The Buyer Set of a Dozen
Run a real sale process: build a 12-name list, disqualify against the sit-out criteria, then call it
- Difficulty
- Moderate
- Time to result
- ~months to results
- Steps
- 5
- Confidence
- 93%
When a sale is actually on the table, Schottenstein replaces vague networking with a bounded, mechanical process: enumerate the roughly one dozen companies that could plausibly find you a good fit, score each against the known reasons buyers are currently sitting out, then work the list. The posture — coy versus fully transparent — is set by exactly one variable: how much time you have left.
Origin
Julia Schottenstein, drawing on her M&A experience at dbt Labs and her prior investing career. The 'be public that you're selling' input is credited in the episode to Hunter Walk of Homebrew Ventures, whose blog post argued that in a market where most startups are desperate, transparency creates more of a bidding situation than secrecy does.
Core principles
- 01There are never more than about a dozen companies that will find what you are doing a good fit
- 02Time remaining, not pride, determines how transparent you should be
- 03Buyers sit out for structural reasons that have nothing to do with you — diagnose before you dial
- 04In a downturn, most acquisitions are team acquisitions, so the team is the pitch
- 05There is no shame in saying it plainly
How to run it
- 1
Write the buyer set
List roughly a dozen companies that could find what you are doing to be a very good fit. Resist expanding it — beyond a dozen you are no longer strategic to anyone on the list.
Pro tip Include adjacent companies that are not competitors. Lenny's startup was acquired by Airbnb, a company that had nothing to do with his space until suddenly it did.
- 2
Disqualify against the sit-out criteria
Cross off buyers who are structurally unable to transact right now: they just did an acquisition and are still digesting it, they are not growing headcount (M&A is org-chart gymnastics of folding a target's headcount into your budget and plan), or they are frozen by general market uncertainty.
Pro tip A buyer who just closed a deal in your category is usually the least available, not the most interested.
Watch out Even the best M&A deals carry complexity a nervous buyer will not take on. Do not read a pass as a verdict on your product.
- 3
Set posture by your runway
If you still have room, focus on two or three buyers and run the inflict-pain-with-a-smile play; never say the word acquisition. If you are out of time, open up the buyer list and be fully transparent.
Pro tip The transparent note is genuinely this simple: we're looking for an exit, X, Y and Z didn't pan out, we built an interesting product, we want to keep the team together, we're running a process, are you interested?
Watch out Being cute and evasive to fake competitive interest fools nobody in a market where everyone knows the situation.
- 4
Assemble the data room around the team
In this market, buyers are mostly acquiring the team. The single biggest motivator for a buyer is the specific list of team members who will come along with the acquisition. Build the materials around that, not around vanity metrics.
Watch out Elaborate promotional decks and microsites are optional; a clear team roster is not.
- 5
Use your investors as the connector layer
Your VCs have the network into the buyer set. Ask them to open doors without agonising about disappointing them — they already know they are not making their money back on most positions, and what they want instead is for you to land somewhere great, because that pays them back over the long game.
Pro tip Around 50% of portfolios don't return anything. Your investors have priced this in far more than you have.
Watch out A misplaced duty to return capital keeps founders stuck at companies they hate for outcomes nobody wanted.
In the wild
Lenny met Airbnb roughly a year before any process began, at a random party at South by Southwest that he does not even remember. Airbnb's head of product, Joe Zadeh, remembered it and came back a year later asking what they were up to and whether they could collaborate on something. Airbnb was never on any conceivable buyer list — the businesses had nothing to do with each other.
→ That collaboration conversation led to Airbnb acquiring Localmind. Schottenstein's takeaway: the buyer must know who you are before the acquisition moment, so let a thousand flowers bloom on relationships well ahead of any exit event.
Common mistakes
Padding the buyer list to feel like you have options
Beyond about a dozen names you are calling companies for whom you are not strategic, which produces process theatre and no bids.
Interpreting silence as rejection of the product
Buyers sit out because of integration digestion, headcount freezes, and macro uncertainty. Diagnosing the reason tells you whether to re-approach later or move on.
Grinding on out of a duty to return investor money
Founders are told grit means never quitting. Sometimes you should quit. Investors would rather you land at a great company than stay stuck to manufacture a small return.
Is it for you?
Best for
Founders who have concluded the independent path is closed and need to run an actual sale process in the next two to three quarters
Not ideal for
Well-capitalised companies with runway — for them, the entire M&A word is off-limits and only partnership conversations should happen
From the transcript
“what I would do if I were in a position of wanting to sell my company is I would come up with a buyer set…”
“there's absolutely no shame in sending a note that says something like hey we're looking for an exit for our company X Y and Z…”
“usually in this these situations people are acquiring the teams and so having your data room together really the most important thing is this is…”
“you want to make sure that the buyer knows who you are before the acquisition moment”
“your investors understand that they're not making their money back”
“what they want to do instead is have you end up at a really great company like an Airbnb because that will help them down…”
From the episode
M&A, competition, pricing, and investing
Julia Schottenstein (dbt Labs)