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Strategic Acquisition or IPO?


Tom Reilly

Founder's Spotlight

The most interesting dilemma for a CEO?  The decision that comes with having the option to go public or accept a strategic acquisition offer.

Tom Reilly, former CEO at Cloudera has been a CEO with the experience of selling a company to IBM, another company to HP and then taking Cloudera public after raising $766.5M from strategic partner, Intel.

Tom says a CEO should invest 20% - 30% of their time working with strategic partners - do not outsource to your partnership team.  In fact, this advice comes from the experience of Tom working closely with the CEO at Intel which led to their strategic investment in Cloudera.

Strategic buyers use partnerships to evaluate the value and fit of a strategic acquisition.  It is critical to have well defined performance metrics for strategic partnerships, including close rates, annual contract value, gross and net dollar retention rate and CAC payback period to highlight the financial performance and efficiency of strategic partnerships.

We then turned to discuss the decision to go public versus accepting a strategic acquisition offer.  Tom shares that IPOs  and being a public company do have their challenges - and that there are many great options including Private Equity, Growth Equity and now SPACS!

Being public comes with heightened scrutiny on quarterly performance and transparency - which can be distracting.  Developing the capability and culture of being able to accurately forecast quarterly revenue, margins and provide longer term guidance needs to a be a focus and competency developed three to four quarters before an IPO

Hot take #1 - being capital constrained can led to learning how to operate more efficiently - it may not always be best to take a lot more capital than needed OR at least ensure the culture of efficiency is maintained even after taking a large sum of investment

Hot take #2 - companies have to start early to instrument, capture, analyze and make metrics informed decisions earlier and faster - numbers do not lie!!!

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