Mar 12, 2025 · 37m · saastr
The 10-Point Checklist For When You Sell Your Company With Founder Collective's Dave Frankel
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
SaaStr's Jason Lemkin and Founder Collective's David Frankel break down a comprehensive 10-point checklist for startup M&A, analyzing buyer psychology, deal execution, and cap table alignment. They offer actionable advice on managing negotiation friction, understanding strategic buyer motivations, and knowing when founders should resist selling to let their companies compound.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Jason holds 41.8% of the talking time here. How this is scored →
Jason as informed peer 6.3 Guest teaching 2.8 Guest disagreement 1.3 Jason pushing back 1.7
speaking balance: gold is Jason, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 23:48 Frankel rejects casual exploratory framing once bankers are hired
Frankel politely but firmly pushes back against Lemkin's advice to tell teams a process is 'just to learn,' noting that hiring a banker makes that defense untenable.
Hardest push from Jason ▶ 25:09 Lemkin challenges the universal rule of hiring M&A bankersLemkin directly offers an exception to Frankel's rule, illustrating how introducing bankers into established CEO-to-CEO negotiations can destroy trust.
Biggest teaching moment ▶ 12:27 Frankel explains PillPack's true acquisition value to AmazonFrankel educates the audience and host on how the public narrative around PillPack missed the real target: the backend integration code with pharmacy benefit managers.
Jason holds their own ▶ 20:37 Lemkin outlines the internal corporate dynamics that derail acquisitionsLemkin demonstrates deep institutional knowledge from his time as a VP at Adobe, showing how mid-level executive departures silently tank acquisitions.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Jason as informed peer | Guest teaching | Guest disagreement | Jason pushing back | Why |
|---|---|---|---|---|---|---|
| Founder Collective's Big Bets and the Regret of Selling Early | 6 | 2 | 1 | 1 | Lemkin shares his personal regrets selling his company at $1M MRR and observing it scale to $250M, while Frankel shares parallel stories from Olo and Sprint. Both venture capitalists readily validate each other's perspectives on the long-term compound value of SaaS. | |
| Cap Table Dynamics, IPO Benchmarks, and VC Alignment | 6 | 3 | 1 | 2 | Lemkin defines the strict IPO bar (50% growth at $500M ARR) and addresses founders' irrational fear of VC vetoes. Frankel supplements this by detailing LP fund-life constraints using Media Radar and Bain Capital as real-world examples. | |
| Checklist Item 1: Understanding Buyer Motivations and Pitch Tailoring | 6 | 4 | 1 | 1 | Frankel breaks down the PillPack acquisition by Amazon, showing how acquirers often care about underlying infrastructure rather than front-end novelty. Lemkin immediately builds on this by advising founders to analyze who attends early M&A meetings. | |
| Fully Committing to the Process and Navigating Deal Friction | 6 | 2 | 1 | 1 | Lemkin details Mailchimp's grueling sales process and draws upon his corporate tenure at Adobe to explain how executive turnover kills deals. Frankel completely agrees, citing private equity satellite deals. | |
| Managing Team Expectations, Hiring Bankers, and Corporate Friction | 7 | 3 | 3 | 4 | The dialogue shows sharp, friendly friction when Frankel explicitly pushes back against casual 'we are just here to learn' framing once bankers are hired. Lemkin counters with his own exception regarding high-trust CEO-to-CEO deals being ruined by intermediary bankers. | |
| Positioning as the Solution, Securing Multiple Bidders, and Knowing When Not to Sell | 7 | 3 | 1 | 1 | Frankel and Lemkin discuss managing auction leverage and the hard signals for holding vs selling. Lemkin concludes with a definitive operational heuristic: if you have a top-tier team gaining market share, never sell. |
Statements from this episode (19)
Lemkin: Startups are acquired to solve immediate buyer problems
“Just remember when you do have M&A discussions with companies, you're being bought to solve a problem. The problem might be a feature gap. The problem might be, I got three years behind. The problem might be, I'm going to miss the quarter. The problem might be…”
Frankel: Founder Collective Fund 1 had zero reserves for follow-ons
“Fund one was a literally Zero reserve fund. We were, there was no follow on. Zero. Like when we said we were seed and pre-seed, that's exactly.”
Frankel: Founder Collective owned roughly 12% of The Trade Desk at IPO
“We owned roughly 12% at IPO.”
Frankel: Almost every company sale in my career was a mistake
“I look in the rear view mirror and I go, everything I've sold pretty much has been a mistake. So I'm a contrarian.”
Lemkin: EchoSign reached $250M revenue after acquisition despite neglect
“I sold the business at a million a month growing up to a hundred percent with a 110% in our, that was cashflow positive. You would never sell a business like that today, right? And I saw it even while its market share decline still grow to two hundred fifty mi…”
Frankel: PayPal offered $100M to buy Olo before deal collapsed into $5M check
“Olo, PayPal offered to buy the business. PayPal came in and made a hundred million dollar offer, and literally, it was like Christmas, and that, that deal fell through. Noah and I were very disappointed. I remember, like, the 29th of December, they offered to …”
Lemkin: Modern SaaS IPOs require 50% growth at $500M ARR
“The IPO bar today is 50% growth at five hundred million, okay? Now that's not a billion dollar IPO, that's a much bigger IPO.”
Frankel: VCs often push startup sales to generate fund liquidity
“Often there is an investor on the cap table that's been there for a long time, and their model, it's like the tail wagging the dog here, their model is they need to see some liquidity for the next fund, so they're often very problematic reasons.”
Frankel: Founder-only secondary liquidity creates friction with executive teams
“Sometimes like the mistake we make is we take pressure out of the system by giving the founders some kind of liquidity. But we don't think enough about the rest of the team. And then the team's playing on the founders.”
Frankel: Amazon Pharmacy is literally built on PillPack's software code
“And it's, it is Amazon pharmacy today. It's literally based on that pill pack code.”
Lemkin: Acquirer attendee roles in early M&A meetings reveal true motivations
“Watch who they bring to the early meetings. If they drag a very technical leader, right? It's a sign, right? It's a sign, right? If they bring a GM of the business unit or something, they're going to care about your revenue, right?”
Lemkin: Mailchimp suffered a failed year-long M&A deal before Intuit sale
“They sold MailChimp to twelve billion to Intuit. There are actually a lot of learnings, but one is they had a deal before that, that fell apart and it almost destroyed the team. He said, going to your point, it really resonated almost destroyed the team. They …”
Lemkin: Departures of corporate business unit heads frequently kill sub-billion-dollar deals
“Another reason deals falls apart, the SVP leaves or is fired. That's actually a top reason for like sub billion dollar deals is the head of the business unit retires or is kicked out or is fired all of a sudden. That's not on the, it's not on his or her priori…”
Lemkin: Hiring a banker for a $100M exit always pays for itself
“For any deal, even approaching a hundred million, you should hire a banker, right? You, it always pays for itself. I think. Always, I found, and I don't want to do it out of order. It was one of my top 10 mistakes. As a founder, if you don't hire a banker, eve…”
Lemkin: Founders heavily underestimate the operational distraction of M&A for acquirers
“Founders way underestimate how big a deal it is for an acquirer. It's so much work. It's so distracting. It's years of commitment. Forget about the money. The money often doesn't matter.”
Frankel: Pitching acquirer engineering teams backfires because engineers underestimate built software
“If you're pitching to the engineering teams, typically they'll go, they will underestimate what you have built and go, we could build that every single situation.”
Lemkin: Buyers debating 'build, buy, or partner' usually lean toward acquiring
“When a potential buyer says build, buy or partner, right? That's usually internal code word for we're thinking about buying, but we're not quite there yet, but we're pretty close. Like they're not really thinking about build or partner or they'd be partnering …”
Lemkin: Founders detect market share declines in sales cycles before VCs
“Founders will see a decline in market share before VCs can see it before anyone can see it, you'll smell it. You'll go walk into that deal and you'll start losing deals. But you're still growing at a hundred percent or 80 or 200%.”