Twice so far, Steven Aldrich has built and sold small company to a bigger player and stayed on to run it. In 1996, he sold the online insurance company he founded while studying for his MBA at Stanford University to Intuit and stayed with Intuit for several years.
Last July, his team sold Outright, an online software company that eliminates the need for data entry and spreadsheets, for an undisclosed sum to GoDaddy.com, the billion dollar web-registration and online services company with 10 million mostly small business customers.
After the sale, Outright.com’s 30 employees remained in Mountain View, Calif. But Aldrich is on the move, commuting between Northern California and Scottsdale, Tempe and Gilbert, Arizona. In his role as senior vice president of applications, he manages about 100 other employees.
Outright.com, which has about 200,000 customers, was GoDaddy.com’s first acquisition. “They wanted a Silicon Valley presence,” said Aldrich.
Board Member as Matchmaker
Aldrich said one of the reasons Outright became part of GoDaddy is because they have 10 million customers and “together we can truly impact the small-business economy.” He said the match was made by a GoDaddy.com board member who introduced us and “then we moved quickly to bring the two companies together.”
GoDaddy.com, which is privately held and believed to be the world’s biggest web site registrar, recently expanded into India. In late 2011, the company received investment capital from several venture capital firms, including KKR, Silver Lake and Technology Crossover Ventures.
Aldrich said he is comfortable working for big companies like Intuit and small companies like the one he worked for before joining Outright. That company made ‘brain’ games for brain-damaged and normal customers.
“The journey has been tremendous,” said Aldrich. “The thread across all the businesses I’ve been involved in is to meet a big, unmet customer need.”
Unlike many founders who are reluctant to let go, Aldrich says he’s worked hard to handle the sale of his companies in a positive manner, before, during and after the acquisitions. It’s not easy, especially since 70 percent of mergers and acquisitions fail and two-thirds of those fail due to a cultural ‘mismatch,’ according to Dr. Ivan Rosenberg, CEO of Frontier Associates, a management consulting and coaching firm based in Valley Village, Calif.
“It’s important to connect your people with those from the acquiring company,” advises Rosenberg. “Allow them to get to know each other as people.” He said it’s also important to disclose the pending merger or acquisition to your employees as soon as possible. Then, once the deal is signed, speak with your vendors, suppliers and customers. Tell customers they can benefit from dealing with a larger company which can offer more options and products.
The Customer Component
“Major customer should get a personal phone call from both the old and new CEOs,” Rosenberg said. Making sure your smaller company culture meshes with the bigger company you are selling out to is critical to success, Rosenberg said. “For example, when Disney acquired Pixar, the issues that were important to Steve Jobs was the preservation of the Pixar culture..,which means a core team handles the project from start to finish unlike Disney’s sequence of (teams working in) silos.”
Being able to sell out and stay on requires some soul-searching, Rosenberg said. “Ask yourself, does their philosophy of operation and plan for the company match yours,” he said. “Then ask whether you are still committed to the growth of the company… or are you just cashing out?”
So far, Aldrich said selling Outright to GoDaddy.com has been positive. Go Daddy already offers more than 50 products today related to web site hosting, domains, search engine marketing, SEO products and email marketing. Until now, most products were built internally, but Aldrich said Go Daddy is looking to bring in successful products from the outside.
He offers this advice to other entrepreneurs thinking of selling out and staying on:
1. Decide why you are going to make a transition. There are lots of reasons to sell—financial and personal. You have to see a way to have a bigger impact by joining forces with a larger organization. “It’s very important for the leader to have a clear view as to why they are embarking on this journey.”
2. Think it through. Ask yourself, "why am I doing it and what do I want to get out of it?"
3. Have patience. Organizations do things differently. You need to be open to doing things differently and letting the small stuff go.
4. Communicate. Be sure to keep an open door policy with both your original staff and your new teammates.
5. Know why you are doing it. Weigh all the options. Then, breathe deeply and take a step back when things get hard.
Read more about mergers and acquisitions.
Photo courtesy of Outright.com