Closing an Acquisition is Very Hard

According to equity management platform Carta, around 1% of startups get acquired.☨

I've sold two startups I founded, and one where I was a senior executive. Getting across the line is very hard, and most companies don't have multiple suitors.

When I speak with founders who are at an inflection point and considering an exit, I try to remind them that selling isn't an easy path. Most interested acquirers don't consummate the deal, and a lot of the time the challenge is unrelated to the asset being acquired.

Wallaby to Bankrate

I founded Wallaby Financial in 2011. We raised about $1.6MM in venture capital and acquired tens of thousands of customers. As we struggled to understand user acquisition, we pursued shifting from a direct-to-consumer to business-to-business model, leading us to white-label our software platform for credit card marketers.

Our first big client was Bankrate. The then publicly traded company owned bankrate.com, creditcards.com, and thepointsguy.com and signed a ~$1MM commercial agreement for us to customize and power experiences on their sites. Within one year, they had asked to make a strategic investment ($500K). A few months after that, they asked to acquire us.

I went to my investors and said: "I have this offer; I'll make a lot of money, but I'm willing to go at it: do you want to fund a Series A?" They all said, "Not me, but don't sell the company; find another VC." This was uniquely unsatisfying, so I sold Wallaby to Bankrate.

It was a stressful time. After we signed a term sheet, but before we signed the deal, Bankrate's CFO was put under investigation by the SEC for accounting fraud. (He did, in fact, later go to jail!) As a result, we were stuck: our term sheet prohibited us from taking to other acquirers or investors, and we were running out of money. Amazingly, Bankrate still acquired us, and the deal closed. I made life-changing (but not as they say "fuck you" money). However, in my opinion, the chances were just as good we would have gone zero because of that CFO (and nothing to do with our business).

Vertical to Apto

In 2019, I founded Vertical Finance. (Fun fact: the domain is for sale for $50K!) This startup didn't go so well. We were running low on cash and investor interest by the end of 2020, so I tried to execute the DTC-to-B2B pivot again. This time I tried to market our reward platform, but the timing just wasn't right.

I did, however, receive interest in an acquihire from Apto Payments. I spoke to a few other companies who expressed some interest, but only Apto made an offer for us. None of the employees made any money: our common stock equity was wiped out in the deal. Investors received shares in Apto. We were days away from being broke when the deal closed in the fall of 2021. Because of the small dollar value of the deal, we had to be super scrappy with negotiating and closing the deal; we simply couldn't afford professional help like a banker.

Apto to Qenta

Apto was a true rollercoaster. Within six months of acquiring Vertical, we raised a $26MM Series B, valuing the company close to $200MM. My options were worth a lot of money! Amazing. Sadly, within another 12 months, the fintech market turned, crypto had a winter, and we were also left with terrible options. We hired a banker to run a process. Even that was hard; most larger investment banks wouldn't take on the deal. We sold the company to Qenta in March of 2023 at far less than what had been invested in Apto, leaving all employees' shares worthless again, and investors taking a haircut on invested capital.

Examples of Other Challenges

• An acquisition offer from a multi-national company for a straight acqui-hire. The deal was just $100,000. It failed due to internal politics. A zero.
• A $1B valuation, followed by a $300M all-stock acquisition by another startup, followed by a $0 exit a year later.

You get the idea. Most interest in an acquisition goes nowhere. Companies will waste your time, or prospective buyers won't have the management or board buy-in. Even getting to a term sheet isn't a done deal. Only a signed deal counts. PLUS, if it isn't cash, it might go to zero. Stock can be good: It can go up. Startups buying startups don't always work, however.

Stay on Edge

All of this is to say: don't let your dreams get ahead of your realities. I have been fortunate to bring deals home three times now. Each was a struggle in its own way, and only one left me with more wealth than before I started the journey. Even if you end up with $0 in cash, getting the deal across the line, preserving jobs, and keeping your product alive is a huge win and very rare. I wish you luck.

☨1.2 Percent of Carta Startups Were Acquired in H1 2025. I know this stat isn't phrased quite this way, but all the data on this point seems quite challenging.