a job. Heck, none of the startup CEO's I work with would probably even look at my resume, if I had submitted it through normal channels. However, now I can call them or IM them and talk.

We probably bring more than just the tech skills. Building a team and delivering projects is not easy. It is about 10 times harder than I initially thought. I now have much more respect for all the small independent software consulting shops.

These thoughts actually started in my mind after I saw two ROR firms that recently got acquired. I think LivingSocial acquired one of them. That and the fact that we are not making enough money to justify the hours we put in. Slowly coming to the realization that I might not be tha good of a businessman.

misfyt
"That and the fact that we are not making enough money to justify the hours we put in"

raise your rates, you're not charging enough. two simple ways to tell if you are not charging enough:

1. everybody is willing to pay your rates - nobody ever says, "no"

2. you are not making any money

triviatise
You may actually be making a lot of money, but cash could be tight. It may actually be hard to tell, because it is easy to let your receivables get too large. If everyone is busy, maybe no one is bothering to collect the $. Or at least you wait too long to collect the $
triviatise
You need to make a minimum of 50% gross margin in services. This means if the team members make 50/hour, then you need to charge at least 100/hour. One way around this is to do fixed fee projects, but this is risky without strong processes. Also the danger zone is around 3-5 people because you dont quite make enough to hire one full time overhead person but you need half of one. Once you get to 8 or so it gets a lot easier because you can afford some overhead.

Also cash will always be a problem because if your profit margin is only around 10% you will continually be short of cash as you try to grow.