My friend sold his small company to a big company, with the usual mixed feelings of elation and regret. After all, no matter how big your payout, you’re still selling the thing you’ve sweat blood over building. Ultimately, though, he was ready to let go — it had been a long, hard ride. However, while he was ready to release the burden of the business, he wasn’t ready for the culture shock that came from dealing with his new corporate overlords.
There are many ways the transition from entrepreneurial endeavor to corporate bureaucracy can go off the rails, and he could illuminate any one of dozens of interactions that have left him disillusioned. But there was one particular moment which, in my opinion, crystallizes and encapsulates everything that corporate America gets wrong about entrepreneurship.
As my friend tells it, the moment that forced him to realize that his new bosses would never understand him or his team, happened during a meeting in the early days of the transition. An executive was listening to their forecast and looking over their pipeline for new business, then shook his head and said, “I thought you guys were entrepreneurs. I guess that went out the window after we bought you.”
In the popular culture, startups are characterized as, “Driven,” or, “Scrappy,” and guided by slogans like, “Fail fast,” and “Innovate or die.” But to corporate America this translates into, “Cheap, fast, and efficient.” Most executives in big organizations have never experienced startup life and grasp only that these smaller entities are merely simplified versions of themselves, shed of management layers and focused on selling. So, naturally, the expectation is often that the acquiring company will simply harness and ride a startup engine of innovation or profitability.
What they fail to recognize, though, is the critical part that ownership has to play.
As soon as you take away the freedom of self-determination from something, it ceases to serve its own vision and begins to serve yours. So, without accounting for some level of autonomy for the entrepreneurs within the new business structure, the acquiring company effectively crushes the enthusiasm for innovation and business success under the weight of its own bureaucracy. The result is that most acquiring organizations are only buying the shell of a business, along with their users and/or clients, while emptying it of many of the things that made it attractive to them in the first place.
Now, as crass as the above summation may seem, it’s perfectly legitimate as long as the objectives for the acquisition are aligned with this course of action. There are plenty of times that bigger companies acquire smaller ones to own a technology, establish a foothold among a new client base, or simply to kill competition in the space. But judging from many of the acquisition tales that I hear, acquiring companies are still often left frustrated that the entrepreneurial spirit is not transferable into their own bloated structure.
This leaves the acquiring organization with one of two choices.
The first option is to just get over it. If you’re only buying talent or tech, you need to make peace with the fact that all you’re getting are new employees or a cool product. Either or both may continue to grow as a part of your company, but without self-determination the entrepreneurial spirit is essentially killed the moment the ink is dry on the deal.
However, if you want to keep the entrepreneurial spirit alive, the second option is to have the guts to allow the acquisition to flow both ways. Take a hands-off approach for a while. Nurture, invest in, and support the startup team. Learn from them. Adopt approaches that make sense for your larger organization. Provide input and guidance as collaborators in their vision. But remember that you bought them because they were a disrupting force, not in spite of it. So, let them disrupt a little.
In the end, neither approach is perfect and each has its benefits. Not every startup is well run and not every big company is bad at acquisitions. But you can’t have it both ways. You need to be clear from the start about your objectives. Otherwise, no one is satisfied with the results.