The Next Day...
Why founders feel like shit after selling their startup and how to find happiness as a post-acquisition-ex-founder-employee
I spent the last 10 years studying, reading, learning, and not sleeping much in order to build a business good enough to sell. And guess what, I did! I sold my startup and to my (and probably your) surprise, I woke up a few weeks later unhappy, unfulfilled and lost.
I’d achieved what I set out to do; I had money in the bank, a well-paying job, a brand-new retirement account, and a great new boss but somehow I felt miserable.
“Poor little rich boy,” you think.
But I’m not alone (and not as rich as you might assume). It’s actually very common for founders whose companies have been sold to feel somewhat sad, unfulfilled, and unmotivated. In fact, hundreds of founders have walked away from millions of dollars at their new companies because they just couldn’t cut it as an employee.
When your startup sells, very rarely do the founders get a pile of money on day one and walk off into the sunset of eternal holidays. When a large corporate buys your startup, they’re also buying you, your team, and your collective expertise, ability, and vision. They want the machine but also need the machinists.
When a large corporate buys your startup, they’re also buying you, your team, and your collective expertise, ability, and vision. They want the machine but also need the machinists.
In order to retain the talent, they put the proverbial “golden handcuffs” on you, making you “earn out” your portion of the proceeds over time (usually 2 - 4 years). So when a frustrated founder walks away after just 6 months, they may be leaving with nothing more than a broken heart (sob) and a signing bonus.
Like an astronaut the day after returning to earth or an olympian the day after winning a gold medal, it’s actually natural for a startup founder who’s reached the pinnacle of their field (selling their company) to feel down and directionless the next day.
Every step from incorporation, cap table creation, fundraising, reducing churn, finding an acquirer, negotiating a term sheet, and maximizing sale price is mapped out for founders. But what do you do if you follow all of the advice, step by step, and sell your startup? There are no steps, books, nor accelerators about being a great post-acquisition-ex-founder-employee.
And this isn’t just about the feelings and frustrations of the disillusioned founder who doesn’t know how to go from being the boss to being an employee. An unhappy startup team really can hurt the large company that just paid millions to acquire them. They want the team to be happy, challenged, fulfilled, and productive just as much—if not more—than the founding team does.
You might assume that founders and team members would be happy and stay in their new well-paying gigs that give them extra-big bonuses as part of their post-acquisition retention plan but did you know that 33% of acquired workers leave in the first year after being acquired?
33% of acquired workers leave in the first year after being acquired.
Before selling, an independent startup founder jumps out of bed—either out of excitement or dread—as each action feels monumental. Each and every decision each and every day gets you one step closer to success. Your actions and decisions are important, impactful and create value for yourself, your team, your investors, and your industry! But then you are purchased (which was the point, no?) and suddenly your work is much less monumental.
Suddenly, things move slowly. There are LOTS of meetings, conflicting priorities, and processes. Now your decisions are just opinions that can be easily dismissed or ignored. You aren’t captaining your agile rowboat, you’re swabbing the decks of a slow-moving cruise ship.
While the demotion from captain is naturally difficult, it is possible to find fulfillment, happiness, wealth, and influence within a big company. You can help navigate the cruise ship but you have to have a map. What if there was a play book or a guide on how a founder can optimize their mindset and be prepared for the shift so that instead of being swallowed, they utilize the acquiring company’s established size, reach, resources, technology, and channels to realize their startup’s vision and find happiness.
After selling my startup, the first thing people asked me was, “so, what’s next?” or “When are you creating your next startup?” as if it was a given that I couldn’t thrive (or didn’t want to) within our acquiring company. But I’d built a team and a product that I was passionate about and wanted to see grow and flourish. Our customers loved us and while running a COVID-era travel tech company had left us exhausted with low customer counts, and even lower bank balances, we knew we were onto something. We wanted to get our product out into the world at scale and see our vision truly realized. We decided the best way to do this was through a company with the reach and customer base we could only dream of.
We wanted to get our product out into the world at scale and see our vision truly realized.
Even if you go into an acquisition with your eyes open; have your, your team’s, and your acquirer’s expectations set; have clearly aligned your product and go-to-market strategy; and gained access to all the resources you’d been lacking, it still might suck.
You might never be able to see eye-to-eye with your new boss (or your boss’s boss’s boss). You may realize your product isn’t as important to the acquiring company as you (and they) thought. Possibly you just get frustrated and bored by the lack of speed and increased bureaucracy. Even if you’re destined to exit post-exit, why not optimize the experience so you can learn, mature, and expand your network, knowledge, and bank balance while there for a possibly short time.
Unfortunately, you’re almost certainly not the exception to the rule so take the next step, prepare, study, and be ready to be a kick-ass contributor to your bigger team - even if it’s only for a short period of time. Failing to prepare is, as they say, preparing to fail. And you want to be happy. You’ve earned it!
One of the most famous examples of lack of founder/acquirer fit is eBay’s acquisition of PayPal. Here, all but two of the six original PayPal founders, along with two of their most famous non-founders, Elon Musk and Reid Hoffman, were out of PayPal within the same year as the acquisition (2002). The exceptions to the insta-exit were Russell Simmons, who stayed until 2003 and Yu Pan who stayed until 2004. Musk, who joined PayPal (then Confinity) as part of a merger with his payment company, X.com, never made it to the M&A. He was merged with, appointed CEO of the new combined company, PayPal, and fired, all in the course of the year 2000!
When the founders of PayPal left eBay after the 2002 acquisition:
Elon Musk (Joined via merger in 2000) - became CEO and was fired in 2000 (-2 yrs)
Peter Thiel - 2002 (0 yrs)
Max Levchin - 2002 (0 yrs)
Luke Nosek - 2002 (0 yrs)
Ken Howery - 2002 (0 yrs)
Reid Hoffman (Joined in 2000) - 2002 (0 yrs)
Russell Simmons - 2003 (1 yrs)
Yu Pan - 2004 (2 yrs)
Reading though that list of names, you might be tempted to consider it proof that running for the door immediately after an acquisition is the right thing to do. After all, that group (often referred to as the PayPal Mafia) went on to found companies like Tesla, LinkedIn, Palantier, Yelp, Yammer, and SpaceX to name but a few. But for every Reid Hoffman (EVP of PayPal, Co-Founder and CEO of LinkedIn, VC at Greylock) there are thousands of founders who never reach—never mind exceed—the heights of their acquired startup. For some, the best way to build influence, wealth, status, happiness, and fulfillment might actually be at a big company.
For some, the best way to build influence, wealth, status, happiness, and fulfillment might actually be at a big company.
I’m not claiming that being acquired means you have to “go all corporate” at all. You very well may go on to found and fund tens or hundreds of new companies but if you walk away, you want to leave your well-earned riches as you are “pulled” to greater things rather than “pushed” away from worse ones. You can be empowered to make the right decision instead of feeling forced into one by having your mindset and expectations better prepared.
If you stay on within your acquiring company, you have the opportunity to remain the steward of your team and product. To do right by those that vouched for you and made business cases to spend millions on you. You may soon realize that you’re not as smart as you thought and they’re not as dumb as you’d assumed. Big companies are often slow because they have to be due to scale, regulations, or technology limitations, not because they’re filled with morons.
If you stay, you’ll get to build a network of smart, professional co-workers who can expand your knowledge and maybe go on to become friends (or even future co-founders).
Even if you decide you can’t stand the thought of having a boss, understanding their goals of the acquisition, vision for your product, and the standing of your team helps you walk away with your head held high. Helping set things up for success ensures your reputation remains in tact and no bridges are burned on your way out.
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