Inflict Pain, With a Smile
Get acquired by becoming the competitor your buyer cannot ignore — while staying their friendliest partner
- Difficulty
- Advanced
- Time to result
- ~months to results
- Steps
- 6
- Confidence
- 95%
M&A is about manufacturing Plan Bs, not about being for sale. Julia Schottenstein's counterintuitive play: identify the two or three companies for whom your product is genuinely strategic, then deliberately compete where you are strongest so they feel the pain — while simultaneously positioning yourself publicly as their partner, integrating with their ecosystem, and never closing the door on a conversation. The pain gets you noticed; the friendliness keeps you acquirable and makes post-acquisition integration cheap.
Origin
Developed by Julia Schottenstein from both sides of the table — as an early-stage investor at NEA and then as the dbt Labs product leader who led the acquisition of Transform (announced Feb 2023). She credits Transform's own founders with running the playbook on dbt Labs so effectively that it became the template.
Core principles
- 01M&A is always about creating Plan Bs — the strongest negotiating position is a credible willingness to stay independent
- 02For any given company there are only two to three buyers who find what you build genuinely strategic
- 03Pain gets attention; a competitive posture without pain gets ignored
- 04Never take so competitive a stance that you shut the door on a future buyer
- 05Being technically integrated with the buyer before the deal is itself a form of deal value
How to run it
- 1
Build the offense first
Start thinking about M&A strategy when you don't need one. A credible independent path is what gives you the upper hand in every acquisition conversation, because your alternative is to do nothing and stay the course.
Pro tip If you genuinely have runway and an independent path, do not talk about M&A at all. Talk about partnerships, collaboration and knowledge sharing instead.
Watch out Most companies do not have a viable path to independence forever. Be honest about which case you are in before choosing a posture.
- 2
Name the two or three strategic buyers
Identify the small set of companies for whom your product closes a real gap in their roadmap or ecosystem. Not the dozen you would call in a fire sale — the handful who would actively want what you have.
Pro tip Look for buyers who have strong distribution but a product gap in your exact area — that asymmetry is what makes you strategic rather than merely interesting.
- 3
Find the seam where you have a real advantage
Locate the specific area where you genuinely out-execute the target buyer — a technical problem you solved and they haven't, a use case they serve badly. That is the surface where pain can be inflicted credibly.
Watch out Do not manufacture pain in an area where you are not actually better. It will be read as noise, not threat.
- 4
Be loud and vocal about that advantage
Publicly and repeatedly demonstrate that you solve the hard problem they haven't. Make it impossible for them not to notice you, so their leadership starts asking internally what is going on with your company.
Pro tip Aim the volume at the buyer's own community and users — that is where the pressure actually registers internally.
- 5
Position as a friendly partner throughout
While competing, frame yourself as a partner to the buyer's ecosystem. Build integrations with their product, court their community, and keep every conversation open. This is the step most founders skip because they take too competitive a stance.
Pro tip Integrating with the buyer's product before any deal materially lowers their post-acquisition integration cost — and buyers price that in.
Watch out Prematurely shutting down conversation with an incumbent forecloses optionality you may badly need later.
- 6
Farm Corp Dev for an internal sponsor
If a buyer is active, they have a Corp Dev team whose job is to meet everyone. Take that meeting, say you are not looking to be acquired right now, and push them to introduce you to a product leader or GM who could sponsor a deal. Start a partnership conversation with that person.
Pro tip Get the Corp Dev team working for you — sponsorship comes from product, not from Corp Dev.
In the wild
Transform was a pure-play semantic/metric layer company founded by ex-Airbnb data people (Airbnb's Minerva metric layer is famous in the data world). They had solved the hard technical problems of the semantic layer early and were extremely vocal and loud about it. dbt Labs had exactly the opposite profile: excellent distribution and ecosystem, but behind on bringing a semantic layer product to market. dbt Labs felt the pressure. Yet Transform simultaneously positioned itself as a partner to dbt, courting the dbt community and building for dbt compatibility, so the two never became publicly hostile.
→ dbt Labs announced the acquisition of Transform in February 2023. Schottenstein led it, and cited two reasons for the enthusiasm: the product was genuinely good, and Transform had already done the integration work with dbt, making post-acquisition integration far easier. Transform's founder Nick Handel then led dbt Labs' competition philosophy exercise.
Common mistakes
Taking too competitive a stance and slamming the door
Founders refuse to talk to incumbents or shut down conversations early because they see them as the enemy. This destroys optionality precisely when you cannot know whether you can go the distance as an independent company.
Starting M&A conversations only when you need one
A buyer should know who you are long before an exit moment. Relationships built under duress are priced under duress.
Being cute with code words when you are out of time
Everyone in the room knows 'exploring strategic alternatives' means you are for sale. If you are in a Hail Mary situation, a plain transparent note casting a wide net beats coy signalling.
Is it for you?
Best for
Venture-backed founders with a defensible technical wedge but weak distribution, who suspect independence may not be viable and want to manufacture acquisition optionality 12-24 months ahead of needing it
Not ideal for
Companies already out of cash and time — at that point transparency and a broad buyer list beats the slow-burn pain play; also inappropriate if you have no genuine area of technical advantage over the buyer
From the transcript
“I would figure out the area that you bring a competitive advantage and I would inflict pain on that potential buyer make it impossible for…”
“I see a lot of Founders get this wrong and they prematurely will shut down a conversation or they won't talk to an incumbent or…”
“because they had positioned themselves as a friendly partner when when really we we weren't we were trying to compete for this similar use case…”
“use that Corp Dev team to your advantage like it's their job to meet absolutely every company that could be potentially interested”
“instead you're talking about maybe collaborating or Partnerships how do we work together knowledge sharing”
From the episode
M&A, competition, pricing, and investing
Julia Schottenstein (dbt Labs)