Ep 248 David Yaffe - 5 Lessons from growing a startup to a 9-figure exit in 2 years
Aug 14, 2020
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David Yaffe, an entrepreneur, shares insights on growing a startup to a 9-figure exit in 2 years, including creating an identity graph for publishers, determining equity slices, building a strategic data asset, employee protection and incentives, and the decision to accept the offer.
Fostering partnerships can create opportunities and drive acquisition offers, as showcased by Arbor's initial rejection of a lower offer which turned into a valuable partnership opportunity with LiveRamp.
Founders should negotiate earnout terms based on tenure within the acquiring company rather than performance, while setting realistic timelines and trigger terms to protect their financial interests.
Deep dives
Building a Successful Startup in Two Years
David Yaffe shares the story of how he left Google to start his own company, Arbor, which focused on connecting publishers and marketers. In just two years, Arbor experienced exponential growth, reaching critical mass by covering 40% of the US unique users. The company's success was driven by the right market timing, a strong team, and a solid business model. After receiving multiple acquisition offers, Arbor was ultimately acquired by LiveRamp in a nine-figure exit. The negotiation process was challenging, with several offers being turned down before the final one was accepted. The acquisition required a rapid sprint to prepare the company for due diligence and finalize the deal. With the successful exit, Yaffe faced the challenge of adjusting to a new goal and purpose in life while exploring new ventures like estuary.dev, a company focused on making real-time data infrastructure accessible and easy to implement.
The Power of Partnership in Negotiations
During the acquisition negotiations, Arbor initially declined a lower offer but turned it into a partnership opportunity. This strategic move allowed the teams to collaborate, build trust, and understand each other's businesses better. Through partnership discussions, Arbor showcased its potential and established the value of its technology and data assets. This eventually led to LiveRamp making a significantly higher offer, highlighting the importance of fostering partnerships as a way to create opportunities and drive acquisition offers.
Navigating Earnouts and Acquisition Agreements
The acquisition agreement included an earnout, which involved part of the acquisition's value being held back and paid over a specific period of time. Yaffe advises founders to avoid tying earnouts to performance and rather focus on tenure within the acquiring company. He emphasizes the importance of setting realistic earnout timelines, usually around two years, and recommends negotiating trigger terms to protect the founder's financial interests. Yaffe also highlights the significance of having supportive investors who understand and align with the founder's vision throughout the negotiation process.
Life After Startup Success
After the acquisition, Yaffe experienced a period of personal and professional readjustment. It took time to figure out new goals and motivate himself. Despite achieving significant financial success, Yaffe was driven by the desire to continue building and creating. He embarked on new ventures, including angel investing and starting a new company called estuary.dev. Yaffe finds fulfillment in the day-to-day creation process and working with talented individuals to build innovative products and infrastructure. He values the personal connections and collaborative nature of startups and believes that the drive to build and create is an inherent quality for entrepreneurs.
David Yaffe was working at Google when he spotted an opportunity to connect advertisers with smaller publishers competing for online advertising dollars. He and two friends started Arbor, raised more than $2 million in seed capital and built a prototype. Two years later, Arbor had grown to 25 employees when LiveRamp acquired them for more than $100 million.
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