Got tagged in a thread this week talking about acqui-hires/smaller acquisitions and how they happen, so thought it would be helpful to share my experience and how we sold Birch back in 2018.

A thread:

After just over 4 years of running Birch we had ~6 months of runway left before we actually ran out of cash and realized we had three options:
1) raise more money
2) find a home for the team and the tech
3) magically make the business model work

So we put together a plan

We would spend 3 months trying to raise our seed (we had only raised angel $$) while simultaneously looking for a partnership to turn on our affiliate business model (had good traffic but banks still turned us down).

If fundraise failed, we'd have 3 months to get acquired

Needless to say, we didn't raise any additional capital. I met with a few dozen investors and no one was excited about an affiliate based PFM. I even broached the idea of a personalized rewards credit card.

Hard to raise when you don't have momentum

But even though the fundraise failed, we had been meeting everyone in the consumer fintech world in hopes of landing an affiliate partnership. One of these companies would eventually acquire us.

So, now to getting acquired. I had no idea how it worked and I couldn't afford a banker to shop us around.

I read as much as I could and ended up making a hitlist of 30 companies on our team whiteboard - ranging from Square to Airbnb to Capital One.

I had a two-fold strategy. I would try to find someone from the product team and pitch a partnership with the hopes that partnership conversation would turn into acquisition talks.

If I couldn't meet the partnerships team, I would just cold email the corp dev lead.

We got rejected or no reply from 25/30 companies. The ones who answered just offered to interview the team for roles but didn't want the tech, so no return for investors.

Two did seriously engage through - LendingTree and Even - so we kicked off conversations with both

I met the LendingTree team at a conference in Vegas that they sponsored, looking for partnerships to turn revenue on. I had met Even Financial through a mutual friend because their API was exactly what we were looking for - it would enable us to monetize instantly (so we thought)

We thought it would but they were also a bit earlier on than we expected.

We had been talking to them for a couple of months about a credit cards API but it wasn't ready yet, they only had a personal loans API (part of strategy 1!)

When LendingTree initiated acquisition conversations, I emailed the founder of Even with something along the lines of:

"Hey, we're considering selling the company and not sure if something of interest but we could come build out the credit cards business with the team and tech."

Turns out it was the next top of mind thing on their roadmap so it was a perfect fit.

Over the next two months we'd visit Charlotte and Chicago to meet with LendingTree and NYC to meet with Even. Having two conversations going helped some with negotiating leverage

Ultimately, LendingTree didn't work out. An acqui-hire was unusual for them anyway, they were used to acquiring profitable companies and we were barely-revenue.

Even made us a stock offer with good comp packages for the whole team that included cash over a vesting schedule.

So, we had their lawyers paper it up, barely reviewed it because money and signed a month later.

They had just raised their series A and my bet was this was another shot at goal for our investors (and us) which turned out to be true when we raised at ~3.5x a few months later

I've talked to a dozen or so founders about their acqui-hires and all trend to two common themes. They were either acquired because 1) the team was a perfect fit or 2) partnership talks turned to acquisition talks when roadmaps lined up

In my experience, the best conversations we had with companies were when we went through the product team versus corp dev.

The product team saying "we need this" was better than corp dev saying "look what we found."

I've also spoke with several founders who have considered this path as they reach an inflection point in their businesses which is either shutting down or raising more money, and I think this line of thinking is very common. 9/10 companies don't work out.

I'm just a sample size of 1 but I'm happy to answer any questions that don't require disclosing confidential information!