Am I a good candidate for your services?

We work with technology companies with proprietary IP in one of two situations:
1. They are a successful or quickly growing business and want to understand their potential acquisition options before raising another round
2. They are a bootstrapped or VC funded company that did not achieve the scale to attract another round of funding or run the business based on operational cash flow

What are my chances for a successful exit?

If you have more than one employee coming with the transaction and over $50K in recurring revenue, the odds of a success exit are over 70%. If you do not have any employees coming with the transaction, or have not achieved significant commercial scale, your business is likely too risky for an acquirer to make an acquisition.

What is my company worth?

If you are a sub-scale business, your value to an acquirer is likely more than a multiple of revenue. For most acquirers, the cost the cost to replicate your business plus the amount of revenue they can generate in that timeframe is more representative of your value. You can get an idea of that value using our estimated value calculator.

Doesn’t my valuation just follow conventional revenue multiples?

Revenue multiples were created looking at large private or public companies and are not as applicable in our part of the industry. Those large revenue multiples normally apply to companies that already have commercial scale and are growing at 100% to 200% per year in recurring revenue.

What can I do to make my company more valuable to acquirers?

Acquirers in our space are primarily trying to reduce the risk of a failed acquisition. To reduce their risk the simplest path is to create a strategic partnership with as many potential acquirers as possible. This allows them to better understand your team, your technology, and your potential value. Beyond that increase your commercial scale to prove the viability of your technology is key, whether they are paying customers or free users.

Does the amount I have raised impact valuation?

Only partially, the amount you raised will be used as a value anchor in the early conversations with acquirers. But just because you raised $5M, does not mean you have built technology worth $5M. Your value to an acquirer is based on their own evaluation of your IP, team, and what you can bring to their business

How long does your process take?

From kickoff to a LOI, the normal timeline is approximately 4 months in total. The diligence time after a LOI to closing the deal is normally 30 to 60 days.

What are my time requirements during the project?

We estimate your time commitment at less than 10 hours total over the first 6 weeks of the project. After we kickoff the project your time requirements depend on the level of interest in your company, but I would assume 3-5 hours for each interested acquirer.

Do you create a confidential information memorandum (CIM) for outreach?

We do not. Our landing page lists your name, website, key commercial and technical details, and the estimated value. Your financials and growth metrics are unlikely to draw interest on their own, so we provide enough information for acquirers to understand whether they want to engage in the process upfront.

Can I remain anonymous in the outreach?

Our outreach goes directly to the acquirers, but the landing page is not available unless someone has that direct link. If you choose to stay anonymous, and your commercial success is not spectacular, you should expect significantly lower odds of a successful outcome.

How do you approach outreach?

We identify the two best contacts at the acquirer to review your company. This is normally the Corporate Development or Strategy team, the CEO, or the product team. We contact those people multiple times over a six week period to ensure each acquirer reviews your companies information.

Where can I see updates on outreach?

We have a proprietary reporting engine that shows contacts, engagement, interest, and details any conversations with acquirers at clients.basisstate.com

How many interested acquirers should I expect?

A normal process returns 10 interested acquirers, that lead to 6 discussions Those 6 initial discussions lead to 4 parties moving into deeper diligence.

What engagement results should I expect through outreach?

We can track that 80% of acquirers will at least engage with our outreach. 25% of acquirers will consider and engage with the landing page. We normally receive responses from 15% of acquirers. If a client chooses not to follow our advice for messaging or estimated value they can expect lower results.

I already have some acquisition interest. If I get an offer from an existing contacts do you still get an outcome fee?

Yes, but maybe not the full fee. By engaging Basis State in a process, you can increase urgency and drive existing conversations down a path to a quick conclusion. Our phased approach and fee structure allows you to pursue a full outreach process or to move an interested acquirer to a LOI without incurring the full fees.

Do you advise all the way through the transaction?

Our process runs through the acceptance of a LOI. After that step, we find lawyers and company advisors are more integral to completing a transaction. We are available if you have questions, but our active participation ends at the LOI.

Is it expected that the team join the acquirer?

At a minimum we ask key founders (normally CEO and technical leads) that they are willing to help transition the company. If you are willing to transition, it can increase the odds of finding a successful acquirer as it removes some of the risk from the transaction.

What happens if your process does not yield an LOI?

It happens over 20% of the time, so we do have a process for it. During onboarding, we will ask you two questions:
– Would you consider strategic partnerships if you are unable to find an acquirer?
– Would you be open to letting a 3rd party operate the company if you are unable to find an acquirer?

If the first answer is yes, we will reach out to all parties that have shown an interest to see if they would be open to discussing alternatives to an acquisition. Oftentimes, partnerships represent a “try before you buy” opportunity for enterprises.

If the second answer is yes, we will also reach out to our network of SaaS operators, who are in the business of turning around SaaS companies in exchange for a percentage of profits or exit proceeds.

One thing we have learned — discounting the asset and going back out to market with a lower price does not work. It signals that something must be seriously wrong, which just turns a “pass” into a “hard pass.”