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INNOVATION
& DESIGN Home Page Architecture Brand Equity Auto Design Game Room SMALLBIZ Smart Answers Success Stories Today's Tip INVESTING Investing: Europe Annual Reports BW 50 S&P Picks & Pans Stock Screeners Free S&P Stock Report SCOREBOARDS Hot Growth 100 Mutual Funds Info Tech 100 S&P 500 B-SCHOOLS Undergrad Programs MBA Blogs MBA Profiles MBA Rankings Who's Hiring Grads | | JUNE 25, 2003 ENTREPRENEUR'S BYLINE By Rosalind Resnick How I Sold My Company for $111 Million Yes, it was at the tail end of the dot-com delirium, but these lessons about networking and negotiating are timeless and universal
Another part of the story, however, has little to do with heady times, and a lot to do with skillful negotiating -- and astute company building. And that's the part that you, the entrepreneur, can learn from as you build your company today. Five factors need to be in place, in my view, in order for negotiations to go smoothly -- and I've bold-faced these points in the text below. The business itself must be scaleable – with a great product, a solid management team, and long-term contracts that ensure a recurring revenue stream. Its finances must be in order. You, as owner, must network with competitors, who are your most likely buyers. You must also, as the old saying goes, "Know when to hold 'em and know when to fold 'em." Finally, you must get liquid fast. Great deals, in other words, don't happen in a day. They take time, patience, preparation, guts, and many years of building relationships with potential buyers. Only then can skillful negotiating kick in and produce the desired results. PERFECT TIMING. As I look back on it, NetCreations had all of the above, as well as good timing. So keep those points in mind as you follow the trajectory of my story. Now, back to that kitchen table. I had just come from a career in business journalism, learning the ropes at the Baltimore Sun and Miami Herald, then pursuing the story of the rise of the Internet economy for dozens of computer publications, among them Internet World, PC Today, and Home Office Computing. Why, I eventually asked myself, should I be writing about this revolution unfolding before my eyes when I could be living it? That was when my partner (a talented programmer and our chief technical officer) and I came up with the idea of building databases on the Internet using e-mail addresses instead of postal addresses. In doing so, we also developed the then-unique concept of asking that people "opt in," or elect to have their names included in these databases. That plan, which we called "100% Opt-In" e-mail marketing, is a trademark of our company. It contrasted with the prevailing practice of including the names of parties who might or might not be receptive. Those who weren't receptive would need, in turn, to "opt out" to get off lists. The opt-in strategy put us on the map, making us a leader in the market and enabling us to be profitable at a time when a lot of Internet companies were little more than ideas pursuing venture-capital funding. NEGOTIATING THE CURVES. We never were VC-financed: I owned 51% of the company, and my partner had 49%. We never sought venture capital. The closest we came to looking for outside funding was two-and-a-half years after our launch, when we wanted strategic cash, about $5 million for a 25% stake in our 10-person company. We immediately received an overture from our archrival, DoubleClick, the leader in Web-based banner advertising. We demurred. Times were heady, and we decided we weren't ready to "fold 'em." Besides, I wanted to be CEO for life, running this hot little company with my partner.
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