The Exchanges

Q So in terms of building out that market map and finding the right companies within it, what makes you drawn to one company over another?

A So we, and I think everybody has to have a framework of some sort. But ours is called the three T's, and these are really the three sources of value in a transaction. Everything that we do here through the M&A process centers around these three T's, and they are technology, talent, and traction. So technology can take the form of a product or an app or some IP. You know, talent can be a killer team, a brilliant founder, some really specialized knowledge potentially, and traction is revenue growth or scale. It could have Be something like a beachhead in a new geography or market or some amazing logos in a particular vertical. We try to be really dispassionate at the way we look at the sources of value and assess them as objectively as possible.

AI assessment note: “ours is called the three T's, and these are really the three sources of value”

Q I'd love to just start today with a little bit about you, and how you made your way into the world of early-stage startups. So what was your entry point?

A So I was a big computer nerd in high school. I built PCs with my friend Al, and then went into computer science, and I graduated in Possibly the worst time to graduate with a computer science degree, but I caught a big break. I got a job. I had one of the few promising startups at the time doing pretty much whatever needed to be done. And against all odds at that time, at least the company grew to 700 people. We went public in 2003. And then we sold the company in 2005. I went back and did my MBA graduating again at probably the worst time to graduate with that respective degree. I ended up joining an investment bank, which is It's probably why I pursued MBA school in the first place. I had an amazing experience there working on primarily M&A, but a whole bunch of debt and equity as well. Uh, and it was an amazing experience. Gave me lots of exposure to execs and big companies. And for a lot of the same reasons, other people enjoy investment banking, or I think what's we're commonly referred to now is the dark side. Now that they're back in, in startups. But when I think about what I thought about the transactional nature of it, it did start to wear on me. And so I Entered the world of venture investing. I joined a fund. We started an accelerator. We got to work with some amazing companies, and about two years into that, and I think this is a common story for lots of people tha…

AI assessment note: “I got a job. I had one of the few promising startups at the time”

Q So in terms of building out that market map and finding the right companies within it, what makes you drawn to one company over another?

A So we, and I think everybody has to have a framework of some sort. But ours is called the three T's, and these are really the three sources of value in a transaction. Everything that we do here through the M&A process centers around these three T's, and they are technology, talent, and traction. So technology can take the form of a product or an app or some IP. You know, talent can be a killer team, a brilliant founder, some really specialized knowledge potentially, and traction is revenue growth or scale. It could have Be something like a beachhead in a new geography or market or some amazing logos in a particular vertical. We try to be really dispassionate at the way we look at the sources of value and assess them as objectively as possible.

AI assessment note: “ours is called the three T's... technology, talent, and traction.”

Q When do you think it's the right time? Is it seed and onwards? Is it series A and onwards? Is it when you raise the series C? What's the right time for you?

A Well, I think less about the money that you've raised. I think it's more around the establishing of product market fit, and to what degree you've established product market fit. And I say that in that, and I don't know if I peg a specific revenue number or raise number around it, but I think if you don't feel as though, or you really understand Your customer and your market, and you're able to have predictable unit economics that you can throw dollars behind. I think that makes for a challenging M&A conversation, and maybe too, too early to reach out. I also think reaching out too early just defocuses the business, and can be a huge distraction, and businesses that have been built to sell early are really, really obvious to acquirers.

AI assessment note: “I think it's more around the establishing of product market fit”

Q Can I ask, in that monitoring phase, you said something being critical or of high priority. What makes some situation critical or high priority? Is it an alternative acquisition offer from Buffer or a competitor? What makes it prioritized in your thinking?

A You know, I think, I think things that are relevant are definitely funding rounds are interesting. It could either signal that someone, you You know, could be open or interested in M&A, or it could mean they've gotten beyond what we could do a deal in, and maybe they're out of our range. They've raised a really large sum of money. I think if we see big announcements around growth and inflection points in the business, I think those are particularly interesting to us, but also just a lot of personal things. You know, the comings and goings of executives and founders and, and milestones that those organizations are hitting, I think is less about sort of some While critical piece of information is going to make us act, rather than just getting a sense of, of the overall organization, and really getting to know them.

AI assessment note: “funding rounds are interesting. It could either signal that someone... could be open”

Q to address particularly the M&A aspect of your role today, and approach the conversation with two different and potentially separate hats on. So first starting with the point of view of the acquirer, so in this case Hootsuite, and then switching to the startup and founder perspective. So from a starting point, looking for potential M&A for Hootsuite, and building out the pipe, how does this process look for you?

A Yeah, it's interesting, you know, I think First, it has to start with company strategy. For a startup, you're busy, you're doing lots of stuff, and often codifying company strategy is not at the top of the list, but there's two big forcing functions for codifying company strategy, and I think one of those is financings and raising money, and then the other is M&A, and so I think when you figure out where you want to go, you need to chart a really clear path to get there, and really, if you think about the B to B software company that we are B to B software companies in general, your, your focus is pretty simple. You know, you're responsible for bringing company solutions to their problems, and so I think you can arrive at solutions in one of three ways. You can either build something, you can find someone to partner with that has that technology, you can acquire that capability, and I think so we go through that build, buy, and partner thinking internally. We ultimately decide what areas we want to make acquisitions in, and we build what we call market maps or sector overviews that lay out What exactly that market entails? Who are the players in it? What are the opportunities for who's within that market? And these are pretty exhaustive, and the team works extremely hard at creating these because they form kind of the basis for the acquisition thesis that we then go and execute…

AI assessment note: “we build what we call market maps or sector overviews”

Q That's a really interesting one, and it makes me immediately think to the statement that companies are bought and not sold. Others tell me they're sold and not What's your take on this dilemma between the two?

A I think generally, unless you are in a situation where you, you absolutely need to sell, I think it's inadvisable to put a for sale sign in front of your company. I really think it's too much opportunity to destroy value. I think you can just leave too much value on the table. That being said, I think there's lots that companies can do to start heading down that path and put themselves in a position with some of their acquirers, and I think You know, some of the stuff I've talked about earlier around partnering, I think, is critical. I think you can also start to build some personal relationships with key players at acquirers, and I think that goes a long way, even if you don't have a formal partnership in place.

AI assessment note: “inadvisable to put a for sale sign in front of your company”

Q I'd love to just start today with a little bit about you, and how you made your way into the world of early-stage startups. So what was your entry point?

A So I was a big computer nerd in high school. I built PCs with my friend Al, and then went into computer science, and I graduated in Possibly the worst time to graduate with a computer science degree, but I caught a big break. I got a job. I had one of the few promising startups at the time doing pretty much whatever needed to be done. And against all odds at that time, at least the company grew to 700 people. We went public in 2003. And then we sold the company in 2005. I went back and did my MBA graduating again at probably the worst time to graduate with that respective degree. I ended up joining an investment bank, which is It's probably why I pursued MBA school in the first place. I had an amazing experience there working on primarily M&A, but a whole bunch of debt and equity as well. Uh, and it was an amazing experience. Gave me lots of exposure to execs and big companies. And for a lot of the same reasons, other people enjoy investment banking, or I think what's we're commonly referred to now is the dark side. Now that they're back in, in startups. But when I think about what I thought about the transactional nature of it, it did start to wear on me. And so I Entered the world of venture investing. I joined a fund. We started an accelerator. We got to work with some amazing companies, and about two years into that, and I think this is a common story for lots of people tha…

AI assessment note: “I got a job. I had one of the few promising startups at the time”

Q When do you think it's the right time? Is it seed and onwards? Is it series A and onwards? Is it when you raise the series C? What's the right time for you?

A Well, I think less about the money that you've raised. I think it's more around the establishing of product market fit, and to what degree you've established product market fit. And I say that in that, and I don't know if I peg a specific revenue number or raise number around it, but I think if you don't feel as though, or you really understand Your customer and your market, and you're able to have predictable unit economics that you can throw dollars behind. I think that makes for a challenging M&A conversation, and maybe too, too early to reach out. I also think reaching out too early just defocuses the business, and can be a huge distraction, and businesses that have been built to sell early are really, really obvious to acquirers.

AI assessment note: “I think it's more around the establishing of product market fit”

Q to address particularly the M&A aspect of your role today, and approach the conversation with two different and potentially separate hats on. So first starting with the point of view of the acquirer, so in this case Hootsuite, and then switching to the startup and founder perspective. So from a starting point, looking for potential M&A for Hootsuite, and building out the pipe, how does this process look for you?

A Yeah, it's interesting, you know, I think First, it has to start with company strategy. For a startup, you're busy, you're doing lots of stuff, and often codifying company strategy is not at the top of the list, but there's two big forcing functions for codifying company strategy, and I think one of those is financings and raising money, and then the other is M&A, and so I think when you figure out where you want to go, you need to chart a really clear path to get there, and really, if you think about the B to B software company that we are B to B software companies in general, your, your focus is pretty simple. You know, you're responsible for bringing company solutions to their problems, and so I think you can arrive at solutions in one of three ways. You can either build something, you can find someone to partner with that has that technology, you can acquire that capability, and I think so we go through that build, buy, and partner thinking internally. We ultimately decide what areas we want to make acquisitions in, and we build what we call market maps or sector overviews that lay out What exactly that market entails? Who are the players in it? What are the opportunities for who's within that market? And these are pretty exhaustive, and the team works extremely hard at creating these because they form kind of the basis for the acquisition thesis that we then go and execute…

AI assessment note: “we build what we call market maps or sector overviews”

Q I'm intrigued, because once you've identified an opportunity, what does that internal conviction-building process look like for you internally in building those internal champions for the project and transaction?

A You know, it's, it's interesting. In the early days, it was very simple. Ryan and I would need to be aligned on the value it would create for the business, and, and, and then we would go and execute on it. Add a thousand people, and I can only imagine how it becomes more complicated as you get bigger, but there is a lot of different stakeholders, and one of the biggest risks associated with M&A, as I think everybody in M&A quickly learns, is integration risk. So great, you get through the transaction that could be extremely difficult to get through, and you're done, but now the real risk hits you in the face, and that is, will this actually create value for the company, and will this new appendage or organ be accepted or rejected by the larger company, and so I think for us, We mitigate that by getting many different teams involved in the process as early on as possible, and that's a way to engage the product team and marketing and talent team, and we really get a large array of partners together to help mitigate that early on.

AI assessment note: “mitigate that by getting many different teams involved in the process as early on”

Q comes to the monitoring phase, what does that monitoring process really look like for you, and what tools do you really look to use to ensure that you get the highest level of monitoring and assessment of that company? You know, Josh Felser on the show said that every tweet is a potential M&A investigation. How do you look to really keep strong coverage of those relationships that you build?

A Oh my God, that sounds exhausting. We have the thought of every tweet being an M&A process or investigation scares me. Ours is pretty human. We try to schedule regular touch points with the companies that we're talking to. We have a bunch of mechanisms that we use to follow people. So we're, you know, we have a bunch of search strings. We obviously use social a lot. A member of our team who just organizes a lot of inbound around some of the relationships that we have to make sure that we're not missing anything. And that's disseminated out on a daily basis. If there's anything particularly high priority or critical or on a weekly basis, it's kind of a newsletter for the team of some of the goings on in our universe. But largely, it falls upon each of the business and corporate development managers, the guys who are responsible for a particular area or sector thesis, M&A thesis, and they do an amazing job of staying on top of the companies. We use, similar to VCs, we use CRMs in the back end to track all of the interactions we're having and making sure that we all Understand the nature and where a relationship sits, and so that we're pretty organized about that, but that's where we primarily focus, I guess.

AI assessment note: “We try to schedule regular touch points with the companies that we're talking to.”

Q That's a really interesting one, and it makes me immediately think to the statement that companies are bought and not sold. Others tell me they're sold and not What's your take on this dilemma between the two?

A I think generally, unless you are in a situation where you, you absolutely need to sell, I think it's inadvisable to put a for sale sign in front of your company. I really think it's too much opportunity to destroy value. I think you can just leave too much value on the table. That being said, I think there's lots that companies can do to start heading down that path and put themselves in a position with some of their acquirers, and I think You know, some of the stuff I've talked about earlier around partnering, I think, is critical. I think you can also start to build some personal relationships with key players at acquirers, and I think that goes a long way, even if you don't have a formal partnership in place.

AI assessment note: “I think it's inadvisable to put a for sale sign in front of your company.”

Q What one thing do you wish startups knew more about with regards to the M&A process?

A I think you often see startups trying to engineer the perfect process, trying to make the company look as perfect as it can possibly be, and I think probably the thing I like founders to know the most is really that trust is everything. You know, we, it's more important that we feel as though We have a trusted partner to go and do something with rather than have a perfect company or entity to acquire. It's, it's, it's about the people and the trust associated with those relationships. And I think that's just a really important thing to know. We'd way rather someone just came up and talked to us about where the business was really at, and we can get over tons of challenges that approach has taken.

AI assessment note: “the thing I like founders to know the most is really that trust is everything”

Q comes to the monitoring phase, what does that monitoring process really look like for you, and what tools do you really look to use to ensure that you get the highest level of monitoring and assessment of that company? You know, Josh Felser on the show said that every tweet is a potential M&A investigation. How do you look to really keep strong coverage of those relationships that you build?

A Oh my God, that sounds exhausting. We have the thought of every tweet being an M&A process or investigation scares me. Ours is pretty human. We try to schedule regular touch points with the companies that we're talking to. We have a bunch of mechanisms that we use to follow people. So we're, you know, we have a bunch of search strings. We obviously use social a lot. A member of our team who just organizes a lot of inbound around some of the relationships that we have to make sure that we're not missing anything. And that's disseminated out on a daily basis. If there's anything particularly high priority or critical or on a weekly basis, it's kind of a newsletter for the team of some of the goings on in our universe. But largely, it falls upon each of the business and corporate development managers, the guys who are responsible for a particular area or sector thesis, M&A thesis, and they do an amazing job of staying on top of the companies. We use, similar to VCs, we use CRMs in the back end to track all of the interactions we're having and making sure that we all Understand the nature and where a relationship sits, and so that we're pretty organized about that, but that's where we primarily focus, I guess.

AI assessment note: “We try to schedule regular touch points with the companies that we're talking to.”

Q Can I ask, in that monitoring phase, you said something being critical or of high priority. What makes some situation critical or high priority? Is it an alternative acquisition offer from Buffer or a competitor? What makes it prioritized in your thinking?

A You know, I think, I think things that are relevant are definitely funding rounds are interesting. It could either signal that someone, you You know, could be open or interested in M&A, or it could mean they've gotten beyond what we could do a deal in, and maybe they're out of our range. They've raised a really large sum of money. I think if we see big announcements around growth and inflection points in the business, I think those are particularly interesting to us, but also just a lot of personal things. You know, the comings and goings of executives and founders and, and milestones that those organizations are hitting, I think is less about sort of some While critical piece of information is going to make us act, rather than just getting a sense of, of the overall organization, and really getting to know them.

AI assessment note: “things that are relevant are definitely funding rounds are interesting.”

Q I do want to switch sides of the table now, and put on the startup founder hat, and we had Rishi Garg on the show from Mayfield, and he said that startup founders should really put on that M&A hat early, and think about building out the pipe. I'm intrigued, when should startups start thinking about building out the M&A pipe, and really considering it as an option?

A So as a general rule, I think Founders should focus their energy on, on driving customer value and building a sustainable and durable business. You know, that being said, as a founder of a company, I think your goal is to maximize the return for your shareholders. And I think most founders I meet and interact with take that responsibility pretty seriously. And return, when you get to very, when you get very tactical, return can be realized in one of three ways. Either you can go public, you can turn into a dividend in cash machine and dividend out money to your investors. Or you can, you can sell your business. And so I think today, most companies and startups that are built are not built out as sort of cash flowing entities. And so that's not always a viable way to return capital and at least not top of mind for most of the startups we interact with. You know, going public requires scale, often a hundred plus million dollars in revenue, which is large for a lot of the founders to be thinking about, at least in the relatively early stages. And so I think it's reasonable for founders to be thinking proactively about selling.

AI assessment note: “reasonable for founders to be thinking proactively about selling”

Q I'm intrigued, because once you've identified an opportunity, what does that internal conviction-building process look like for you internally in building those internal champions for the project and transaction?

A You know, it's, it's interesting. In the early days, it was very simple. Ryan and I would need to be aligned on the value it would create for the business, and, and, and then we would go and execute on it. Add a thousand people, and I can only imagine how it becomes more complicated as you get bigger, but there is a lot of different stakeholders, and one of the biggest risks associated with M&A, as I think everybody in M&A quickly learns, is integration risk. So great, you get through the transaction that could be extremely difficult to get through, and you're done, but now the real risk hits you in the face, and that is, will this actually create value for the company, and will this new appendage or organ be accepted or rejected by the larger company, and so I think for us, We mitigate that by getting many different teams involved in the process as early on as possible, and that's a way to engage the product team and marketing and talent team, and we really get a large array of partners together to help mitigate that early on.

AI assessment note: “We mitigate that by getting many different teams involved in the process as early on”

Q What does that first touch point look like? Is it email outbound? Is it intros from VCs, Partners. What is that for you, preferably?

A Well, I think, so there's a couple things. One is we're always engaging companies and talking to companies. That's a key part of the function, so I think I did a, we did a poll a couple weeks ago for something else, and I think over the course of a year, we will have substantive, and this is probably 30 minute, at least, discussions with over 300 companies over the course of a year, and so we're a relatively small acquisition team, and that's a lot of contact, and so we talk to And try to talk to every company. That is just something we focus on and often we'll reach out over LinkedIn. We have, you know, collectively across the company, we have connections to most of the big venture funds and a lot of companies in our space. It's a pretty small community of startups that are in marketing and social and a lot of adjacent spaces that we're involved in. So I think it's not really that difficult to get in touch with companies. In most cases, a quick LinkedIn reach out or email will, will do it. And in most cases, and in many cases, They've already reached out to us previously to kind of build a partnership or start to do some relationship building, so there's an opportunity there as well.

AI assessment note: “In most cases, a quick LinkedIn reach out or email will, will do it.”

Q I do want to switch sides of the table now, and put on the startup founder hat, and we had Rishi Garg on the show from Mayfield, and he said that startup founders should really put on that M&A hat early, and think about building out the pipe. I'm intrigued, when should startups start thinking about building out the M&A pipe, and really considering it as an option?

A So as a general rule, I think Founders should focus their energy on, on driving customer value and building a sustainable and durable business. You know, that being said, as a founder of a company, I think your goal is to maximize the return for your shareholders. And I think most founders I meet and interact with take that responsibility pretty seriously. And return, when you get to very, when you get very tactical, return can be realized in one of three ways. Either you can go public, you can turn into a dividend in cash machine and dividend out money to your investors. Or you can, you can sell your business. And so I think today, most companies and startups that are built are not built out as sort of cash flowing entities. And so that's not always a viable way to return capital and at least not top of mind for most of the startups we interact with. You know, going public requires scale, often a hundred plus million dollars in revenue, which is large for a lot of the founders to be thinking about, at least in the relatively early stages. And so I think it's reasonable for founders to be thinking proactively about selling.

AI assessment note: “it's reasonable for founders to be thinking proactively about selling.”

Q What does that first touch point look like? Is it email outbound? Is it intros from VCs, Partners. What is that for you, preferably?

A Well, I think, so there's a couple things. One is we're always engaging companies and talking to companies. That's a key part of the function, so I think I did a, we did a poll a couple weeks ago for something else, and I think over the course of a year, we will have substantive, and this is probably 30 minute, at least, discussions with over 300 companies over the course of a year, and so we're a relatively small acquisition team, and that's a lot of contact, and so we talk to And try to talk to every company. That is just something we focus on and often we'll reach out over LinkedIn. We have, you know, collectively across the company, we have connections to most of the big venture funds and a lot of companies in our space. It's a pretty small community of startups that are in marketing and social and a lot of adjacent spaces that we're involved in. So I think it's not really that difficult to get in touch with companies. In most cases, a quick LinkedIn reach out or email will, will do it. And in most cases, and in many cases, They've already reached out to us previously to kind of build a partnership or start to do some relationship building, so there's an opportunity there as well.

AI assessment note: “In most cases, a quick LinkedIn reach out or email will, will do it.”

Q You said about destroying value there. I'm really intrigued to hear your thoughts on valuation sensing And how much of a role price plays in your mindset of whether to engage in an M&A process with a potential opportunity?

A When we look at M&A, we're often looking at it in the context of how we can solve a particular problem for our customers, and we take a very build by partner agnostic view of solving that problem, and so I think when we look at it in that perspective, I think Value creation in and around, or the value that we ascribe to a particular opportunity is directly proportional to how we would think about solving it in other ways, and so for companies of our size, and I think, and definitely for bigger companies, you start to believe that you can, with hundreds or thousands of developers, you could probably build anything, and with a large marketing and sales team, you could probably take anything to market, but as everybody knows, the real magic is in that painstaking work that founders have done to establish a Product market fit, and so I think that's really, when we think about ROI internally, when we think about the value that we ascribe to transactions very much around that, how do we value that early, early work, that painstaking work that founders have done to establish that product market fit in a way that would be very difficult for us to do so.

AI assessment note: “the value that we ascribe to a particular opportunity is directly proportional”

Q You said about destroying value there. I'm really intrigued to hear your thoughts on valuation sensing And how much of a role price plays in your mindset of whether to engage in an M&A process with a potential opportunity?

A When we look at M&A, we're often looking at it in the context of how we can solve a particular problem for our customers, and we take a very build by partner agnostic view of solving that problem, and so I think when we look at it in that perspective, I think Value creation in and around, or the value that we ascribe to a particular opportunity is directly proportional to how we would think about solving it in other ways, and so for companies of our size, and I think, and definitely for bigger companies, you start to believe that you can, with hundreds or thousands of developers, you could probably build anything, and with a large marketing and sales team, you could probably take anything to market, but as everybody knows, the real magic is in that painstaking work that founders have done to establish a Product market fit, and so I think that's really, when we think about ROI internally, when we think about the value that we ascribe to transactions very much around that, how do we value that early, early work, that painstaking work that founders have done to establish that product market fit in a way that would be very difficult for us to do so.

AI assessment note: “value that we ascribe to a particular opportunity is directly proportional to how we would”