Jeff Seibert: Acquisitions: Lessons from All Sides [Entire Talk]

TL;DR

A successful acquisition depends on more than securing an offer: founders must evaluate cultural fit, preserve their team’s trust, and ensure the buyer will continue investing in growth. When fundraising failed for Increo, its founders identified valuable document-conversion technology, proposed concrete partnerships, and received acquisition offers after prospective partners demanded exclusive, self-hosted access.

Transcript

Thank you so much, Tina. It is an absolute privilege to be here. I remember so fondly sitting in these seats helping organize this lecture series. There's actually quite a few people here that I recognize from years ago when I use to lead this, so it is amazing to be here. So, I want to start out very briefly on the Twitter side. About a month and ... Read More

Key Insights

• A prominent product launch is only the beginning of a startup’s journey. Increo received a strong traffic spike after appearing on TechCrunch, but traffic returned effectively to zero about two weeks later, showing that initial attention does not establish durable demand or growth.
• Increo’s strongest early market was approximately 20,000 freelancers. They valued a system that let them share designs with clients, collect comments, draw directly on documents, and iterate, but the company found it difficult to grow beyond this concentrated audience.
• Fundraising requires a compelling idea and a sufficiently large opportunity. When Increo sought an A round during the difficult market of 2009, its proposed vision for exploring and manipulating file formats confused investors, and all 36 venture firms it approached declined to invest.
• Constraint can force a startup to identify overlooked sources of value. With about six months of runway remaining, Increo concluded that its most valuable asset was not necessarily its user base or complete product, but its back-end engine for converting 100 file formats for browser display.
• Concrete solutions can persuade operating companies when broad visions fail to persuade investors. Prospective partners understood the immediate value of previewing documents inside their services, even though venture firms had rejected Increo’s more ambitious and future-oriented explanation of the underlying technology.
• Privacy requirements can fundamentally reshape a partnership. Prospective partners wanted to host Increo’s technology themselves because sending private user documents to an outside system could require privacy-policy changes, user communication, legal work, and additional infrastructure.
• Exclusivity can turn a licensing proposal into an acquisition discussion. Companies wanted Increo’s technology withheld from their competitors while also hosting it internally, leaving the startup with little ability to sell the same capability elsewhere or operate a conventional partnership model.
• Acquisition outcomes depend on human and organizational factors after the agreement. Seibert emphasizes cultural fit, maintaining the acquired team’s trust, and continued investment in growth, while also warning that an acquisition is not automatically the best exit for every promising startup.

Questions & Answers

Q: How can a startup turn failed fundraising into acquisition interest?

A startup can reassess which part of its business holds the clearest strategic value for established companies. After 36 venture firms rejected Increo’s funding pitch, the founders focused on their back-end engine for converting 100 file formats for browser display. They then proposed concrete integrations to companies dealing with documents. Interest became acquisition interest when prospective partners requested exclusive and self-hosted access to the technology.

Q: Why did Increo struggle after its TechCrunch launch?

Increo’s TechCrunch appearance generated a strong initial traffic spike, but traffic returned effectively to zero about two weeks later. The launch created attention without proving sustained adoption. The founders continued improving the product, recruiting a team, and asking bloggers to cover it. Those efforts eventually produced traction among approximately 20,000 freelancers, but the company still struggled to expand beyond that particular market.

Q: What problem did Increo solve for freelancers?

Increo gave freelancers a way to share work with clients, receive feedback, and revise designs. Users could upload files and invite others to review them in a browser. The product supported 100 file formats, including PowerPoint, PDF, Photoshop, and Illustrator files. Reviewers could draw on documents and add comments in real time, allowing everyone on the page to observe feedback as it happened.

Q: Why did venture firms reject Increo’s funding pitch?

Increo needed additional funding in 2009, when investors had pulled back following the housing-bubble collapse. To justify an A round, the founders presented a broad vision in which files could be separated into component pieces, enriched with metadata, rendered across the web, and modified by different applications. Venture firms found the concept confusing and unconvincing. Increo approached 36 firms, and every one declined.

Q: What made Increo’s document technology valuable to buyers?

Increo had built a back-end system that could convert 100 file formats to Flash and display them inside a web browser. Many internet companies handled documents, but few could present those files directly within their sites. Increo demonstrated a practical experience in which a user could click preview on a stored file and see it within seconds. Prospective partners considered that capability a meaningful product improvement.

Q: Why did potential partners require self-hosting?

Potential partners wanted to host Increo’s technology themselves because their systems contained private user documents. Sending those documents to Increo could force the companies to revise privacy policies, notify their users, address legal complications, and create additional infrastructure. Self-hosting avoided those issues by keeping document processing within the partner’s environment, but it also gave the partner direct control over Increo’s core technology.

Q: How can exclusivity transform a partnership into an acquisition?

Exclusivity prevents a startup from providing the same technology to competing customers. In Increo’s case, prospective partners wanted both exclusive access and the ability to host the technology internally. From the startup’s perspective, that combination eliminated much of the commercial logic of an ordinary licensing relationship. Seibert directly told the interested companies that their requested arrangement sounded more like an acquisition, and three proceeded with acquisition offers.

Q: What should founders evaluate beyond an acquisition offer?

Founders should consider whether the acquiring company’s culture fits their team, whether they can maintain employee trust throughout the process, and whether the buyer will continue investing in the acquired product’s growth. Seibert’s lessons span selling Increo to Box, selling Crashlytics to Twitter, and later working on deals from Twitter’s side. His central warning is that acquisition is not always the best exit for a promising startup.

Summary

In this talk, the speaker shares his experiences with acquisitions, specifically selling his startup Increo to Box and Crashlytics to Twitter. He discusses the lessons learned from his startup journeys and provides insights from his perspective as an advisor for Twitter's acquisitions.

Questions & Answers

Q: What was the speaker's role in Twitter prior to the talk?

The speaker was in charge of Twitter's consumer products, including the Twitter product and leading the Moments launch.

Q: What was Increo and what was its concept?

Increo was a startup focused on idea sharing and collaboration. Their concept was to build tools that would help people, whether freelancers or within companies, share and improve their ideas through feedback and iteration.

Q: How did Increo initially struggle to grow its user base?

While the product appealed to freelancers, it had difficulty expanding beyond that market. Increo managed to gain a customer base of about 20,000 freelancers but struggled to grow further.

Q: How did Increo eventually find a path forward for the company?

Increo identified the most valuable aspect of their company as the technology they built for document conversion. They pitched partnerships with other companies to power their document conversion and display and managed to secure four acquisition offers.

Q: How did Increo decide which acquisition offer to accept?

Increo weighed the pros and cons of each offer. They considered factors such as company scale, culture fit, technology compatibility, and investment commitment. Ultimately, they chose to partner with Box due to strategic alignment and the cultural fit.

Q: How did Crashlytics gain traction and differentiate itself in the market?

Crashlytics solved a real need for app developers with its crash reporting tool. The product appealed to developers and gained popularity through word-of-mouth and positive feedback. Crashlytics grew rapidly, serving thousands of apps and becoming a respected solution in the industry.

Q: How did Twitter become interested in acquiring Crashlytics?

Twitter recognized the value of Crashlytics' technology and its strategic alignment with their vision of improving their developer platform. Twitter saw Crashlytics as part of a new wave of developer tools and believed they could leverage it to build upon their existing platform.

Q: What were some considerations in negotiating the acquisition deal with Twitter?

The Crashlytics team considered strategic alignment, product need, reputation among developers, opportunity cost, funding alternatives, and reporting structure. They made sure to negotiate from a strong position, retain control over the messaging, and prioritize the team's trust and financial security.

Q: How has Twitter managed its acquisitions in terms of integrating the acquired companies and products?

Twitter has been successful in retaining the original teams and integrating the acquired products. They have continued investing in the products, expanding and modernizing them. The Crashlytics team tripled in size, and the product expanded to become Fabric, a suite of developer tools under the Twitter brand.

Q: What is the speaker's role in advising Twitter on acquisitions?

The speaker has the privilege of advising Twitter on acquisitions and has seen a funnel of 50 evaluated companies, deeply evaluated 12, seriously considered 6, and closed 3 deals. The speaker highlights the importance of strategic alignment and the low likelihood of an acquisition deal happening.

Takeaways

The speaker shares several important takeaways from his experiences with acquisitions. These include the importance of focusing on the long-term future rather than the moment, optimizing for culture fit, understanding the strategic alignment between the acquiring company and the startup, being cautious about transparency during the acquisition process, and carefully considering reporting structure and support within the acquiring company. The speaker also emphasizes the need for founders to gauge transparency appropriately and reduce stress for their team during the acquisition process. Finally, the speaker highlights the critical role of strategic alignment and complete control over messaging in successful acquisitions.

Summary & Key Takeaways

• Jeff Seibert frames his lessons through experiences on multiple sides of acquisitions: selling Increo to Box in 2009, selling Crashlytics to Twitter in 2013, and later participating in deals at Twitter, most notably Periscope. These perspectives showed him how startup founders and acquiring companies can interpret the same transaction differently.

• Increo began as a file-sharing and feedback product built during Seibert’s senior year. Although its TechCrunch launch produced an initial traffic spike, usage soon fell effectively to zero. Continued product and marketing work attracted about 20,000 freelancers, but the company struggled to expand beyond that specific customer segment.

• After 36 venture firms rejected Increo’s funding pitch, the founders focused on their document-conversion technology. Several companies wanted the technology but required exclusivity and self-hosting because of competition, privacy policies, and infrastructure concerns. Those requirements made a conventional partnership impractical, prompting Seibert to suggest that the discussions were really about acquisitions.