Don’t Think ‘Competitor’, Think ‘Opportunity’
CEO at MootUp
I was very interested in the audience, content and technical intellectual property (IP) of a company that was having financial troubles. The technology was running on 150 servers in a top-tier data center so it was costing them a huge amount to run. At the same time, though, our company had been working on a server technology that was built to optimize for massively multi-user shared experiences online. We could easily run thousands of people on one server, thereby, only needing five servers maximum to run their backend instead of the 150 it was taking them. So when the option arouse to acquire the company we had to make the difficult decision to either agree to attain the troublesome company that cost 40 million dollars to build, or to pass and look for another way to build audience, generate content and mature our technology.
We ended up acquiring the business. First, I identified the costly server problem. The amount of infrastructure they had and the cost association with that was burning a huge hole in their pocket. I acknowledged that this could be resolved by using our current server technology. I anticipated that we would acquire what they had and simply replace it with our servers. Luckily, this is exactly what happened.
However, we didn't do all due diligence (reasonable steps taken in order to determine if the company was suitable to acquire) at the beginning, while we were testing these ideas. The due diligence process of the business took months but in that time we were able to determine whether our technology would fit and would work with what we were looking to acquire. Once the deal was executed then we acquired the business, matched up the technologies which, inevitably, enabled us to run the platform at a fraction of the cost than originally viewed at.
- If you are interested in something, put out an expression of interest, start a discussion, and then find out along the way if it will or will not work. You could always say no or cancel an opportunity if there are major differences from what you initially expected.
- Companies that are in distress and looking for certainty are more likely to stick with someone who shows interest and opportunity.
- The time during due diligence, before we signed the agreement, gave us time to work through the technologies and make sure that they were a good fit for both parties involved.
- Instead of viewing other companies as competitors, reflect upon things that they have that could add value to your business. Don't consider anyone a competitor. They are just other players in the market and they could potentially become a partner.
- Anyone you consider a competitor, talk to them, connect with them. In the future you might acquire them, they might acquire you, you might engage in a merger.. whatever happens having a relationship there sets a foundation for later. This doesn't mean you need to be an open book, but do consider why you fear sharing your stories and plans with others it might be because you are not doing something unique or valuable.
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