How to sell mobile Internet startups to high prices?

Although mobile internet startups are the focus of media attention, acquisitions in this area are actually rare. So how can a mobile startup attract the attention of tech giants?

Last month, Facebook made a deal that stunned the tech sector by buying its information services company, WhatsApp, at $19 billion trillion. WhatsApp users are expected to reach 1 billion in a year or so. It has such a large user base, the acquisition is not a strange thing. The deal has attracted widespread media attention, not just because of the sheer scale of the deal, but also because of the relatively small number of companies that have bought mobile startups, most of which are small ants that work hard and don't pay attention. So we have to ask: Why are a few startups like WhatsApp making unimaginable money when most of the startups fail?

To answer this question, we can start with Apple's App store as a foothold in the field of mobile Internet competition. It is probably hard to imagine that at the beginning of the App Store in early 2008, fewer than 1000 apps were available to download. By the end of last year, the figure had surpassed 1 million, and it was still growing. Therefore, the level of competition faced by newcomers is undoubtedly stifling. This partly explains why most mobile startups fail, but it does not explain why a few lucky ones have succeeded.

Before we start talking about other blockbuster acquisitions (such as Facebook buying Instagram for $3 billion for $1 billion), let's take a look at the smaller deals. After all, considering that thousands of new apps are popping up every year, it's a profit to move a mobile start-up company at any significant price. Yahoo, for example, acquired a company called stamped in 2012, which allows users to record and share restaurants, books and other things they like. After Yahoo finished the acquisition, it turned off the app, and all of stamped's employees joined Yahoo's New York office, suggesting that Yahoo had bought stamped only for its talent.

It further proves that recruiting an excellent team of engineers is the first and key step in making your company a potential acquisition value. In fact, most mobile acquisitions are "talent acquisition", that is, the acquirer in order to retain the acquisition of employees, the general will give an incentive for equity, such as 3-4 years to the right to do. Such deals are generally not more than 10 million dollars in size. Tech giants like Google and Yahoo generally use "talent acquisitions" to recruit people who are hard to fix in other ways, because skilled developers who want to recruit iOS and Android in the San Francisco Bay Area or New York are quite difficult. The acquirer will even value the start-up company at the time of acquisition by "how much per engineer" and "how much per employee".

But the millions of dollar deal is nothing more than a drizzle, compared with a billion of of dollars in some of the most important mobile internet platforms in the buy-out world. So, as a founder, how should we improve the value of startups? After recruiting the right talent, the next step is to build a solid technology that invests in a clean, scalable code base that makes it easier to integrate into the technical reserves of the acquirer in order to reap the rewards.

For example, Yahoo bought last year's mobile news integration application Summly, it was founded by a 17-year-old British entrepreneur Nick Daloisio. Yahoo paid 30 million dollars, if only to buy the small entrepreneurial team, it is too high. But after shutting down the app, Yahoo has integrated its technology into its flagship app. So the deal can be achieved thanks to the technical quality of summly and the relevance of the technology to Yahoo.

Talent and technology are key to any mobile takeover, but a good product itself can create a lot of value. Although there are dozens of applications that want to be "Instagram in the video field", three of them have not only been sold at high prices, but their products have also been retained after acquisitions. Twitter, for example, is very interested in Vine's testing products and has not yet waited until Vine officially comes online to buy the product. Today Vine has 4000多万名 users. Another video-sharing app was bought by Autodesk (Autodesk) 60 million dollars the year before. Another app, called Qwiki, automatically converts video from a user's iphone library into a short film, which was bought by Yahoo $50 million trillion last year. From the purchase price can be seen, these startups because of creating a buyer want to do a good job, bigger products and get a generous return.

The right talent team, solid technology, excellent products can make a mobile start-up company become very valuable, on the basis of a solid user base can make this value further. Of course, only a handful of startups are attracted to a group of users that extravagantly big companies.

When Facebook announced a 1 billion dollar takeover of Instagram in 2012, the mainstream media could hardly believe that a company with only 13 employees would be bought at such a high price. Of course, Instagram has not only a solid team-it also has 30 million young, active, and still growing user base. And the acquisition of Instagram has made Facebook a competitor for itself before the IPO, so Instagram will sell such sky-high prices. In hindsight, the Facebook deal was a bargain. Today, Instagram has about 180 million months of active users, and it is one of the world's most mainstream picture and video mobile sharing platforms.

Whether it has the potential to make money is another important factor that affects the valuation of a mobile venture, but whether it has yielded gains may not affect valuations. At the end of last year, Facebook offered 3 billion dollars to try to acquire the popular information application Snapchat, a feature that allows users to share "burn after" photos and videos. Snapchat has a large, young (predominantly female) user base, and the base is growing, but there is no revenue. In other words, it should be its potential revenue capacity to contribute to its sky-high valuations. Facebook is a public company that needs to increase its share price by demonstrating its mobile revenue growth capabilities, while Snapchat has a high appeal and a growing user base. Facebook has shown that it can generate a lot of revenue through its mobile business, with mobile ad revenues reaching $1.2 billion trillion in the 4th quarter of 2013.

According to Goldman Sachs, Facebook's acquisition of Instagram succeeded in allowing it to contribute 240 million to 485 million of dollars in estimated revenue, while the Snapchat was at least less lucrative than Instagram. In this case, Facebook thinks it's no surprise that the 3 billion-dollar takeover of Snapchat is a good deal. The founder of Snapchat, who rejected Facebook's offer, made it clear that he thought Snapchat was worth more money.

As the founder of a mobile start-up company, if he wants to sell his company a good price one day, he first has to understand why the acquirer might want to buy his company. Does the acquirer want to make money from a large user base or a solid talent team or both? To improve your chances of success, you must strive to build the best company at every stage, whether you are just starting out with your own team or starting a sales strategy. WhatsApp did not spend a penny on marketing, because it believes that a good product naturally is not afraid of the alley deep. If a start-up company lays a solid foundation at every stage, it is not only more likely to accomplish its goals, it is more likely to sell a staggering price. (translator: Pak)