The key reason LinkedIn bought my firm for $175M

I was born into a family of entrepreneurs. My father ran his own company, as did his father. I started my first business, a tennis racket–stringing service, when I was still in high school.

When I graduated from college, I was unsurprisingly attracted to entrepreneurial companies. Before I founded Bizo, I worked for or founded a number of fast-growth start-ups, including AGEA, which I founded in 1999. That was quite an education. I made a ton of mistakes and eventually sold that business to a company that soon went bankrupt.

Upon reflection, I realized that most of the major mistakes were related to the culture and people I hired.


Bizo
Source: Bizo

When I launched Bizo in 2008, I knew that a key element of building the company would be a maniacal focus on the company's culture and hiring the right people. Ultimately, the culture we built at Bizo was directly responsible for building a high-growth company, selling it for $175 million to LinkedIn in 2014 and making the integration of Bizo into LinkedIn remarkably seamless.

How did we do it?

In our hiring at Bizo, we looked for talented people, but it was more important to us that our new hires possessed optimistic attitudes, were driven, were team players and enjoyed working hard (and playing hard). In addition to investing significant thought into building our culture, we invested significant money in it, too. We realized that we would never find all A-plus talent in San Francisco, so we built systems to accommodate employees wherever they lived. This gave us the ability to truly look for A-plus people, even if they lived in Honolulu, as does one of our engineers.

Additionally, twice a year we had all-hands meetings, where we flew in all of our employees for a week of synchronizing strategy and team building. The get-together, which we called Bizopalooza, was essential to maintaining our culture and impressing its importance on new hires who joined since the last all-hands.

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Our people and culture at Bizo was responsible for building a company that had a run rate of $50 million when we were bought. The culture was also responsible for developing a new product—Bizo for Multi-Channel Nurturing—which had a lot to do with LinkedIn's interest. Our culture didn't permit our teams to rest on their laurels with a product that was performing and selling well. Our people asked enough questions of customers to understand that the product could be improved and we could disrupt a market. In less than a year from conception to unveiling, we created an entirely new product category that integrated display advertising with lead nurturing and marketing automation to make it irresistible for forward-thinking B2B marketers.

Finding the right fit

Then culture struck again. With Bizo for Multi-Channel Nurturing selling very well in the summer of 2014, we made the decision to sell to LinkedIn. Perhaps the decision was counterintuitive, but our culture told us it was the right decision. Deciding on the right time to sell is not an easy one. Many start-ups have left millions—even billions—on the table by selling too late or by completely missing the opportunity to sell.

There are a number of factors involved in deciding to sell, including the mind-set of the team and how excited they are to continue to work hard and to build the company. However, the decision really comes down to the business opportunity as a stand-alone company versus the opportunity as part of the acquirer.

You have to weigh what value you are getting for the business, compared with its "fair market value." And you have to assess how good the cultural fit is and if your current employees, who helped build a fantastic business, will have an opportunity to thrive at the new company. In my opinion, if the cultural fit isn't there, the value the acquirer would have to pay, relative to "fair market value," is significantly higher. Similarly, if the opportunity for growth within the new company isn't there, what the acquirer is paying would have to surpass "fair market value."

But if both the cultural fit and opportunity is there, it might even make sense to sell at or even below "fair market value," depending on market considerations, including the financing climate and balance-sheet strength.

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We ultimately sold to LinkedIn in large part because we believed that the platform and the brand provided a huge opportunity for our products to reach even more marketers and to reach them faster. We also felt confident that we would be successful at LinkedIn because of how closely our cultures matched. If the cultural fit is strong, there's a much higher likelihood that the acquisition will be a success, because the "host" company won't reject the foreign body.

Of course, the business reason for the deal is also a huge factor in the potential success of an acquisition. If the deal is pursued thoughtfully and resourced appropriately, there's little reason for the acquirer to want to shut the business down, because it is value-accreditive to the acquirer. There's always the risk that the rationale was either wrong or runs up against market changes, but those risks also exist in staying a stand-alone company.

Lessons learned

  • Building a successful company culture requires thoughtfulness in each and every hire, from day one.
  • The right people aren't always where you expect to find them—meaning, in your own backyard. They possess the attributes that make it worth allowing them to operate on a remote basis, even if that means paying more right from the start.
  • Just when everything is going well with your first product is exactly when you need to plan your next market disruption, and having the right people on board ensures that will naturally occur.
  • A strong culture helps immensely in choosing the right time to sell and in becoming an indispensable part of the acquiring company.
  • There is no one "right" value for selling a business. An acquisition has a higher likelihood of being a success when the growth opportunity and cultural fit are right, and even if the deal being considered is less than the highest possible bidder's price.

By Russell Glass, founder of Bizo, which was sold to LinkedIn for $175 million in 2014. He is currently head of marketing products at LinkedIn. Glass is a member of the CNBC-YPO Chief Executive Network.

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