The Decision To Sell

I was on Cape Cod with my family when my CEO called to tell me the time had come to make a decision. In the anatomy of a deal, there are many points at which you can safely safely hit the eject button, but this perhaps was the most important one. Prior to this call, we had engaged with the acquiring company in the context of a business partnership, and had politely listened to their early intimations. But as the proposed deal became real, the time had come to make the decision: do I have the conviction to stand before our board and commit to being acquired or not?

I’ll confess to having been down this road before. After a hard first year slog to get to product market fit at CloudHealth, we had sustained the “up and to the right” growth charts every investor loves. And so in 2016-17, acquiring companies started to take an interest in us. Three of these deals reached the stage of being brought to our board, where they were received cooly by our investors. Don’t ever believe the old adage that you cannot have your cake and eat it. When a startup company is working, venture capitalists can lean into all the flaws of your business to talk down its valuation, while simultaneously pointing out the incredible opportunity you are leaving on the table by even considering an acquisition. Some days I can’t help but think: it’s good to be a venture capitalist.

As the CTO and founder, I had ceded a large amount of decision making authority the day I brought on a CEO and co-founder. I gave up further power by bringing on investors, and then through each successive senior hire. This is a positive and natural progression of a growth stage company, and one with which I was fully comfortable. But when it came down to the decision to be acquired in 2018, I knew there was no delegation here. If we wanted to move forward with an acquisition, it required my full and wholehearted support.

The good news for me was that my experiences from 2016 had given me the rubric for making this decision. I defined it with four simple questions:

• Is this right for my investors? - I enjoyed working with most but not all of my investors. In the course of building CloudHealth, we’ve experienced good times and bad times together. I’ll admit there were one or two occasions in which I was glad our board meetings didn’t occur on a cruise ship with one of them standing near a railing. But there is one thing I knew for sure: I could not have built this business without their support. While I didn’t need my investors to like an acquisition, it was essential I believed in my heart this was a good outcome for them.
• Is this right for my team? - At the time of acquisition, we had over 300 people in the company. Every one of them had added value to CloudHealth, and a few were absolutely essential in achieving our business success. No acquisition decision could be right for me if it was not also good for them. Also I considered our earliest employees as investors. While they didn’t provide the capital for the business, they provided something even more valuable: their time, their commitment and their passion.
• Is this right for my product? - I single handedly wrote the first CloudHealth product as a one person business. It was my baby. When it failed a customer, I felt it personally. When we lost a deal for product reasons, it kept me up at night. I could not agree to an acquisition that did not show me a path to fulfilling my product vision.
• Is this right for my customers? - I have been involved in hundreds of our customers, maintained strong relationships with dozens, and personally closed our first two deals. I used to say in the early days that my goal everyday was to wake up and deliver more customer value than I did the day before. Customers are the fuel that drives me. An acquisition that was not right for my customers was never going to be right for me.
• Is this right for myself and my family? - I have spent more hours in this business than anyone has or ever will. I started it with my kids in 5th and 6th grade, quitting a job for the unknown journey of being an entrepreneur, and working 14+ hour days, usually seven days a week, through much of the first few years. I made great personal and professional sacrifices to create CloudHealth. If my company was to get acquired, it had to be right for myself and my family.

After I hung up the phone I went down to chat with my wife, who had been my consigliare throughout the early phases of our talks. “From everything you have been saying,” she said, “it sounds like you want to do this.” I paused and thought about the obviousness of what she said. This opportunity was right for my investors, our team, the product, our customers, myself and my family. Yes there were still mountains to climb: a complex deal to be negotiated, investors who coerce, due diligence to complete, and a few high pressure moments that could easily derail this. But I knew when she said those words that she was right: I was selling my company.