If It’s Not on Paper, It’s Not Real: Canvas Prime's Rebecca Lynn

0:00So they're out, they're talking to people, they kind of have, and this is when the founder has decided, maybe even just to raise money, right, for the company for the next round. But a lot of founders are afraid they're not going to like the terms, right? And so they don't have that investor put something on paper. And there's something about getting it on paper that really makes it real. Because once you, if it's not on paper, it's not real. And so once it's on paper, I mean, they've had the investor or the company that's put it on paper has had to go through some hoops internally, right, to get a sign off to do that.

0:37And they've done that work. And so they're not going to want to walk away from it. You get them a lot more invested. And once it's on paper, you can negotiate it, right? You can go to other investors or other potential acquirers and say, hey, I do have an offer now, but I really love to work with you and try to perfect that offer.

1:00Rebecca Lynn: Rebecca Lynn, managing director and co-founder of Canvas Prime, has spent 25 years in venture capital with investments in companies including Lending Club, Doximity and Case Text. She's also helped founders navigate more than a dozen exits. In this episode, we talk about something early-stage founders typically don't think about until much later. How to create options for a strategic exit. Rebecca explains why taking VC puts you on a path towards liquidity. How relationships with potential acquirers develop years before the offer arrives. And what founders need to understand about bankers, deal terms, earnouts, and negotiation.

1:35Rebecca Lynn: I'm Walter Thompson. This is Fund, Build, Scale. Are you building something that's hard to explain? It can be a sign you're working on something interesting, but it also raises the risk that you're missing out on fundraising, sales, hiring, and media opportunities. I help early stage founders sharpen the narrative. What matters? Why now? Who needs to care? And why they're the right team to make it happen. If you're preparing for a raise, a product launch, an important customer meeting, a panel discussion, or even a hiring push, I can help you pressure test your story before the stakes get higher.

2:10Rebecca Lynn: Visit the Fund Build Scale website to learn more or email fundbuildscale at gmail.com. Rebecca, thanks so much for joining me today. I really appreciate the time. Thank you, Walter. I scarcely know where to begin. 25 years experience in venture, 10, 11 exits. I'm not sure if I'm getting the number right. I think it's 11, maybe 12. And the IPOs as well. So what's the simplest way to kind of describe the kinds of outcomes you're best at engineering? Yeah, I like to engineer liquidity whenever I can for my founders and for my limited partners. And so I think it's always important when you have a company to to actually create opportunities for yourself, whether that's business development, whether that's channel partnership or whether that's an acquisition in the future.

3:05And often those three things go hand in hand. So I am very good at helping my founders navigate that so they have options along each step of the path.

3:16Rebecca Lynn: When we spoke earlier, you said one of the things you like helping founders with is helping them think through M &A early. What's something most founders just completely miss about how companies actually get sold? Yeah, I mean, I think founders are incredibly focused individuals. That's how they become so successful. And that's why they become founders. And oftentimes that focus is directed 100 % internally. It's directed at new features for the product, improving the product, and really their own customers, which is what has made them successful. But when the company's scaling, a founder really needs to kind of pick their head up and look around and form relationships externally, form relationships with other people in the industry, other companies in the industry.

4:06And those can evolve over time. Usually, even large channel partnerships that people are successful at Inkey and usually don't happen over the course of one phone call. Usually, they happen over the course of multiple years. And so it's important for the founder to really develop their network broadly within their industry. and you're not really thinking about, oh, would somebody buy my company later? You know, companies, when companies are bought, they're bought for a strategic value. They're bought for strategic relevance. And so that strategic relevance has to be very apparent long before, you know, a company says, we want to acquire you.

4:47And the best acquisitions happen when there's been a longstanding business deal of some sort where the companies have sort of dated for a period of time. And so the mistake founders make is they get very myopic. They're very feature focused. They're very product focused. And, you know, that gets them from like zero to 10, right? But then to scale from 10 to above, it's really an external emotion. And founders should spend a fair amount of time, you know, externally and talking to other people in that landscape and get to know them and build trust over time.

5:26Rebecca Lynn: I mean, would it be useful for a founder to reach out to a competitor or someone who actually had previously failed in the attempt to build something similar? I always think it's useful to reach out to competitors to get to know them, if nothing else, because it's like friends close, enemies closer, right? And oftentimes, you know, people are very hesitant to just go out and speak to somebody who they see as their competition. They're very afraid of doing that, especially large companies. But I always encourage it because you don't have to tell them anything you don't want to, right? You can have a very, you can have a benign conversation.

6:06You can have an in-depth conversation. You can talk about, you know, your joint competition, right? It's really good to know those people because oftentimes you'll find out that maybe you're not as competitive as you thought, or they're actually maybe joint things to work on. And if you find out you're, you know, head on competitive, you're going to know that for sure, right? So you've gathered information no matter what. And I do think it's a good idea to, and there are many, there are cases where maybe not, but in the vast majority of cases, I would say it's a good idea to be friendly. We've seen coalitions of companies in the past go up against like the Googles of the world and things like that.

6:52And sometimes you do need to sort of have a united front, you know, against some like entrenched incumbents, for example. And so I find that those are really opportunities for founders. And they gain a lot of knowledge by going out and talking to these companies. And the failed companies, too, it's really informative to go out and talk to a founder that maybe tried this and tried it before. Because oftentimes, the investors will broad brush and be like, oh, that didn't work before, right? But there's always a story behind it. And there's always a story. And there's always something different and some unique set of facts.

7:30And having that information where the investor said, well, it didn't work before. And the founder said, well, I hear you. But I actually talked to that founder. And in reality, here's what really happened. And now this is why the timing's right for this opportunity. I mean, how much more powerful can it be, right? So I think they should take the opportunity. Whenever I've regretted things, it's when I didn't reach out and have those conversations earlier.

7:57Rebecca Lynn: so I'm always looking for ways to kind of save people time by taking like those performative kind of you know things people do that look great but don't really produce results are you seeing some what's the behavior that founders are doing that kind of to to grow their network but that's just not it's more one of a it's a performative gesture doesn't really do them much good they could just stop doing tomorrow it'd be fine oh they could just I mean posting on twitter probably I mean, it's just like, that's really the, I mean, I don't, I don't, I think that's, I think that's more, you know, their own, their own thing.

8:29You know, I don't, I don't think people, I think there's a small universe of people that pay a lot of attention to that, but, you know, always posting and political views and doing all that kind of stuff. and like investors, they don't really care. Unless, of course, like you have a unique company where you're gaining customers by doing that. But typically it's not super helpful. In our prep call, you said the moment you take venture capital,

8:54Rebecca Lynn: you're on a path to liquidity. I think founders, you know, they want to, most founders think they want venture capital. What are they not fully understanding about that decision? Yeah, I think they want venture capital to help them grow their company and scale. I think, and they want, hopefully, advice along the way as well. But when you do take venture, I mean, there are other pockets of money you can go and get to scale your company, right? Venture is a unique beast. You take venture capital when you know what you're going to do with the money, when you can scale exponentially faster with venture capital.

9:32when you do need to invest a lot in building the product, building the go-to-market, and do it quickly. And when you take venture money, you're expected to have a liquidation event, right? And that means you are expected to give a return to the investor, to the venture capitalist, who thereby gives a return to their limited partner, which is often, you know, pension funds and retirement foundations and things like that. And so you're on a train, right? And that train historically has been in seven to 10 years, you will exit your company. And right now, unfortunately, that's longer on average. But there are really only two ways to do that, or there's kind of a third right now.

10:22but that is, you know, IPO, which, you know, everyone talks about, but I'd say it's the minority or M &A. And a strategic M &A, I think, can be incredibly, incredibly rewarding. And a lot of people don't kind of consider that out the gate. They're just, you know, IPO or nothing. Not an M &A, to be clear, that we're going to go sell this for a couple hundred million in three years. Like, that's not what venture capitalists sign up for. And it's not what a founder should sign up for. But an M &A that can, you know, return, you know, a 10x plus, you know, to the investor and make the founder quite wealthy.

11:00And then, you know, and pursue that. And the thing is, is that, you know, the best IPOs and M &As are when they were pursued in parallel. So again, you want to create optionality for yourself as a founder. And so from the very beginning, and along the way, just kind of think, look, who would I want to partner with? Who would this, who am I strategic for? Because that should also govern a lot of your business conversations along the way. But when you do take venture capital money, you're signing up for a liquidity event. And there are the stripes of the world which stay private and do these distributions which are incredible and just awesome companies.

11:37But those are very few and far between. Those are the true unicorns.

11:42Rebecca Lynn: Founders should be thinking about creating those exit pathways from the beginning. just bringing it back down to earth what does it actually look like in the first 12 months let's say because I like as far as like in practice is what are the behaviors you're looking for yeah so a couple things here so um because I think we I think the way that was phrased it's going to be a little founders like oh I'm going to sell my company from day one that's not at all what we're saying here um what I react to more than anything is this this mantra of our companies are bought not sold right well you know if you want to sell your house you don't just sit in it and hope somebody comes down the street and gives you a check, right?

12:18And if you want to raise money from a venture capitalist, you don't just sit there and be like, oh, somebody will come over the transom and give me a financing, a term sheet, right? The same thing with M &A. It's just not how it works. And so, you know, and I say that they should be thinking about M &A. They also should be thinking about an IPO. They should be thinking about them, you know, in parallel the whole time because, again, you're creating opportunity, you're creating options, and you should be thinking about how much water is between you and the IPO and then what lies after that IPO, because your life does.

12:48I mean, the real conversation is what happens and how does your life change once you go public? Because that's a whole nother realm, right? That I think oftentimes founders don't really consider adequately. And it really, that hamstrings you, right? In so many ways on what you can and can't do. But in terms of the M &A piece, I think I wouldn't say I wouldn't frame it that founders should think about M &A from day one. I think founders should be thinking externally and strategically from day one, because that's going to inform them of what their options are. Right. It's going to inform them of, you know, business development opportunities, channel partnership opportunities.

13:28So many founders just try to go it alone. Right. And I just listened to this lovely Coca-Cola podcast on Acquired. And, you know, Coca-Cola is the poster child for not going it alone, right? Their bottlers distribute, bottle, do all that. Coke just takes care of syrup and marketing. That's it, right? And so I think founders, you know, are so in the go it alone mentality that they really should think about these channel partnerships, these broker partnerships much earlier. And that evolves into deeper and deeper strategic conversations along the way. so it's not like I start a company and like hey would you buy me that that is completely not the case it's how can we work together right that that's the question how can we work together how can we help each other and the answer probably in the first 12 months is not at all but interesting keep me posted right but that will evolve and I've seen it evolve in so many of my companies if they scaled from zero to 100 plus million in revenue right and those conversations evolve over time.

14:29And those relationships are important. Like when Jake sold Case Text to Thomson Reuters, that was not the first time he'd met that team. He'd been talking to that team for many, many years. And what he had built was trust. They really trusted Jake and they trusted that he was building a really great product and that he was a very straight shooter because Jake is. And just the other day, I mean, the Thomson Reuters announced the millionth user on that case techs platform that they brought internal. So I think the first 12 months, I mean, chances are you are probably heads down building, right? But beyond that, when you have sort of assembled a bit of a team, then when you've got that team sort of shored up a little bit, a founder's focus should shift largely externally.

15:17Rebecca Lynn: Let's actually unpack that case techs example. um like just walk me through the acquisition like um where was the company when as far as the first relationship to the final offer like how how how did that unfold and how much time how much time did it take there i mean i would say and jake would be a better person to ask of course but um but with case text and their acquisition by thompson reuters jake had gotten to know that team over the course of many years and i and i actually remembered the specific board meeting where the company was doing fine. It was growing, you know, it was growing kind of year over year.

15:52It wasn't knocking the cover off the ball, but 10, 15 % growth year over year. And they were really focused on the legal research. They were already, you know, leading edge of AI because they had to be given what they were doing. But GPT-4 hadn't launched yet. And it was a couple of years before that. And I had just come into a board meeting and I said, guys, we've all read the board deck, right? And they were like, yes, because we usually go through the whole board deck and the executive team usually would present. And I said, let's just shove that aside and let's just talk strategy. Like, where are we really going?

16:23And strategy by, you know, what product, where do we really need to end up to be a billion dollar plus company? And every company I've been a part of, there is a meeting or a point in time where, you know, I think Scott Sanborn said it best at Lending Club many years ago, where he said, I can hit the numbers that the board and we have agreed upon doing what I'm doing, but we're never going to be a billion dollar company unless I do something different to shift the curve. And that different at lending club is really, you know, exploring different marketing channels. And at case text, it was like, let's really figure out deeply what these customers want and let's create a whole outbound motion for Jake.

17:02And, and so our recommendation for Jake was that he do like three to five external meetings a week and, and, and learn from them. Like it wasn't that he was, again, it's learning and the best salespeople do much more listening than talking, right? And so it's go and learn. And in that process, he did a lot of conferences, he did a lot of speaking and a lot of outbound. And so they got to know him over the course of many years. The other thing we did do, and I often recommend, is to go ahead and hire a banker. Now, everyone bristles like, oh, a banker, you know, why would we do that? And I'm not talking about hiring a huge, big, big bank banker.

17:43There are bankers out there that serve every kind of niche. And so in this case, we had a banker on board that just did legal tech. He knew the people at all the different places. And so he helped behind the scenes.

17:57Rebecca Lynn: Relationship with a banker. How early was that for case tax? Because I'm thinking, is that something you think of? that seems like a, was there an inciting incident or was this more like they hit a certain level and then they started thinking we need to bank a relationship? Yeah. It's not, it's not super early to be honest. It's when you, I mean, there's no like magic revenue number, but what, what you, what you don't want to have happen is you don't want to have, you know, an offer coming over the transom and to be unprepared. Right. And, and, and that, that can happen sometimes. Right. I mean, Even when Jobs called DAG to buy Siri, right, they hadn't really thought about an acquisition.

18:35And I would argue they probably shouldn't have been thinking of an acquisition at the time. So there was nothing that – but they just hadn't thought about it. And the initial offer came in, and it wasn't really that high. And DAG had the best response ever, which is, you know, Mr. Jobs, we apparently haven't earned the right to work with you yet, right? And then, of course, Apple came back with a higher offer later. and bought Siri a while back in the last wave of AI. But if you can be prepared, you want to be prepared. And you want to be able to consider the offer in the context of your other options.

19:16And bankers can help you do that. And so it's nothing to get highly distracted about, I don't think at all. But with Gabby, what happened was there were a couple inbound offers of acquisition that weren't that interesting, actually. And so we went ahead and I said, guys, I know we're not for sale, but let's just talk to a few bankers and have them inform them of the ecosystem, right? And really have them kind of taking a look at everything. And keep in mind, your banker is kind of your marketing channel. So you do want to position your company for the banker in a very good light, because even if you don't go with that banker, You want them to speak very, very highly of you.

19:59Right. And so I think you learn a lot from that process and talking to bankers. Now, I do not ever advocate people to spend a ton of time, but, you know, talking to like three of them. You know, at one point in time to kind of go through the process and get a feeling for what the options are out there is smart. And I also really advocate for hiring. If you choose to go with a banker, hiring somebody that knows your space really well. That's not a brand name for themselves, but, you know, like a big bank, but it really, really knows your particular domain very deeply because they will have a connectivity.

20:37So when the offer came over from Thomson Reuters for Case Text, you know, we had somebody helping us who was more of an advisor. I mean, you can also just call them advisors. We do that sometimes. And they were like, you know what, this is real. and we kind of, you know, we talked to everyone and we kind of knew who was a buyer, who wasn't a buyer. And we're pretty informed because of that. And then we really liked, you know, the Thomson Reuters team. So we were able to negotiate that up from like their initial offer to where it landed at 650 and be pretty effective at that and really negotiate the terms.

21:15It's one thing I think people shortchange is that the price is one thing, but the terms themselves are equally important. in terms of how clean the offer is, any strings attached on, you know, what that offer is. And always the best way to perfect terms is have, you know, at least two people who want to buy the company, right? Because then you keep everyone kind of down the straight and narrow.

21:39Rebecca Lynn: Looking back at the M &As you've been involved with, were most of those acquiring partners known to the founders you're working with? Or how many of them were kind of surprises out at left field? I would say they were all known, but the movement was typically a bit of a surprise out of left field at the end of the day. So they were all known. Again, they'd all externally reached out. They knew the people, but the actual offer of acquisition, I think in every case, was a bit of a surprise out of left field. And it was because usually what happens is that you have an initial inbound offer that maybe isn't exciting.

22:21and then typically, I mean, sometimes it ends up being what you go with. But then oftentimes that just kind of, that basically ignites like the whole process, right? So then you go back to the people that you know. And then sometimes there's this offer out of left field. They're like, wow, okay, that's incredible. And that's the one we'll go with. But there are times when it is the first offer and that is the obvious fit for a company. and it works out quite well. But again, staying informed, staying a little externally focused. So sorry about that. So again, staying informed, staying focused, not only on what you're doing in front of you internally, but also making sure that you're touching base with a broader ecosystem is important so that you know when that offer comes in, like who else might be at the table.

23:17Rebecca Lynn: I'm trying to work backwards here. It's fair to assume that like an M &A deal like this is probably going to be initiated by like a champion, a champion inside one of your customers is going to say to somebody else inside that company, we need to bring this in house, we need to own this? Or what usually is the spark that triggers? I mean, I think that's typically it. I think companies are always looking for growth, especially before a company will go public. What a banker will do is say, hey, you need to show the markets that you – so the banker taking the company public, right? So the banker taking the company public will often tell the company pre-IPO that it would be great if they could show that they could grow by acquisition, right?

24:02Because, again, you're trying to educate the street that you can continue growing, you know, once you're a public company. And so those companies oftentimes will look for acquisition targets. In the case of AI, right, and like the Thomson Reuters acquisition, I mean, it's an existential threat to the business, you know, the AI in and of itself. And so that's when you get really exciting acquisition opportunities, right? When it's a strategic acquisition, it's an existential threat to the entire business model. you will get some really interesting opportunities. And in that case, yeah, the internal teams are looking broadly and it's a build-buy kind of decision.

24:46Can we build it? Do we need to buy it? And if so, who's out there and who are our competitors for the asset, right? So that's how they kind of think about it. And then once you have one person coming forward, if you want to be set up properly as the target, if they want to potentially acquire you, it's really helpful to know what you're turning down. And the mistake founders make sometimes is that they haven't done that assessment. And when that offer comes in, they have a very short time to react. And so that's also, that's why having somebody, and again, it can be a strategic advisor. It doesn't need to necessarily be a banker, right?

25:29But somebody who at a senior level really knows all the kind of movers and shakers in that particular industry can be very helpful. And you have to really view them as an external, like a piece of your business development strategy.

25:45Rebecca Lynn: I think also it sounds like people, potential acquirers need to, they need a bigger vision. They need to see how your thing fits into their thing. Oh, absolutely. Absolutely. They need to see that you are on their roadmap going for it. What are some of the signals that like founders tend to overlook then when they actually, when the time is right and they're later in like, you know, approaching series A, let's say. Like what is, I'm guessing strategic buyers don't all show up the same way. So can you share an example of a founder kind of just missing the signal entirely? I don't have an example for that in terms of them missing the signal.

26:20I have founders that have said, we're just not for sale, you know, full stop, end of story, which I mean, can be fine. But I don't think it's ever really the right move. I think, you know, just saying, hey, you know, a better answer is, you know, we are so excited about our trajectory and what we're building. And we have a path to be a really huge company. And we haven't even thought about being acquired. I mean, that's the right answer, right? And so I have seen founders maybe too early to shut things down and really alienate potential partners later who wish maybe they had kept that door a little bit open, right?

27:05So you can be not for sale. Your board can say you're not, excuse me, your board can say you're not for sale. But be a little polite, right? Because you never know. And so I think, you know, I think, you know, I was taught really in my career, never burn bridges. And so my coaching to founders is don't burn the bridge. You never know. And it might not be an acquisition. It might be a partnership. It might be sort of a strategic thing you work on together. But if it's just a hard no, like we'd never sell to you. We hate your business model. We don't like you. You know, don't do that. Just be like, you know what?

27:38We haven't even thought about it. We're building such an incredible business here. It hasn't even crossed our minds to sell yet. But let's talk about what we can do together, right? That's a much better way to approach it. I've seen founders take the first path and sort of regret it later.

27:54Rebecca Lynn: I just wanted to shift and kind of talk about some of those negotiation mechanics, I guess, founders don't actually see because, you know, you'd only, I'm guessing most, how do I say it exactly? Like M &A experience is something you don't get until you get it. Right, right. You only see it a couple of times. Yeah. Right, right. So everyone's coming in cold. You said in the prep call that a lot of founders are kind of just, they're afraid to put an offer on paper. um why is that why is that mistake well there's there's the founder's not afraid to put it on paper they're afraid to get one on paper so they're out they're talking to people they kind of have and this is when the founder has decided maybe even just to raise money right for the company for the next round but a lot of founders are afraid they're not going to like the terms right and so they they don't have that investor put something on paper and there's something about getting it on paper that really makes it real.

28:48Because if it's not on paper, it's not real. And so once it's on paper, I mean, the investor or the company that's put it on paper has had to go through some hoops internally to get a sign off to do that. And they've done that work. And so they're not going to want to walk away from it. You get them a lot more invested. And once it's on paper, you can negotiate it, right? You can go to other investors or other potential acquirers and say, Hey, I do have an offer now. Um, but I really love to work with you. Um, and, and then, and try to perfect that offer. But one mistake founders make is they often are trying to perfect the offer before it's written down.

29:30And you should just, a founder, in my opinion, should, get it on paper and then you have something to negotiate from. And then you can use that to potentially pull in other offers that you don't have yet. And that people are there kind of dancing around the hoop. Once they hear that there's something on paper, you're going to know pretty quickly if the other people are real or not.

29:56Rebecca Lynn: Any tips or suggestions for leveraging an offer without blowing up the original deal?

30:04I think, you know, I just tell people like just be honest, right? You don't have to say anything you don't want to say ever. But in terms of leveraging the offer, I mean, it all depends. It really depends on who it's from and what the situations are. But, you know, don't overplay your hand is my typical guidance. Like just, you know, be bold but know what the line is. And every situation is going to be a little bit different. But on the other hand, you know, usually walking away at least once is usually a good idea in terms of an acquisition, you know, just, you know, having some situation. But again, walking away in the right way.

30:47I mean, when we when case text was acquired, the initial offer came in very quickly, completely unsolicited, out of left field. Right. And and we very politely said, no, thank you. And my guidance to the CEO, who was rightly very excited about it, was that if a company has approved an offer to buy and they come to you like that, there's usually latitude that the board is also approved. They're like, oh, you can go up to this amount. And so if we do this in the right way, we can test that. And it's a little nerve wracking. I mean, it's a hard thing for a founder to play that card, but it's usually the right thing to do, provided you say no thank you in a very respectful way that allows them to come back with something a little bit better.

31:43Rebecca Lynn: Again, I'm sure it varies, but if I got an offer from my company on Monday afternoon at 5 o 'clock, how long would I typically have to consider? You know, it completely varies. It completely, completely varies. I hate these exploding clauses. They're never real, pretty much, right? So, I mean, you should have a week or so at least, but it really depends. And then usually it's a no-shot period. Like you sign it, then there's like a 30-day no-shot after you sign it. So you have another gate to consider once you've gone through and kind of done the diligence and done the work before the final offer is papered.

32:24And so usually what you're signing is a no shop initially. And then that gives the potential acquirer time to get to know you. It gives you a time to get to know the acquirer. But when that no shop is expired or before the final papers are signed, there's an opportunity to say no and to break up on either side. And that's an important thing for people to understand too is keep your eyes wide open going through that process. If you think this is going to be a great marriage and it's turning out not to be so much, then keep your eyes wide open as you go through that process.

33:02Rebecca Lynn: Beyond just price, what are some of the terms founders consistently misunderstand once they're looking at the deal terms like earnouts or cash versus stock or the title they get after they're acquired? I don't know that they misunderstand things. I think, again, there can be over-optimism. I mean, I think getting as much upfront as you possibly can is super important. Getting stock in a company, if you really believe in the stock of that company, you could always take your cash and buy that stock, right? And so I'm all up for as much upfront cash in the deal as you can get and very low earnouts because the problem with the earnouts is you may lose a lot of control in how those numbers are hit once this is done.

33:52And so you want to keep things really in the realm of what you control for as much as you can. I think that's missed. I think there have been situations where a company will say, oh, we're going to buy you and you're going to get half of it now and half of it in a year, provided you're still employed. And I've seen a situation where the acquiring company basically terminated everyone a couple weeks before that second piece happened, right? So be careful. And again, there was trust between the two parties, but companies get reorganized, right? Especially big companies. So be careful. And again, get as much upfront as you possibly can.

34:38and then the earn out can be hard sometimes. I mean, I've seen companies want founders to work for companies for three and four years. That's a really long time. And so, yeah, it's a long time. It's a really long time. I don't think my companies have, it's too long, right? But I've seen, I've talked to founders who are like, oh, I'm still here. I'm here for another year or so. I mean, a year is typically fine as long as they're well comped for it. But, and sometimes that lets a founder kind of reset, but really think through those terms, right? And again, you know, a bird in the hands, a bird in the bush, right?

35:16If you get as much of that in stock upfront as you can.

35:21Rebecca Lynn: I mean, before we wrap up, I definitely want to - And the other thing too is take care of your employees. Ah, yes. I see this sometimes where the board is really just thinking of the acquisition in terms of the management team and the founders. But other people have really been with you along the journey. And I've been an operator as well. And I find it's really important. It's typically important for CEOs to be sure to take care of everyone. And even if it's like a smaller acquisition, it's 10 ,000, that's meaningful to somebody, right? There have been much bigger acquisitions where the person answering the phone never has to work again, right?

36:03So, but this is a small valley and you're going to need those people in your next endeavor and you're going to want them to come work for you again. And more importantly, you're going to want people who did work for you to say really good things and most importantly, say how they were equitably treated. And so I always push on the board, the board level to make sure that we have, you know, kind of considered everyone who's been with the company when an acquisition happens and make sure they get something.

36:30Rebecca Lynn: I'm very glad to hear you say that. Speaking as a below the marquee player in several companies, what are some of the most common reasons a promising deal falls apart late in the process that you've seen? Late in the process? Well, I think time kills all deals. And so if you have something that you're excited about on Rails, move. Don't delay. Don't delay getting data and materials and try to kind of be too cute by half, right? Time kills all deals. And a lot of times it's nothing to do with your company. It's nothing to do with what you did, but the person championing your deal suddenly left, right?

37:11Or, you know, there's some other acquisition or the economy takes a nosedive or something happens, right? So I would say, you know, if there's something that's later in the process, it is typically something external that was not predicted, you know, early on. And, and it's often just a case of the deal just dragging out way too long.

37:32Rebecca Lynn: If a founder finished this episode and they wanted to spend the next week getting more M &A ready, what's the most high leverage thing you'd work with them to actually do? I, you know, I would spend time with them and really deeply understand their business. I would, I would tell them to just, you know, you know, crawl before you walk and go out and figure out who the, you know, who the five kind of most likely partners would be for them and make those and reach out themselves. If they didn't have that network, I would actually reach out to somebody who in the industry, who could be an incredible advisor for them, who is really kind of a door opener.

38:19I mean, I'll use the example of like John Mack at Lending Club, right? The former CEO of Morgan Stanley. Add that person to their board, right? And even this board, adding a person like that to a board is incredibly powerful. We've done that many, many times in our companies. And the process of adding that person to the board can actually be in and of itself strategic. So imagine you get a recruiter on board, a really good one that deals with C-level execs, and you tell them you're doing a board search because you are. And now all of a sudden the door is open to any sort of high-level industry person that probably has a Rolodex that may want to take a board seat in a really hot AI company or really hot fintech.

39:11We do fintech and healthcare here at Canvas. And so they may want to be able to be part of that and to help coach a startup. And a lot of people do. So now as a CEO, you're not pitching for them to buy you or buy your product or partner with you. You're saying, hey, would you like to be a board member? And you're kind of turning the tables a little bit. And you're getting to tell your story in a very different way. and so it's almost like the asking advice you know or asking for advice for money now you're now you're asking for advice right and so um running a a board search for an independent can be an incredibly strategically um advantageous motion so that's probably what i would tell them i'd probably say hey do you have an independent on your board if not who would be the perfect person who could open doors for you, right?

40:07And I would encourage them to add that person first.

40:11Rebecca Lynn: Rebecca, thank you so much for a fantastic conversation. This has been super tactical. Uh, thanks for unpacking this with me. I appreciate it. Yeah, no, it's been really great. The fund build scale theme was written by Michael Tritter and performed by Michael and Carlos Chárez. Michael also composed Ocean, the track he heard at the top. If you enjoyed the episode, please subscribe and leave a rating. It helps more people find the show. You can get the Fund Build Scale newsletter on Beehive, follow along on Instagram, and if you have a guest suggestion or a question, reach me at fundbuildscale at gmail.com.

40:44Rebecca Lynn: Thanks for listening. Fund Build Scale is a production of Truth and Soul Media, LLC.