In this episode of the 20 Minutes VC, host Harry Stebbings interviews Emily Choi, Head of Corporate Development at LinkedIn, who offers insights into the world of mergers and acquisitions (M&A). Emily discusses the importance of strategic M&A alignment with company goals, the value of early and ongoing dialogue with startups, and the significance of transparency throughout the M&A process. She also highlights the critical role of integration post-acquisition and advises founders to balance building their business with forming strategic relationships. The conversation touches on the changing landscape of tech M&A, the rise of private equity and strategic investors, and the need for a methodical approach to acquisitions, emphasizing that the right company fit trumps price. Emily's experience includes leading LinkedIn's acquisitions such as Lynda, Bizo, and SlideShare, and she stresses the importance of retaining key talent post-acquisition for long-term success.
"Another beautiful week begins here on the 20 minutes vc with me, Harry Stebbings on Snapchat at h stepbings with two B's."
This quote is Harry Stebbings opening the podcast and sharing his Snapchat handle for listeners to connect with him.
"So I wanted to dive into the world of m and a today with one of the preeminent players and buyers of startups."
Harry Stebbings sets the stage for the episode's focus on mergers and acquisitions within the startup ecosystem.
"Emily Choi, head of Corp Dev at LinkedIn, where she's led 40 plus acquisitions, aqua hires or investments."
This quote provides a brief overview of Emily Choi's role and her significant experience in corporate development at LinkedIn.
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This quote describes NatureBox's business model and value proposition for providing office snacks.
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"I'd always been into tech and digital media, and I was on the east coast working in investment banking for more traditional industries, and I reached out to Yahoo about working in Corpdev and strategy and I got the role."
Emily Choi discusses her career path, highlighting her interest in tech and digital media, which led her to a role in corporate development and strategy at Yahoo.
"I think anybody who's building out a corpdev practice should think about kind of a crawl, walk run approach."
Emily Choi advises on the gradual and strategic approach to developing a corporate development practice within a company.
"It's true. I think there's a few dynamics going on. One is that the tech giants have in many cases gotten really good at copying emerging startup products, so they don't need to deal with the hassle of acquiring."
Emily Choi explains one of the reasons for a perceived slowdown in tech M&A activity: tech giants are able to replicate startup innovations without needing to acquire them.
"It's certainly an interesting development for this space I think PE firms see an opportunity to consolidate certain spaces, potentially spur some more revenue growth, and find cost synergies."
Emily Choi comments on the trend of Private Equity firms entering the technology acquisition market, highlighting their strategies and potential concerns.
"We map"
The transcript ends abruptly, indicating that Emily was about to explain how they map the competitive landscape or engage with potential acquisition targets. Unfortunately, the transcript cuts off before she can elaborate.
"We also track things like vc funding and talent flows to understand, for instance, that a startup is attracting a lot of high quality engineers from Google and Facebook."
This quote highlights the methods used to assess the competitive landscape, emphasizing the importance of following talent movement as an indicator of a startup's success and potential.
"So don't just come to us when there's a transaction going on. Knowing the Corp dev team at a company is a great way to navigate the company and begin to form the right relationships, and it can start at any time."
Emily Choi emphasizes the value of building long-term relationships with corporate development teams, rather than only engaging during transactional events.
"It's good for us to start interacting at that stage if they're in a space that we're interested in."
Emily Choi suggests that early engagement with startups allows for a more informed and beneficial relationship for both the CorpDev team and the startup.
"There's a balance to this and no one's expected to network all the time."
Emily Choi acknowledges the need for founders to balance their time between building their business and networking with potential partners or acquirers.
"It's good to just, again with both the vcs and the founders, just have an ongoing dialogue so that you're both tracking things and triangulating upon points about the spaces and the companies that are interesting."
Emily Choi values ongoing dialogues with VCs to gain insights into the startup ecosystem, which helps in making informed decisions about potential collaborations or acquisitions.
"I like openness and transparency. I like the ones who aren't trying to put lipstick on a pig."
Emily Choi expresses a preference for VCs who provide a truthful and comprehensive view of their portfolio companies, which aids in building trust and long-term relationships.
"I think interviews and due diligence can be very grueling."
Emily Choi acknowledges the challenging nature of the M&A process, highlighting the importance of careful planning and alignment between the parties involved.
"Good conversation should be a back and forth."
Emily Choi advises founders to engage in reciprocal dialogue with potential acquirers to explore synergies and collaboration opportunities.
"At that point, the founder either say yes or no, but assuming they say that they're open to it, they should collaborate with the corp dev head on what the process should look like."
Emily Choi outlines the steps of the M&A process, emphasizing the importance of collaboration between the startup and the CorpDev team to ensure a smooth and successful transaction.
"Well, typically a lot of the breakdown happens when there's issues with, for example, leveling."
Emily Choi identifies common challenges in the M&A process, particularly around the integration of startup teams into larger corporate structures and ensuring that the acquired team feels valued.
"So, for example, it often happens that somebody will call and say, listen, we're going to get a term sheet from three other companies by the end of the week. If you want to enter this process, you've got to jump right in."
This quote exemplifies the pressure tactics some founders may use to accelerate a deal, but it also highlights the potential negative consequences of such an approach, such as losing credibility if the stated deadlines are not genuine.
"There is one usually executive level sponsor who will on R D, usually who will recommend this acquisition. The other R D person, for example, the head of engineering for that particular group, would then have to agree with it because they have to make sure that they are comfortable with it."
This quote explains part of LinkedIn's internal process for acquisitions, emphasizing the need for executive-level recommendation and agreement from relevant department heads, which ensures alignment and comfort with the potential acquisition.
"I truly believe that the most important thing is buying the right company and not getting the right deal."
Emily Choi argues that the strategic fit and potential of the acquired company to transform the acquirer are more significant than the acquisition price, suggesting a long-term view of the value of an acquisition.
"I always say that everybody loves a deal, everybody wants to weigh in on a deal. It's the sexy part of the transaction for us."
This quote from Emily Choi acknowledges the allure of deal-making but underscores the importance of focusing on the integration strategy from the beginning to ensure a smooth and successful post-acquisition process.
"We work with both the target companies as well as the sponsoring teams at our companies to come up with those, call it three or so goals of the integration."
Emily Choi describes how LinkedIn collaborates with the acquired company to establish clear, shared goals for the integration, emphasizing a tailored approach to success metrics for each acquisition.
"So which employees have we designated to be truly key for the longer term, and what is our benchmark retention rate going to be?"
This quote highlights the importance of identifying key employees within the acquired company and setting a benchmark for their retention to measure the success of the acquisition.
"So at one point, for example, at LinkedIn, we had three founders running the three key business lines of the company..."
This quote highlights the strategic move by LinkedIn to place founders from acquired companies in leadership positions, signifying successful integration and the positive impact of an entrepreneurial mindset on the company's main business areas.
"If you are anywhere close to the overall software engineer retention rate for your company with the acquisitions, you are crushing it."
This quote explains that retention rates for software engineers from acquired companies are a key metric for success, and achieving rates close to the company's overall retention is an exceptional outcome.
"Be transparent... if you can talk to that startup founder and say, listen, for some reason this landed with a thud. Let's unpack it and figure out what went wrong."
The quote emphasizes the importance of clear communication with startup founders during M&A processes to address any concerns and determine the potential for a successful acquisition.
"One don't create too much of a sense of false urgency about timing... The other thing I would say is selectively make sure that you leverage advice from your vcs or whatever advisors you truly trust..."
This quote advises startup founders to manage their expectations regarding the timing of M&A and to utilize the expertise of their advisors to navigate the process effectively.
"But lately I've been coming back to the bonfire of the vanities by Tom Wolfe..."
Emily Choi shares her recent reading preference, highlighting "The Bonfire of the Vanities" as a compelling depiction of its time.
"Corpdev is really a corporate level process... It takes a lot for something to actually come together."
The quote describes how CorpDev requires input from multiple departments, and a meticulous approach is necessary for successful acquisitions.
"You need to be constantly reading all of the blogs, newsletters, tweets to better understand what's going on in the universe."
This quote stresses the importance for those in CorpDev to stay informed through various industry-related information sources to make well-informed decisions.
"The most recent one we announced was Heighten, which was for our sales solutions business."
Emily Choi explains the strategic rationale behind LinkedIn's acquisition of Heighten, emphasizing the alignment with their sales solutions vision and the timing of the acquisition.
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