Corporate Investments and M&A for Startups: Recap

Grabbing the attention of VCs for funding isn’t always easy, even if your startup is flawless and ready to go. On Clubhouse, a series of panelists yesterday discussed some tips on how to catch these opportunities, including Iterate’s CDO,  Brian Sathianathan. 

Jeff Roster, co-host of “This Week in Innovation at Roster on Retail” brought a team together to share their insights on Clubhouse. Roster is a well known retail influencer who creates podcasts to help businesses. On his podcast, he has previously discussed topics such as blockchain and social commerce.

Roster was joined by Brian Sathianathan and Yvanna Perez-Morel. Sathianathan is CDO and co-founder of Iterate.ai, a serial entrepreneur and author of nine granted patents. Perez-Morel is the Head of Corporate Development at Ulta Beauty with a background in business strategy and project management. 

Here are some key observations from their discussion.

Being a New Player in the Market

As a startup, you may feel unsure about where to start, and maybe even wary of your own ability to attract the attention of VCs or an acquisition partner, especially being in retail. In 2019, 8,400+ companies were acquired, but only 690 of those companies were in retail. In 2020, 7,932 were acquired, with a mere 466 in retail.  

Overall, the flow of acquisitions is changing: new, smaller players are coming into the market, while Google, Apple, and Microsoft are slowing their acquisition rates. These shifts may open up some opportunities for smaller companies, as there is a wider variety of buyers.  However, those buyers are also taking their core signals from the big players, so it will be interesting to track this evolution.

How to Approach a Larger Company as a Startup

It can be a daunting task to reach out to a large corporation when you’re just starting out. The group shared some tips on best practices when you’re doing so.

• Be prepared. It sounds simple, but it might be the most critical tip of all. In order to communicate your product’s value effectively and why it’s a unique solution, you need to prepare in advance in order to keep it simple.
• Make sure to share why you think your product or service would be helpful for that particular company, and how it would be helpful. If it’s applicable to that specific company, this will show that you’ve done your research and give the corporation a better idea of what you are offering. Make sure you know the basic business model of the corporation, including where you think they have gaps– then show how your solution fills that gap.
• Don’t be shy about saying what you want. Be clear about what you’re looking for and what you’re hoping to accomplish. This will help both sides with next steps and expectations.

Common Mistakes

Like in any situation, mistakes are frequent. Here are some tips to avoid mistakes that founders often see.

• Consider relationship building strongly and keeping up with that corporation. Add them to your newsletter. Keep them updated on what’s new or what your company is doing. This may open up opportunities in the future that may not have been possible at the time of the initial meeting. Follow up every few weeks or months. There’s no harm in keeping up with the relationship, and who knows? It could pay off.
• Don’t burn bridges! If someone doesn’t reply to an email, that’s okay. It doesn’t necessarily mean they won’t respond at some point. Keep all communications positive. 
• Be proactive. Tell them what you’ve been up to in a blurb format, making your updates quick and easy to read. Don’t just wait for them to reply to a meeting request. 

Corporate/M&A Investment Trends

The panelists caught us up on investment trends. Though we can learn from the trends and common mistakes of the past, it’s critical to be a forward-thinker. 

In terms of beauty, M&A is going to be strong for the next few years. The corporate world looks opportunistic, with larger companies acquiring struggling businesses at an aggressive rate. Keep in mind what your competitive advantage may be, and find companies that may be looking for that. 

These trends are going to continue into 2022, but not across the board. For example, while sporting goods and home improvement had a great moment in 2020, it will likely not be as strong as during the pandemic, when more people were at home. Sectors that were hard hit in 2020 will most likely rebound and pick up a bit more when viewed in terms of relative growth rate to those that were thriving during COVID. 

Overall, remember to communicate with companies and corporations, and focus on building those relationships. Be proud of the products and services that your company offers, and make sure to seek out larger partners that you can provide value to, and to show them why you can help them specifically.