founder stories

How to get acquired

Meet Nami Baral, one of the most impressive founders we’ve ever met. 

Nami is an immigrant from Nepal who got accepted into Harvard as a pre-med student. After switching to study economics, Nami worked as an investment banker in M&A (mergers and acquisitions), joined a rocketship startup that was acquired by Twitter, and led product partnerships there for five years. 

She later left Twitter to start her FinTech startup, Harvest. Harvest used AI to help consumers negotiate bank fees and get refunds automatically. 

Hustle Fund was lucky enough to invest in Harvest and we witnessed Nami go from idea to successful exit in just three years. 

Nami did some things in the early days of building Harvest that ultimately set her up for an acquisition. Specifically, she started with the “end in mind.”

In this edition of The Founder Playbook, we delve into:

  • What Nami did in the early days to open doors later on
  • How to approach conversations about selling with potential acquirers 
  • Questions to ask yourself before finalizing the offer

A masterclass on building relationships

Nami believed that if you invest deeply in building relationships from day 1, good things would happen. 

Early on, Nami carved out time to connect with other folks in the industry. She organized in-person meetups, especially during conferences where everybody was already together. Then after these meetups, she’d schedule 1:1 chats to learn what people thought about Harvest and where they thought the industry was going. 

Nami also added lots of people to her investor newsletter. M&A wasn’t on her mind at this time. But these efforts made future scaling easier, because there was buzz about Harvest in the startup ecosystem. 

Nami did all of this way before she “needed” to. And when it was time to sell, the opportunity came faster than she would have thought. 

One of the people she had connected with was Jeffrey Cruttenden, founder of Acorns, a platform that helps people passively save and invest their money. 

Jeff was an early investor in Harvest. He and his team were interested in acquiring the company when Harvest was super early, but Nami wasn’t ready to sell. Not yet. 

Why was Acorns interested in buying her company when her startup was so early?

Bigger companies (like Acorn) often consider acquiring startups (like Harvest) because they see a great team that can execute well. But Acorns saw more than a great team – they saw the value that Harvest could bring to existing Acorns users. 

See, Acorns is all about helping people improve their personal finances. And regardless of how much money someone has in their investment account, everybody wants more savings. And that’s the value that Harvest brought to the table.

For Nami, the partnership with Acorns could bring Harvest’s technology into the hands of tens of millions of users immediately. And without the huge customer acquisition costs. 

So when did Acorns actually put an offer on the table? 

Harvest was generating $2 million in annual recurring revenue (ARR) and they were about to raise their Series A. Their revenue had doubled every other month. They had great retention rates. So they were excited for the next stage of the company. 

Jeff from Acorns reached out to Nami and asked, “Hey before you go do a series A, can we have a conversation with the Acorns leadership team?”

Nami agreed to the conversation, and she was excited about where it could lead. But she also knew that no deal is a sure thing until contracts are signed. So she continued to prep for her Series A fundraise.

After a few months, Nami had multiple leads for her series A, a potential offer from Acorn, and several other inbound offers to acquire the company (thanks to her networking efforts from the first year). 

Then she just had to decide: do I want to sell? What are the economics? And who should I sell to?

Nami’s thought process

There are many things to negotiate in an offer: cash or stock, timeline, vesting, golden handcuffs, etc. So what did Nami consider before making the deal? 

She told us that every deal is different. 

Some founders take the “acquihire” route, where company A buys startup B mainly for their talented team. So in this scenario, you may try to maximize your team’s well-being or get the highest amount of payouts for your investors. 

Nami’s offer was more of an M&A. So she thought through questions like:

  • How will the buyers incorporate the development of our product into their company’s roadmap?
  • How are they thinking about integrating these two different products? Does the current infrastructure allow for this?
  • Do we need to make additional hires? Do we need additional resources from the acquirer to be able to achieve our original road map?
  • Do our roadmaps align? 

The second component of the M&A is the logistics:

  • What kind of monetary investment will the acquirer put in you? In your hiring processes? Or retaining your team?
  • Can your team members fit into this combined entity?
  • How are your existing vendors going to fit in this?
  • Are you going to be an independent subsidiary of the acquirer or will you merge into the original entity?
  • How much will your budget be moving forward? Will you handle your own P&L?
  • What will be your new job title be?
  • What kind of options will you get? 
  • How will your team be treated? Is there are kind of bonus they’ll get as part of certain milestones we’re tracking? 

How this process actually works behind the scenes

There is a LOT of info that needs to be finalized before the acquisition actually happens. But this can get done efficiently if both parties come to the table prepared. 

First, Nami had to figure out the high-level terms and logistics of the deal. She recommends all founders to talk to their investors, advisors, and other entrepreneurs who have gone through this process. Write down what you want on paper.

See what your acquirer wants out of the deal. Once you both get on the same page on the high-level details, THEN your team can prepare the actual documents to make all this happen. 

This process took a few months for Nami. She successfully sold her startup to Acorns last year. 

Final thoughts

Nami didn’t “get lucky”. From day 1, she invested in building relationships that opened up doors down the line. 

If you wait to start building these relationships, it will likely be much harder to find a company that wants to acquire your business.

So spend time now to connect with people in your industry… and nurture these relationships. Seriously, go do it