THINK HARD BEFORE ACCEPTING AN OFFER – AND IF YOU HAVE DOUBTS AFTERWARDS, DON’T IGNORE THEM.
In early 2012, after pitching to VCs and large corporations, the wine startup Vinomofo sold a majority stake to the e-tailer Catch of the Day, in a deal they thought would future-proof the company. “With all the media hype surrounding the new partnership, Vinomofo did indeed grow fast, as more and more people discovered the site,” says Andre Eikmeier, the CEO and co-founder of Vinomofo. But, behind the scenes, the founders felt increasingly vulnerable.
“We saw another business that Catch had invested in get closed down and the founders were let go,” says Andre. “It seemed, to us, as if Catch had a shift in strategy. We didn’t want that to happen to us, too.” And so in June 2013, with the help of a group of angel investors, they cut ties with their partners. “We bought the company back with zero dollars in our bank account,” says Andre. “They weren’t good numbers for our next management meeting. But, it felt good. We started making better, uncompromising decisions. There were no outside or group agendas or stakeholders. It was just us and our customers again.”
Vinomofo had 10 employees and had moved their headquarters from Adelaide to Melbourne to be near the Catch offices after the buyout.
Another company had to deal with their sale (and subsequent buyback) on a much larger scale, affecting more than 15,000 staff in 27 countries. It was in 2011, when the Intrepid Group created a joint venture with TUI Group, a multinational travel and tourism company headquartered in Germany, to form a new company, Peak, which was owned 40 per cent by Intrepid and 60 per cent by TUI. But due to a difference in philosophies and principles, the two split amicably in 2015, with the founders Geoff Manchester and Darrell Wade, who started Intrepid in 1989, buying back their company.
“The reality was we were a terrible partner for TUI,” says Darrell. “We cared about things they didn’t. We simply didn’t deliver what TUI wanted or expected, so it was a relief to them as much as it was to us when we parted ways.”
Surprisingly, the split had a positive effect on company culture. “Almost the day that we ‘uncoupled’ in June 2015, our growth accelerated, our staff became more engaged again and we’ve gone from strength to strength,” says Darrell. “We’ve been celebrating record sales since the split, up 15 per cent across the group. We’ve moved to new offices in Melbourne and London, paid companywide bonuses. Staying with TUI would have changed that direction of the company. Absolutely!”
Meanwhile, for others, the buyback process hasn’t always been a smooth ride. Snapsort, a Canadian product recommendation site, took 10 months and more than 20 different purchase options before the deal was closed. “Getting a deal done was a moving target,” writes CEO and co-founder Christopher Reid in a blog post. “As I built interest and showed the ability to pay, the price moved. It was a giant game theory mindf**k trying to: a) be a reasonable human without having the other side move the target and b) negotiate something reasonable for the team and investors. In the end, we got a deal that worked; that is to say no one was super happy about it, but we could agree to close. That process included a few sharp elbows, raised tempers and irrational outbursts. I didn’t always keep my composure, but for the most part we all behaved well.”
But don’t let these stories put you off selling. According to the experts, founders just need to protect themselves.
“This kind of buyback is still highly