Senior corporate executives from finance, media and healthcare were on hand to discuss their considerations for purchasing from a startup at the Enterprise Tech Innovation event held earlier this week across from Bryant Park. The premise for this Meetup was that there are an infinite number of startups for consumer-oriented companies, but very little for tech startups bringing innovation to large corporations. This event focused on acquisition and what makes startups attractive to large companies.
The organizer of the event, Safa Sadeghpour, said that in his other life as engagement manager at McKinsey & Company, he works with large corporations and understands how challenging it is for them to try and create all the innovation themselves. “On the other hand I’m involved in the NY startup scene as well, and I realized there are all these driven, passionate people. My advice for enterprise-focused startups is talk with the customers so you understand what their needs are. If you wait too long, and you focus on developing the technology without talking to your customers, then you are going to end up with a product that no one really wants. And don’t be afraid to walk up and pitch your idea to someone who is part of a large corporation, because you might find out that they are equally interested in finding some innovative, distinctive way of approaching a problem.”
Panelist Michael Monson of the Visiting Nurse Service of New York, the largest nonprofit home-based healthcare company in the U.S, talked about how he thinks of M&A activities from a strategic, enterprise perspective. “I think the most important thing I could say to any entrepreneur is make sure your solvent — I think people forget that. It’s not just engineers sitting around in a room thinking of the next sexy thing, it’s got to be something that a real company faces.”
“A lot of tech is moving into healthcare,” said Bill Taranto, the managing director for Merck’s Global Health Innovation Fund. “We are looking for opportunities, especially for data tools; because that is the currency we are going to transact in the future market in our industry. We are looking for tech that aggregates, integrates, allows access or harmonizes data. The ideal company would be a platform company — not a widget company — that can help more than one constituency: the payer, provider, healthcare company or employer.”
Ben Boissevain, the managing partner of Agile Equity had more to say on the subject of acquisition: “You have to position your company well and know your industry well. Who is getting acquired around you? Look at the valuation multiples and figure out who the movers are in your industry. Also, we look for someone who is very talented and dynamic, and hopefully has a track record of other M&A activity — but it doesn’t have to be.”
Fiona Dodd Simmonds, VP of M&A for American Express, had definite views on what she looks for. “The companies we are interested in really understand the customer or have anything to do with the next big thing or understand social or behavioral analytical information. We also look for any sort of technology that helps us gather data or any sort of data analytics as we try to understand how we can get people to spend more on their American Express card. Do you have any patents that are defensible? What product development line do you have? Not having any revenue is not a deal killer by any stretch of the imagination.”
Greg Merkle runs corporate markets for Dow Jones, on the B2B side. He said that it was easier to lease technology talent or partner with a company. “The attractive features of startups are that they can get us to market quicker – sometimes time to market is paramount for our own skill set and for our hubris, if you will.”