Its’ funny. You sit around for months, waiting to have the block of free time necessary to start your blog, you get it, and then when the opportunity presents itself, you go blank. It’s like the comic when put on the spot at a party, “Say something funny!” finds himself utterly devoid of any idea the least bit humorous. And speaking of a lack of humor, my post…

I recently participated in assessing projects being developed by the Georgia Institute of Technology (GA Tech) and Emory University’s joint venture, the TI:GER program. TI:GER stands for Technology Innovation: Generating Economic Results. In this program, students are selected from Emory’s law school, the graduate business schools of GA Tech and Emory, and Ph.D. students from GA Tech or Emory and they are tasked to marry their legal and business training with actual scientific research to create a viable business concept. I sit on the advisory board of this program (the least qualified of all the individuals who do so) in addition to participating in the assessment process. When you look at business concepts being formed by students with limited real world and almost no practical entrepreneurial experience, you can get a lot of bloggable material in a few hours. You also wonder if you yourself were EVER that young. (My wife assures me that I both was that young at some point and absolutely no longer am. Thanks.)

As an aside, if you have interest in entrepreneurship, whether as an academic, capital provider, entrepreneur or service provider, try to volunteer for TI:GER. It’s a fantastic experience.
I saw two projects, each presented by a particular team – one a medical device project and another one that was a proto-pharmaceutical project. The latter was not so much a discussion of a drug candidate as it was a discussion of an interesting compound that might one day be formulated into a drug substance. Interestingly, I found myself giving advice to both teams that closely mirrors what I frequently give to companies run by grown-ups. Thankfully, my assessment partner was Dr. Stacy Williams Shuker, a Board Member of StartupLounge and director of the Life Sciences Center at the Georgia Department of Economic Development. The ratio of Stacy’s IQ to mine looks like the EBITDA multiple for a SaaS company. In other words, she understood the science and I could focus on business.

The first team that presented described a technology that has applications in regenerative medicine. I am being deliberately vague because I want to be careful not to reveal confidential trade information and will err in that direction. They had a very polished presentation, with few flaws that were obvious to me. What they were missing was the big finish – the exit. I understood the benefits the technology could potentially bring, but they struggled with how to make the connection between potential technological success and financial return. And in fact, after their presentation had been completed, the team approached me for input on how to make that connection. The team was uncertain about their business plan because they lacked a clear destination. Banking a startup business on “being acquired by someone in 5 years” is like packing your family in the car for a vacation, and saying you’re going to drive west for 8-10 hours and you’ll spend the vacation wherever that leaves you, and you hope that place is a good one. Can’t you hear the kids’ groans already?

The fact is that frequently, making the connection between technology and financial success is conceptually easy, because you don’t have to reinvent the wheel. That path has been blazed by countless companies. For example, let’s say you would like your company to be acquired by a strategic buyer (someone in your industry). Many such acquirers are publicly held, and they are required to disclose major acquisitions both in their annual reports to the Securities Exchange Commission as well as specifically through form 8-K. The acquiring companies’ 8-K disclosures contain a great deal of information about the companies they acquire. The key information you can pull from those disclosures is

• Which companies acquired which targets
• Why the acquirers thought the purchases added to shareholder value
• The key valuation drivers (from a disclosure called a fairness opinion)

You sometimes can learn even more by listening to the management conference calls online if the acquisitions are significant enough to the acquirer. The calls in which management presents its results orally to key institutional investors are often chock full of information. Typically, the investors are given the opportunity to ask questions. The responses to those questions can reveal a great deal more information than is contained in the written disclosures. If you analyze any public company, you’re not doing your job if you don’t listen to the latest call (or read the transcript, if there is one), and most companies archive them in the Investor Relations section on their web site.
From this information, you see your end point. Your goal should be to make your company look like the one (or ones) you think would be attractive to potential acquirers. How can you find that out? By examining the acquisitions already made! By looking at past acquisitions, you can learn

• The technology areas that interest acquirers
• The level of development required to attract acquirers’ interest
• Other factors that acquirers consider when examining a purchase

Once you know these things, figuring out your business plan is simple. You just pick the endpoint (acquisition) and work your way backward. Make your company look like the ones that have been recently acquired and determine the steps required to do just that. Now, instead of just picking a direction and driving for a specific time period, you have a destination, you understand why that destination is desirable, and you have turn turn-by-turn directions on how to get there. Suddenly, the family vacation’s prospects are looking up!

Like the NFL, entrepreneurship is a copycat league, and successful entrepreneurs and investors understand the value of following paths that have led others to success. Following acquisition paths established by the industry not only gives you much greater confidence and clarity in executing your plan, but will impress investors. Imagine for example that you don’t just say “we plan to be acquired in 5 years” as one typically sees, but instead “we plan to become an attractive acquisition target to the following companies that have demonstrated interest in our space with the following transactions. Here’s what strategic buyers are interested in, and how we will interest buyers in acquiring us.” Then you put up a slide with the transactions, a one sentence summary and the relevant valuation multiples.

It surprises me to this day how few companies seeking capital or just putting together business plans for their own operations do this. Discussing in detail how you plan to position your company for the exit and citing the exits of similar companies shows far greater sophistication and sets you apart from the amateurs. And, it practically writes your business plan for you.