Too many entrepreneurs approach dealmaking with the sole purpose of winning the deal, says Marc Kiven.
“I often equate it to a dog chasing a car,” Kiven says. “A dog is going to chase a car and have lots of fun doing so. Then he gets the car and thinks, ‘Uh oh, what do I do with this now?’ Any entrepreneur needs to have a very clear understanding of what they are going to do with the prize. Many leaders look at it from that perspective versus considering the strategic and accretive value they are going to obtain.”
Kiven, founder of the groundbreaking digital marketing company Signal, is adept at painting a clear picture for what transpires after a deal is secured.
“I’m an entrepreneur,” Kiven says. “I’ve always run my own businesses, acquired my own businesses and sold my own businesses. I look at the world of business from the perspective that everything has a lifespan.”
The key is knowing where the company you seek to acquire is at in its lifespan and what needs to happen to move to the next phase.
We caught up with Kiven to talk about what he looks for in an investment opportunity and how he sets the stage for the company’s future.
Be an opportunistic dealmaker
I’ve always kind of focused on early-stage companies and businesses or industries where there is a lot of future growth potential. It’s a matter of figuring out how to harness the opportunity around that growth for the purpose of the business taking a significant or a good portion of the market share. I’ve focused my attention on the digital media, advertising and marketing landscape.
Typically I look for those opportunities that don’t require a tremendous amount of investment. If they do, there has to be a major differentiator and/or benefit to be gained that would warrant that level of investment. But typically the investment from my perspective would be an investment in time, knowledge and strategy that would move the needle on the business rapidly versus having to find significant capital to build out. I like to let the momentum of the business be the driver.
I’m a speculative builder, a home builder in essence. I identify a property, I build a “home” on that property to the degree that it would interest somebody in purchasing that property and then I ultimately sell the property. I leave some of the finer touches undone so somebody can feel like they’ve added their touch to the home.
Closing the deal
Be honest with yourself. You can only be so transparent because part of negotiating is somewhat keeping your cards close to the vest. If you have a deal in hand that you feel is important and accretive to your business, then move quickly, efficiently, transparently and honestly. You want to run a streamlined process because dealmaking has a tendency to be very exhausting on both sides.
It’s a lot more than negotiating. You can be the greatest negotiator in the world. But is it the right deal? Have you negotiated the right structure? Does it make sense for your organization and the other organization? How are you going to synergize and integrate? There are so many moving components and personalities that need to be taken into consideration. You need to have a strategy.
What’s your plan now?
Overcapitalizing a business can make it very hard to exit a business. It’s all about being balanced and thoughtful. A lot of people subscribe to the rainy day theory, the idea that it’s best to raise money when you don’t need it. I look at it slightly differently. You try to raise as little as possible. But if you are going to raise money, use that money to efficiently grow the business as quickly, as efficiently and as profitably as possible.
People are very concerned about dilution and about losing control. It’s a balance. You have to think about what your long-term strategy is. Are you building a business as a legacy? Are you building a business to take advantage of market timing and market opportunity? Are you building a business to fill a void in the industry? Are you in essence becoming an R&D unit for a larger, more strategic company that can’t move as quickly or make the types of investments it needs to make to do the same thing?
It’s easy to make the strategic investment. You need to understand what your goal is as an entrepreneur. Am I starting this to go change the world and change an industry and do that on my own and become the next Salesforce? Or do I want to become part of Salesforce?
It’s really having a firm understanding of the lay of the land and the road ahead. If you have that, you know what resources to go get. You can get the financial support that will help you get where you’re going. You need to have a clear roadmap and understanding of the market you’re in and you need to know where you are on that map at any given point in time. That helps you as the entrepreneur decide what to do.