Acquiring startups is a common strategy employed by large companies to drive growth and innovation. However, preserving the unique qualities and strengths of startups within the framework of a larger corporation can prove challenging. Nadia Gil, Chief of Strategic Planning and Corporate Development at Brady Corporation, offers insight into how to effectively preserve startups during the acquisition process.
“Everything is negotiable in this life. So if there are things that you can negotiate early on or during the courting period, go for it.” – Nadia Gil
Most large companies do not innovate in a groundbreaking way, therefore, they focus on acquiring startups for innovation. However, preserving startups in a large company can be difficult. The two main reasons startups don’t thrive in a larger company are speed and culture clash.
The pace at which startups operate, their willingness to pilot and iterate quickly, and their flexible cultural norms often conflict with the more structured and risk-averse environment of larger companies.
The key to mitigating the risk of destroying startups during the acquisition process is understanding their unique qualities, or "secret sauce." By knowing what makes them special, acquirers will now have a better understanding of what will break the business and how to integrate it effectively.
Lastly, 80% of the startup's secret sauce depends on the founder. Break those secrets down and understand whether they can be replicated in-house. Usually, founders get retention packages during an acquisition that will force them to stay a couple of years. Use that time to be prepared once the founder leaves.