Selling your company at the right time

Summary

Selling your business is often seen as the easy way out of a difficult situation. But we also know plenty of examples of companies that were on the rise and got acquired successfully (Think WhatsApp-Facebook or Youtube-Google). Getting acquired at the right time is a mix of several factors, but key amongst them is knowing your market and evaluating how well the acquirer understands your business and passion. To understand some of these, Pokkt co-founder Rohit Sharma takes us through his journey of selling Pokkt to Japan-based AnyMind Group.

Selling your company is as much an art as it is a science. It’s difficult to create a playbook around it. Founders may come to those crossroads at different points in their journey. Some sell early, some when they gain traction and others, like Rohit Sharma of Pokkt, find the perfect timing. 

Aiming to be acquired is seen as an easy escape from the grind. But not every company is destined for an IPO. Some flourish as private enterprises while others fit into another company's plan. Meta’s (then Facebook) acquisition of Instagram and WhatsApp, and Google’s acquisition of YouTube and Waze show how startups can find better homes within larger ecosystems. Founders need to assess opportunities carefully. 

Rohit’s journey is unique, but it carries lessons for founders. When he sold Pokkt to Japan-based commerce enablement platform AnyMind Group, he realised he had a blueprint that could help others. 

To understand Rohit’s six phases of selling your company, let’s delve into the past. 

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Beginnings

Rohit began his entrepreneurial adventure in 2012 at age 40, after a successful corporate career, including leadership roles at Reliance ADAG’s digital business and Times Internet. 

His first startup, Wopshop, a toy e-commerce company, couldn’t scale. The founding team tried to sell it to e-commerce businesses including Snapdeal. The sale didn’t go through but during the meeting with Snapdeal, the idea for Pokkt was born. 

Wopshop co-founder Vaibhav Odhekar suggested building something they understood well—gaming and advertising. This time, they raised capital instead of bootstrapping. The Pokkt team spent three years perfecting the product before launching in India, and expanding into Southeast Asia, the Middle East, and Japan. 

In 2019, Pokkt started getting feelers from Chinese and Japanese companies. The best offer came from AnyMind Group, an end-to-end brand enablement platform that viewed Pokkt as an entry point into India, the Middle East, and mobile gaming markets. They retained Rohit to lead their operations. 

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#1 Knowing when to sell

What’s the right time to sell? Rohit has some recommendations:

• If a founder has reached a place where they need to go looking for an acquirer, they won’t get the most attractive deal. Aim to sell during your company’s peak. 
• There are indicators of the peak which is an ideal time to sell —  say, when you’ve overperformed the market, have a larger-than-expected market share, or your team is in top shape. 
• Even at your peak, offers don’t fly in. Founders need to put themselves in the shop window. 

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#2 Setting market conditions

Looking for shoppers within your home market may be easier, but trying to catch the eye of a foreign acquirer can be tricky. To build the path to a sale, set the scene. 

• Be in the market: Rohit’s team visited China and Japan multiple times in 2019. “We would spend time talking to customers, potential partners, analysts, all the big players in those ecosystems,” says Rohit. 
• Get noticed: While some founders may focus on engineering, networking is crucial. Being physically present in a market is as important as building large solutions. 
• Grow where it matters: Build your company in the market of potential acquirers. In Pokkt’s case, Japan was important so it expanded in the region’s B2B space, working with over 500 companies. Before AnyMind’s offer, Japan accounted for 15% of Pokkt’s revenue and substantial market share. 

“We visited China and Japan multiple times in 2019. We would often spend most of our time in those countries talking to customers, potential partners, analysts, all the big players in those ecosystems.” - Rohit

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#3 Attracting attention

What draws the interest of a large company is the ability to break through in a difficult market, Rohit explains.

• In a world where founders choose between building, buying or bleeding, having a strong presence in an established market entices larger companies to buy for a faster and more efficient route to their goals. 
• One of the reasons Pokkt appealed to AnyMind is because Japan is a notoriously tough nut to crack. That could have appealed to an American company seeking entry into Japan too, for instance. 
• It’s important to build a team with a skillset that cannot be easily replicated. The team’s uniqueness can be a deciding factor in acquisition considerations. 

#4 Evaluating a good offer

Valuations are important, but how an acquirer values your company is more important. Pokkt was considering acquisition offers from other companies too but AnyMind stood out because of its deep understanding of the business. 

• For Pokkt’s team, the big picture made the difference. “AnyMind not only valued our business but also the founders,” says Rohit. “The overall opportunity for us in the larger ecosystem, and how our acquirer was professionally integrated within the larger ecosystem was very important for us.”
• AnyMind appreciated the unique value Pokkt brought to its business. While the combined entity can create value, it is crucial to evaluate the offer that lands on the founder's table. 
• Founders typically should ask for a cash payout rather than equity or performance-linked payouts. The latter two are subject to macroeconomic currents and the performance of the combined entity as well. 
• Imagine a 2021-like funding rush, where companies raised capital at unsustainable valuations. In such a case, the acquiring company may be flush with short-term cash, but may need to raise capital at a lower valuation later.

“They not only valued our business but also the founders.” - Rohit

For Pokkt, Rohit says, the deal included a two-year lock-in period for the founder and a cash payout in the short term.

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#5 The art of negotiating

The biggest adjustment involved in cross-border deals is cultural, according to Rohit. 

“In Japan, most of the business happens over drinks. They need to trust you. They rarely talk business during the day.” - Rohit

• In team Pokkt’s experience, negotiating the deal was challenging culturally “because Indians are over-expressive and Japanese don’t visibly react to anything.” 
• Unlike the US and India, where formal professional communication is the norm, Japan works on a different paradigm. “In Japan, most business happens over drinks. They need to trust you. They rarely talk business during the day,” Rohit explains. 

“For us, negotiating the deal was super tough culturally, because Indians are over-expressive and Japanese don’t visibly react to anything.” - Rohit‍

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Also Read: How Founders Should Think About M&A Exits

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#6 Riding past the horizon

The big event has happened, you’ve signed the deal, you’re riding off into the sunset. What next? 

• Life continues, Rohit says. With a few changes. When you’ve sold your company, you will have to confront the reality that you’re no longer an entrepreneur. “You end up in a job. It's not your gig anymore.” 
• But if you know your business and market, and find the right buyer, the only way to go is up. 

As for Rohit, he is now the chief operating officer and board member at AnyMind Group. He was instrumental in the company’s IPO in March 2023 on the Tokyo Stock Exchange. 

#acquisition #M&A #synergy #IPO #adtech #mobile