Acompli, our closest competitor, was recently acquired by Microsoft for $200M. I’m sure many startups see a competitor getting acquired by BigCo. at some point. I wanted to articulate the emotions you will go through when this happens and how to make the most of such an event.
Panic – ‘Shit!’ will be the first word that comes out of your mouth when the news breaks
Pain – Your thumbs and eyes will hurt a lot, because you’re going to scroll through and read every single thing written about the acquisition. “Why did BigCo. not pick us”
Denial – You’ll quickly try and find the positive to it, but still feel sad subconsciously.
Analysis – You’ll probably have 117 theories on how/why the deal went down and where you went wrong. Those will range from colors on your icon, to lack of features and even to the location of your offices.
Acceptance – Eventually, you turn off the Google Alert for that competitor
All the above emotions are absolutely normal (even healthy) to go through if you are passionate about your product and your startup.
A few things to consider when this happens:
- BigCo acquiring a competitor has never meant your startup is doomed. There are numerous examples of this – Sparrow’s acquisition by Google never hurt Mailbox, whose acquisition by Dropbox never hurt Acompli.
- M&A action in your space is invaluable. As someone recently told me, it could be the ‘perfect storm’. Its a big validation of your market’s potential.
- It can easily become a larger opportunity for your product. Mailbox now has a mandatory Dropbox sign up after it’s acquisition, which I’m sure causes people to dump it and signup for CloudMagic instead.
- Its usually a beginning to what could lead to great things. WhatsApp’s $20B acquisition does not signal the end of the messaging era, it signals the beginning.
- Don’t start emulating the competing product/business – you don’t know their context, why they were bought and what dynamics were at play.
- Communicate with your team so that their thinking is aligned with yours. Don’t pretend it didn’t affect you, be clear in communicating that it hurts, and also that it’s important to get back to execution.
- Put your head down and get back to work with your original plan, quickly.
In summary, its likely to be hard on you, there’s no doubt about it, but its not the end. Its easier said than done ‘ignore the competition, focus on what you’re doing instead’, but it must be done. Startups are an emotional roller-coaster (described further by Paul Graham here) but one must think honestly and rationally during the numerous ups and downs.