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Google Wants Even Earlier Exits than in “Early Exits”

by Basil Peters on June 1, 2010 · 2 comments

The main thesis of my book Early Exits is that entrepreneurs and angel investors would make more money, and have more fun, if they built companies around a strategy of early exits.

In “Early Exits” show that most M&A transactions are under $30 million. More recently, I have been saying that  the median price might be as low as $15 million.

Part of my message to entrepreneurs is that they don’t need to build companies to be profitable before they can execute very good M&A exits. This is a main theme in why I think this period will come to be called a Golden Era for tech entrepreneurs.

The fundamental driver behind this trend is that big companies have learned that M&A is the best way for them to grow.

But even I was surprised to learn just how early Google wants to do acquisitions.

Charles Rim, is one of the five most senior M&A professionals at Google worldwide. He did an interview for Corum’s online “M&A Class.” I am grateful to Corum for organizing this event and for posting the archive. (The Corum archive does not seem to be available any longer, so I’ve re-posted below. There’s also a transcript here.)

A few  of the fascinating points from the  interview are:

“90% plus of our  transactions are small transactions.  So  that would be less than 20 people, less than $20 million and that is truly the sweet  spot

“we do prefer companies that are pre-revenue

“technical staff, engineering, a strong engineering team, these are the  things that we think are very important to the future success of Google and  important for us to use acquisitions in that manner.”

This provides some excellent insight into how a very large company like Google thinks about acquisitions. This is a good confirmation of the trend toward early exits, but it goes even further than I did in my book.

Google actually prefers companies that are pre-revenue. In other words, Google doesn’t want to buy the business, they want to buy the team. The people. The entrepreneurial ingredient  that they know they need to keep their company growing and healthy.

You’ve heard it from one of the guys who really knows –  you can sell a tech company today long before it’s profitable, even before it has revenue. And if it was up to Google, it would be the latter.

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