As Venture-Backed IPOs Remain Closed, Qualcomm and Google Execs Offer Some M&A Advice to Startup CEOs

9/17/09Follow @bvbigelow

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a lot more disciplined in what we do,” said Tom Baruch of CMEA, the San Francisco VC firm. Baruch served as the moderator in the session on technology M&As with Google’s Faris and Duane Nelles, a Qualcomm vice president for business development. Among the highlights:

—It’s becoming more important for startups to secure a corporate partner with a vested interest in developing new technology early on. Such interest often evolves into a buyout offer. But Qualcomm’s Nelles warned startup CEOs to choose their first business partners carefully. “If a company comes to Qualcomm after working with some of our competitors, there certainly are some concerns,” Nelles said. “We’re cautious about whether we can trust them completely.. And in buyout talks, Faris said, “the momentum can shift very quickly from a one to a zero—and then the interest [in acquiring your company] is gone. So focus on keeping the momentum going, and get the deal done.”

—When asked how a startup CEO should solicit a prospective corporate partner, Baruch said, “You’re going to know right from the beginning if you’re going to need a partner. So look for investors with connections to that sector, look for accountants with connections to that sector, look for law firms with connections to that sector.” Qualcomm’s Nelles added, “With six degrees of separation, usually you can find someone.”

—Like many technology giants, Google and Qualcomm were previously focused primarily on acquiring young startups with key technology and talent. But that’s changing. “We’ve been very focused on technology in pre-revenue types of situations,” said Qualcomm’s Nelles. “Now we’re starting to move more toward business-model type acquisitions, with more attention on EBITDA [Earnings before the deduction of interest, taxes and amortization]” Karim added that while his team continues to look primarily for acquisitions with “talent, technology, and market,” Google also is now also looking for “late-stage companies with real cash flow.”

—When asked about the process of absorbing a startup after an acquisition, Qualcomm’s Nelles said, “The most important thing from my perspective is always on integration, because if you don’t do a good job, you’ve blown the value of your acquisition. So focusing on the team, and how you’re going to integrate the team, is really important.”

Bruce V. Bigelow is the editor of Xconomy San Diego. You can e-mail him at bbigelow@xconomy.com or call (619) 669-8788 Follow @bvbigelow

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