Many of you may not be aware that apart from being the Founder and CEO of SYCODE, an Indian software company that specializes in developing plug-ins for CAD systems, I also am a Co-Founder and CTO of Print3D Corporation, a US company I started a few years ago with my friend Ron Barranco, that has some pretty interesting technology that we think will revolutionize the way people do 3D printing.
If you have been following my travels on this blog and my personal blog at DeelipMenezes.com, you may recollect that I have been spending a great deal of time in Maui, Hawaii. Well, that’s because Ron lives there and I have been working hard (or rather as hard as one can in a place like Maui) with him to get Print3D up and running.
Although we have not yet officially launched Print3D in a big way, we have been running it on a low key in the form of a semi-closed beta with a view of getting a small subset of people to test our technology.
3D Systems saw value in what we were doing and has acquired Print3D. So that means I have sold both my companies to 3D Systems, not just SYCODE. We are now in the middle of integrating the Print3D technology into the 3D Systems business and as a result have decided to take down our software and suspend our services until we complete the integration. You can visit www.print3d.com to see the press release and leave your email address if you want to be notified when we launch.
Apart from announcing the acquisition of Print3D by 3D Systems, there is another reason I am writing this post. Even after selling two of my companies, by no means do I consider myself an expert in buying and selling businesses. That’s why when the prospect of selling my companies to 3D Systems showed itself I sought the help of people who had been through an acquisition and asked them for advice. I would like to share what I learned from a couple of people.
Of all the people I talked to, probably the best advice I got was from SolidWorks co-founder Jon Hirschtick (@JHirschtick). He said to me, “You will get the best price for your company when you do not need to sell it“. He continued, “I know it sounds like common sense. But I am shocked to see how many people get wound up in the excitement of earning money and don’t see things this way.”
I asked Jon for advice on how one should pitch a company to a prospective buyer. I knew that posturing was the name of game when it comes to mergers and acquisitions and I had absolutely no experience in that sort of a thing. Jon told me something that I spent a good deal of time pondering over. He said, “The worst possible thing you could do is go and tell people why they should buy your company. That’s what just about everybody does. My advice is that when the time comes to make your presentation don’t talk about acquisition at all. The first and the most important thing you need to do explain the vision that you have for your company. Explain with great passion exactly where you want to take your company and then ask them if they are interested in helping you get there. And this is very important. You need to be very clear that no matter what, you are going to fulfill your vision, with their help or someone else’s help or on your own.”
As Jon was speaking to me on the phone I realized that what he was saying was precisely what I wanted to do with my life. I had been developing small plug-ins and utilities for about a dozen years now and I really didn’t want to do that for the rest of my life. I had absolutely fantastic visions for both my companies and I wanted to take them to the next level and beyond. I didn’t want to get rid of them, cash out, buy a boat and go fishing all day. I’m just 35 years old. There will be a time and place for those kind of things. But in all the confusion over the prospect of being acquired, somehow money always came in the way and cluttered things to a point of confusion. After that inspiring conversation with Jon it became crystal clear to me that not everything in life is about the money. This was really about what I wanted to do with the rest of my life and how I could go about doing it. Jon ended the conversation with these golden words that I would like to share with you, “Don’t try to sell them your company. Go sell them your vision for your company and the rest will follow automatically.”
In my opinion probably the most common reason why acquisitions don’t go through is the money. Almost always both parties start at different numbers and after rounds of negotiations they fail to converge at a figure that works for both parties. If you are selling a company, or anything for that matter, you should not expect the buyer to pay more than what he thinks it is worth to him. The important thing to note is the worth to the buyer and not the seller. What you think your company is worth to you really does not matter. You are not the one shelling out the money. The sooner you realize that the more progress you will make in your negotiations. If you find that the buyer does not value your company as much as you do, he probably has a good reason for not doing so. In that event it becomes your responsibility to highlight or increase the value of your company to the buyer.
Here is where I want to share something that Rick Chin (@RickWChin), Director of Product Innovation of SolidWorks, told me when we met recently at SolidWorks World. He said to me, “When looking for opportunities, there is a huge difference between customer frustrations and inconveniences. Solve an inconvenience, and your customer will appreciate it. Solve a frustration, and your customer will enthusiastically rave about you as his or her hero“.
Rick was talking about selling products to customers. But the same thing could be applied to the situation I mentioned above where you need to highlight or increase the value of your company to a prospective buyer. The most important thing you need to do ask the buyer what his greatest frustration is. You will find it much easier to sell your company to a buyer if that solves his frustration as opposed to merely solving an inconvenience. In fact, if the buyer believes that your company does not solve his frustration, he may also be pretty close to believing that you are asking him to pay for something that he does not really need badly. You need to make the buyer list his frustrations in order and then explain to him how buying your company or technology will solve them for him.
When selling a company it may so happen that you may not get a lot of time to make your pitch. Every word you say is important. How you say it is also equally important. But what is most important is what the person you are pitching to wants to listen, and not what you want to tell him.