We recently held a talk for our portfolio company founders about what it takes to sell your startup. As of the time of writing (late 2025), we are in the middle of an expansionary AI boom where incumbents are particularly acquisitive. Below is a high level summary of how founders should think about bringing an M&A to life.
Don’t seek out an acquisition, seek out a partnership
Founders often treat M&A as a sudden event. In reality, most acquisitions start as partnerships—long before the first Corp Dev email lands in your inbox. With this in mind, it’s important to think through a partnership well in advance of an acquisition (think 18 - 24 months).
You should also factor in your cash runway into the equation. Kicking off conversations when runway is dwindling (<6 months) will increase your sense of desperation, which can be smelled a mile away.
Identifying potential partners
When mapping our potential partners/acquirers, you should look to players already in your ecosystem (e.g. ones you compete with, integrate with, co-sell with). What’s less obvious is considering companies that are threatened not just by your existence, but the existence of your competitors (e.g. OpenAI’s intended acquisition of Windsurf given the threat from Cursor).
It’s also preferable to prioritize serial acquirers/partners (e.g. Meta, Palo Alto Networks, Salesforce). Their experience in closing deals will increase the likelihood in a deal coming to fruition.
Positioning
When coming up with partnership proposals, the best founders tend to position their business in a way that aligns with the potential acquirer’s product gaps and key priorities. Uncovering those gaps requires significant upfront research on pain points and strategic objectives.
Skin-in-the-game
Beyond this, it’s important to test for a company’s true appetite to partner. Push for tangible skin-in-the-game commitments from the partner - such as an allocation of engineering resources, milestone-based structures and potentially some non-recurring fees. These “show-me” moments separate real partners from tire-kickers.
Valuation
When it comes to maximizing the acquisition price, consider a few factors. First, Elad Gil’s rule of thumb that an acquirer will pay up to 2% of their market cap (e.g. a $10B company will be able to pay $200M, whereas a $1B company wont).
Many founders think that their company will be valued on a revenue multiple. This is unlikely to be true in practice. Instead, the maximum valuation tends to come about when an acquirer feels most threatened by the startup.
In 2025, many startups’ AI-centric approaches are threats to incumbents. In our experience over the past six months, incumbents with business models that aren’t AI-first are feeling vulnerable to attack by startups. We have seen several acquisitions at handsome prices for seed and Series A AI startups (justified on the basis of nipping an early threat in the bud, or bringing AI talent in-house). Startups should play into this fear as this trend is likely to continue in the coming years.
Managing your board
When navigating board and investor dynamics during M&A discussions, positioning matters. Founders should frame acquisition interest as optionality, not desperation — a potential strategic outcome rather than a lifeline. The best approach balances fear and greed: emphasizing both the downside risk of losing a great exit and the upside potential if the company continues growing independently.
Expect the most recent investors to be the hardest to convince; they often have the highest cost basis and shortest time horizon. To counteract this, build quiet alliances among investors who understand the strategic logic of a sale (seed investors who aren’t on your board can play an important role here).
When should you use a banker?
For most smaller deals (<$500M), it can be overkill to use a banker. Bankers are unlikely to represent your company as well as you can. But, if your company operates within a specific industry where a banker has a valuable rolodex of acquirers (and knowledge of their priorities), it can make more sense.
If you are considering hiring a banker, it’s recommended to take them for a test run before committing. Get them to do some free work highlighting potential buyers, valuation ranges and company positioning.