In this YouTube monologue, Evan Carmichael answers a viewer’s question about whether small‑to‑medium businesses approach large firms for acquisition or wait to be approached. He outlines the three primary reasons big companies acquire startups—team (acqui‑hire), technology, and customers—illustrating each with examples such as Google’s purchase of Milk to retain Kevin Rose. Carmichael explains how acquirers assess a target’s value by estimating the time and cost required to replicate its team, tech, or customer base, which directly informs the offer price. He emphasizes that acquisition opportunities almost always originate from the larger company identifying a strategic gap in its product line; the smaller firm rarely initiates the deal because it appears desperate. To attract attention, founders should create market awareness, grow a strong customer base, generate press, and demonstrate a compelling niche that makes the larger firm see a “hole” they need to fill. Carmichael shares his own experience selling a business to a multi‑billion‑dollar company after building momentum and visibility, and he encourages viewers to apply these principles to position their own companies for a successful exit.
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How to get bought out by a large company. So I got a great question from one of my YouTube viewers, love you guys, I Am Greater, who wrote in to say, I've noticed that many small to medium companies often get bought by a large figure by companies such as Google, Yahoo, Facebook. However, I was wondering if the small companies contact them for offers or if they wait until the big companies contact them and want to buy. Thanks, Greater. So this is a great question and one a lot of entrepreneurs think about. You know, you want to get acquired someday. You want to build this business up and exit and make a big payday. And so I want to start by talking about why companies will acquire you. There are 3 main reasons why a big company will dig in and acquire your company. The first is team, the second is technology, and the third is your customers. So team, this is basically they're buying you just to have you, just to have the founders or whoever you've hired on board on their company. They don't like your company, they don't like what you've made, but they want you on board. So an example is when Google bought Milk, which is a company set up by Kevin Rose, who was one of the Digg founders. They bought the company, they paid, you know, rumor, $15 million for the company, they shut down the new company, they fired all the engineers, and basically kept Kevin Rose on board and some of the designers because they wanted Kevin. They wanted him on Google's team, and so that's why they hired him. That's why they bought the company. So people may buy your company just for your team. The second is technology, and this is where you have something that is better than what's out there on the market, right? So you've got, you've got software, you've got patents, you've got technology of some sort that a company will want to buy. They don't have yet. And the third is customers. Now they may, this big company may be trying to move into your space and they realize Hey, here's a leader, they already have all these customers, and instead of trying to go out and acquire these customers ourselves, we can just acquire the business and get all these customers for ourselves right away. And so the stronger your team is, the stronger your technology is, and the stronger your customer base is, the higher price you get acquired for. One quick thing to think about for being bought and the price tag, when you're going into a company and you say, you know, okay, we're going to be bought out, this is our price tag if you want to buy us. The company will say thank you, and then the CEO will talk to his head of sales and his head of technology, and they'll say, how long and how much will it take us to replicate what this company does? So big company— Facebook, Yahoo, whatever— will look at your company and say, how long will it take us and how much money will it cost to reproduce their technology and to get the customers that they have? And they'll assign— maybe it's a year, maybe it's 2 years, maybe it's 3 months. Maybe it's $1 million, maybe it's $100 million, whatever it is. And then that helps them set the valuation for your business. Right? So if it's going to be cheaper for them and faster for them just to buy you out and that gets them to market faster and it's worth it for them, they're going to give you a higher price tag. If they feel like, you know what, we can do this ourselves, thank you very much, they're not going to buy from you. This is a conversation that always happens before you get bought out by that big company. Now, how does the structure actually work? How does that process work so you get approached by a big company? It's very rare that it's the little guy going up to the big guy and saying, "Hey, we want to get bought out. Will you guys buy us out?" Right? It looks desperate. How it usually works is the big company has to realize that they have a hole in their offering. They have to realize that they want to get into this market, whatever that market is. They want to get into it and they realize that they don't have the right team, technology, marketing yet to fulfill that. And they're looking to you as a potential way to jumpstart that process, to get them there faster, to beat their competition. But they have to realize that there's a hole. If there's no hole, then they're not going to do it, right? If they realize there's a hole, then they're going to go out and start looking for opportunities. They're going to start looking for Who are the leaders in this field? And let's start talking to them. If they don't realize there's a hole yet, then you have to create it. You have to kick up a storm. You have to say, hey, this is an industry worth paying attention to. And then companies will look at it and say, hey, maybe we should be branching into this field too. And maybe instead of trying to do it ourselves, we should just acquire these guys. It's creating awareness on the big company side that they need to be getting into this field. So I sold my first business to a multi-billion dollar company, and it wasn't us going to them and saying, "Hey, here's a software company, come and buy us." It was a combination of one, us creating a lot of momentum and kicking up a lot of noise in our field. So we're getting customers, acquiring a large base, doing a lot of media, doing a lot of press, acquiring distribution channels internationally, kicking up a storm to help our business, but also make people pay attention to us. Combined with the fact that these bigger companies were now starting to look at our field and say, hey, we need to get in here, we need to get into this business, and we're going to start buying companies up to do it. And that's how I ended up selling my business and how hopefully you can sell yours too. Believe. For those of you watching, I'd love to hear your thoughts. Leave it in the comments below. If you have a question that you want me to dig into deeper, leave it in the comment section below. If you guys like this video, you can support me by clicking on the link at the top of the description and click on my face, subscribe to the channel. Thank you so much. I'll see you soon.
