After the acquisition: 3 startup executives share their exit experiences

In an interview at TechCrunch Disrupt in 2014, then-CEO of Pure Storage, Scott Dietzen, was asked about the possibility of exiting via acquisition.

He didn’t pull any punches: “Acquisitions always suck, and suck worse than you think that they are going to suck.”

That doesn’t sound like getting acquired is the best thing that could happen to your startup, but this is only one perspective on the matter, and perhaps it depends who you ask.

If being acquired means losing the brand and identity you have worked so hard to build — or perhaps worse, losing your cultural identity — it probably will suck. If you get stuck with a company that simply imposes its will on you, it definitely will.

Sometimes, in spite of Dietzen’s proclamation, it can be at least OK, and both sides get something out of the deal: the acquiring company needs your product or your talent, you receive an exit and a check.

Previously, we spoke to the acquiring companies to get their perspective on the deal and how they fold these companies into the larger entity. Now, we’ll hear from executives who worked at three companies that they bought.

These companies said their acquisition experience was just fine, thank you very much. Though they aren’t about to talk crap about their new overlords, you do get the sense that they landed in a pretty decent spot, all things considered.

Deciding to sell

The companies we selected are not fresh startups by any means. One was owned by a private equity firm, and one was owned by another company when they were sold, so they had been around the block and knew what it was like to report to someone else. The last company, a 72-year-old operation, was the exception.

Will Conway, CEO of Pathwire, had been down this path before. His startup was a member of the YC Winter 2011 cohort, and was sold to Rackspace a year later. Private equity firm Thoma Bravo picked it up a while later and sold it to Sinch last year for $1.9 billion.

As part of a private equity firm, Conway didn’t have a lot of input when it came to being sold. If the firm was going to sell, it was going to sell, but as Conway sees it, he landed with as good a company as he could have hoped for. Pathwire’s primary products, Mailgun and Mailjet, gave Sinch a missing email marketing piece, and fit nicely into the company’s platform of communications services.

“When you look at the landscape of big companies out there that are way ahead on CPaaS (Communications Platform as a Service), Sinch is one of the first ones that come to mind. And they didn’t have an email provider. Their ambitions matched ours, which is really important,” he said. Pathwire also covered markets that Sinch was looking to enter and there was a product-platform fit.

“All these things just started to really come together. So we just pulled the trigger on it and we got the right price, and it’s been a great fit.”

Widen was a different story, says former CEO Matthew Gonnering, who is now SVP and general manager for Widen at Acquia. He explained the 72-year-old company had moved into digital asset management, and that product attracted Acquia, which was building a digital experience platform and lacked that capability. Widen’s owner decided he wanted to sell the business, and Acquia proved to be a good match.

“We’ve been in the software business for 25-plus years, and continue to focus on digital asset management with expansion into product information management. Acquia was interested in us because they run on a much broader level visual experience with a web CMS and Drupal at the core [and it made sense to bring the two companies together],” he said.

Lexia had a different journey altogether. It launched in the mid-1980s and was sold to Rosetta Stone in 2013, which Cambium acquired in August 2020 for almost $800 million. Cambium then sold Rosetta Stone a few months later, while keeping Lexia and combining it with Voyager Sopris, a company it had previously purchased.

It was kind of a whirlwind time for them, and even though they weren’t told there would a spin out like this, Nick Gaehde, president of Lexia, says that in the end, the moves made sense for his group and for Cambium. “If you look at Cambium, it’s mostly focused on the K-12 market […] where Rosetta Stone was mostly an adult consumer business. So it wasn’t as clear of a strategic fit as the Lexia business was,” he said.

“So I think that really ended up being the deciding factor in terms of how these businesses came together and what to keep and what to divest.”

Learning to give and take

Regardless of how the transaction comes together, once it closes, you’re going to become part of the new organization. In Part 1, executives from the acquiring companies talked about the importance of having an inclusive and transparent process that is more of a discussion than imposing your will on the company being acquired.

The acquired companies confirmed that was the case, at least when it made sense to have a discussion.

Conway says people have to understand that with an acquisition, there has to be change. He’s been through the process a few times, and he admits that not everyone wants to stay, and that’s just part of the process. “With Sinch and everything that it brings, it’s just a volume of new ideas, new people, all this stuff. So if you’re wanting to go out there and you’re wanting to continue to win and kind of attack the market, it’s a great cultural addition,” he said.

“But if you’re wanting everything to stay the same. Or if you’re wanting the same level of autonomy, regardless of how the project grows, or how complicated it becomes — it doesn’t matter if it’s an acquisition through Sinch or if it’s another good growth period — things are going to fundamentally change.”

In Lexia’s case, Gaehde says there was a lot happening around the transition, and that was a lot for everyone to process. “Yeah, it was certainly a lot to take in. I mean being acquired and then with Rosetta being sold within a very small period of time was a lot of change,” he said.

But both companies worked together to make the transition as smooth as possible under the circumstances. “I would say it was an open and collaborative process. It took into account principles of do no harm to our customers and do no harm to our employees, and being careful to do the kind of integration work that we needed to do,” he said. The company actually kept their old benefits package in place all last year and only switched to Cambium’s starting this year.

Gonnering says some things will be open for discussion and others that won’t, and you can complain, but it’s not going to change anything. That was the message he gave his people: They had to pick their battles where it made sense.

“We really started thinking early on as an executive team around what the matrix of openness and collaboration was going to look like,” he said. That meant knowing which things were open to discussion and which they were just going to have to accept.

He gives an example of when they had to accept the changes that came with the Acquia benefits package, but they had a discussion around tooling. The company remains an independent brand even while it’s being folded into Acquia, and they could push for certain tools that made sense for helping them continue to build the new business and help Acquia see the value in using them too.

Becoming a whole

The hardest thing appears to be moving on from the company you were and becoming whatever the acquiring company expects from you, and learning to work in that larger organization. For Pathwire, being owned by a private equity company made transitioning to a new owner a little easier.

Lexia’s Gaehde says that it was a collaborative process with very little of the ‘we bought you so you have to do it our way’ mentality.

“I would say it was a tremendous partnership, and they always focused on who are the stakeholders within the company who need to come together to make these decisions, and who understands the implications of the decisions we’re making. I think that’s the reason, from a cultural standpoint, it worked so well,” he said.

Gonnering said Acquia could easily have taken the stance that it was buying them for the revenue and would impose its will on them, but that’s not what happened.

“They’ve been open to all the things we’ve done across all the capabilities that we’ve built up. Having that openness has been [important] to convince the rest of the organization that they didn’t just acquire us for the revenue. They actually acquired us for the talent, for the processes that we put in place, and then to see it play out and provide evidence that it’s really true, is a really powerful thing.”

Conway says that when they were part of Thoma Bravo, there was a really rigid, templatized way of reporting revenue and progress every month, and it was hard to conform to that. When he got to Sinch, he was pleased to find a lot more flexibility in thinking and approach.

“With Sinch, we are not constrained by the same elements [as at Thoma Bravo]. You know, you can go into the conversation and effectively make an argument not just for how you should be reporting, but how the broader company should be reporting. So there’s a lot less that is ingrained, which means there’s more discussion,” he said.

As these three companies show, each acquisition is going to be a bit different, even though navigating the experience is always going to be challenging. However, as these companies tell it, they were able to maintain their identity to an extent, participate in the process and feel heard.

It was probably not always perfect, and there were likely conflicts that they had to work through, but these experiences suggest that if you’re going to be acquired, maybe it doesn’t always have to suck more than you expect.