We all know that you don't necessarily build a startup with the exit in mind, but daydreams of spending your post-exit cash can certainly help break up the 16-plus-hour days. Earlier this month, Zealot Networks announced their acquisition of ViralNova, a leading digital publisher known for producing sharable content optimized for social platforms that claims over 100 million monthly visits. The deal was reported to be in the range of $100 million, leaving CEO Sean Beckner with plenty of opportunities to live out his daydreams.
But the story is all the more impressive considering that just over a year earlier, Beckner had purchased a majority stake in the company for $3.6M from its founder, viral content visionary Scott DeLong, who had been running the site alone with only two freelancers. So how did ViralNova go from a $1 million annual run rate in 2013 to a $100 million valuation? I spoke with Beckner and found that a big part of his approach is widely applicable to a range of other startups.
ViralNova was already a top performer in terms of its traffic and social reach, but there is a limit on the value that a company can receive for just its reach. Beckner wanted to find a way to take DeLong's insights and expertise and scale them so that the company could more effectively produce great content. Shortly after joining, he hired Shaun Tilford to serve as the company's CTO and build out a platform that ViralNova's editorial team could use to maximize their content's reach and impact.
"Building a company is all about maximizing the ability of your team," he said. "We had one of the smartest minds in social media working as a founder and chief strategy officer, and we needed to find a way to scale his knowledge and automate portions of our business through technology. We were able to build a proprietary CMS called Nova, which served as a critical foundation, helping us grow the business and utilize data and analytics to make smart business decisions." The long-term impact of ViralNova's emphasis on technology was that when Zealot came knocking, it didn't just find a website with a lot of traffic, but a company that possessed the technological assets necessary to help them grow other segments of its business. Strong technology is a force multiplier, and it helped ViralNova reach significantly higher levels.
Have skin in the game
ViralNova isn't Beckner's first startup or his first exit -- among others, his previous company Front Flip was acquired by digital media agency Shoutz -- but the difference this time was tangible for the entrepreneur. "For Front Flip we raised external capital and focused on increasing our users and IP at all costs, and while this strategy had its benefits, I saw a major difference when it was my own money being invested, like with ViralNova. We had more direct control over the direction of the company, profit became a priority much faster and we grew it in a far more responsible way."
He also echoed an idea that many serial entrepreneurs have expressed, that having total control over the process and not having to answer to a board or outside party gave him the flexibility to make the decisions he wanted to make, when he wanted to make them. "When you raise money, a lot of your time is spent dealing with your investors, and in many cases these interactions can influence your decisions, timing and more. One of the things I loved about building up ViralNova was that our team made the decisions that we felt were best for the company, and we were able implement them in a timeline that we set up ourselves, without rushing anything."
We'd all love to have the capital to retain full control over our companies, but even if you don't, there are lessons to be learned. Choosing investors who will give you the space to run your business is critical, and investing your own money where possible can be a huge benefit. As Beckner noted, at a minimum, if you can bootstrap your company at the beginning until you have a product in market and revenue coming in, you are way ahead of the game.
Sell to the best partner, not the highest bidder
When ViralNova was approached by Zealot Networks, Beckner and Delong weren't actively looking to sell the company and took the meeting more out of curiosity than anything else. The key factors that helped eventually make the deal happen were a shared vision of how the companies could help each other and the focus that Zealot Networks placed on finding brands that complemented their existing areas of expertise. Beckner was especially excited by the opportunity to work with Zealot Networks' president and CEO Danny Zappin, co-founder and former CEO of Maker Studios, which was acquired by Disney in 2014.
"Obviously, you want to maximize your value, but more importantly, both parties need to have a shared vision on how your company will fit into its new home. They key factor for us was finding partners that we would be able to work with, learn from, and in our area of expertise, provide expertise for. What impressed us so much about Danny was how excited he was about working with us and learning from what we'd accomplished. He has been incredibly successful, yet saw the unique value we could bring to Zealot."
There are endless stories about companies who get involved in lengthy deal-making processes that either end up falling apart or leading to messy divorces. It's so important to make sure that both the vision and personalities are aligned and complementary in order to ensure a successful merger.