Start-ups selling up – when should you decide to sell your business?
One of the start-ups profiled in the first series of CNBC's The Business Class has graduated. Last week, Tom Allason, founder and CEO of Shutl, the London-based rapid delivery company, announced that online auction site eBay had agreed to acquire his baby for an undisclosed amount. A fast turn-round for a business founded in 2008 and which only made its first delivery in 2009.
"Bottom line: this is very far from the end of the road for Shutl," Allason wrote on the company's website. "Rather this is a doorway to a much greater opportunity… It's been quite a journey so far. We could not be more excited for what lies ahead."
Working with Shutl, eBay hopes to bring a one hour delivery service to the UK. In a press release announcing the acquisition, eBay said that Shutl's "technology, talent and expertise will help eBay reach its goal of expanding its local delivery capabilities."
But while Allason has passed a significant milestone in selling his own business, other challenges lie ahead, according to the founder of another company bought up by a larger high-tech organization.
Shutl joins a long line of British-based start-ups – many located in or around London's much heralded 'Silicon Roundabout'– to have been bought by large, financially powerful foreign companies.
This March, Summly, a news app developed by 17 year old Nick D'Aloisio, was acquired by Yahoo for an estimated $30 million. A few years before, in 2007, London based music website Last.fm was bought by CBS for $280 million.
In 2004, together with his brother Eldar, Roy Tuvey founded web security business ScanSafe. In December 2009, it was acquired by Cisco Systems for $183 million. How did being bought by a global player like Cisco affect Tuvey and his business?
"You're no longer in control, which is a challenge," he told CNBC.com. "In general terms, the benefits are the scale and the global impact that you have. But you have to fight the dilution of the intensity and corporate culture you've established over the years."
Adapting to the internal machinations of a vast company such as Cisco proved a challenge. "Before, all of our energies were focused externally – we had a very well oiled, tight-knit team and didn't need to spend lots of time worrying about internal communication," he added.
"But when you sell it's all about communicating with other elements in the broader organisation, helping them understand who you are and why you're helpful to them. You have scale, but everyone knows a lot less about what you do."
Having an offer made for the business you have so carefully nurtured and developed is clearly flattering, but Tuvey cautions against accepting the first one that comes your start-up's way. Many factors need to be considered before saying yes.
"You need to ensure you're doing the best job for your investors, getting them the best return," he said. "Make sure your employees are going to be retained, have security and an opportunity to flourish. In terms of the business itself, you want a home that will let it expand and have a bigger impact."
There is also the issue of 'seller's remorse', the nagging doubt that selling your company will lead to feelings of regret. "Frankly, I don't think you ever know until you've done it, until you've pushed the button," Tuvey said. "It was a fantastic outcome for our company but there was a tinge of sadness about the loss of control."
Tuvey no longer has direct involvement with his old business, and has moved on to develop a new one, Wandera, which focuses on mobile data optimization. Despite his own experience, which was positive, he is nevertheless conscious that every start-up should not necessarily sell up.
"First of all it comes down to how much [you're offered] and whether you think that's a fair value," he said. "Every company has its own journey, and saying that all companies should sell, or float, is silly frankly. It's a case by case basis."