This past week brought blockbuster news on the M&A front — Unilever, fresh from relieving Dollar Shave Club of its investors, is in preliminary talks to buy The Honest Co., for all intents and purposes turning Paul Polman into the new patron saint of the LA startup scene.
This on the heels of GM and Ford snapping up transportation startups, Walmart placing $3 billion worth of chips on Jet.com, and Microsoft taking out LinkedIn.
All of this validates a thesis I’ve held for some time — those BigCos our industry made fun of for so long are no longer sitting on their hands. They’re run by super smart people who know they’ve got to change, and increasingly, they’re using their corporate checkbooks to force that change to the fore.
But it also got me thinking about the missions of the companies which have been acquired. The Honest Company, for example, was created to give consumers products that have a positive impact on the world. LinkedIn exists “To connect the world’s professionals to make them more productive and successful.” Jet.com was launched with a mission of giving us an alternative to Amazon, Dollar Shave was all about sticking it to the man with humor and better pricing.
Now that all of these NewCos are finding new corporate homes, will their mission, voice, and purpose remain intact? I have my doubts. Great companies are driven by great founders, and while everyone always talks a good game about sticking around, we all know most founders — and founding teams — end up leaving within two years.
Unilever, to its credit, has a strong track record of buying unique assets and protecting their core mission. When it bought the iconoclastic Ben & Jerry’s brand, it struck an unusual deal that protected the ice cream makers’ core values of sustainability and social justice. So perhaps Dollar Shave and The Honest Co. will live on as unique properties in the Unilever orbit. Then again, perhaps not. One thing is for sure: Had the companies stuck it out, gone public, and remained independent, this question wouldn’t be an open one.
I certainly don’t blame the founders for taking the exit — running a high growth business is exhausting, and generational wealth is near impossible to turn down. But it’d be a shame if the extraordinary company creation moment in which we find ourselves fails to deliver long lasting, truly new kinds of companies that one day stand alongside the BigCos who’d otherwise swallow them whole.**
So here’s a message to all you nut cases trying to build a great, new kind of company: When the BigCos come shopping, take a page from Ben & Jerry. When it comes down to striking that deal, ask whether your acquirer will commit to defending your core principles. If the answer is no, at least you know what you’re really selling — and whether you can live with it once the wires are all in.
**On a related note, a big shout out to my colleagues at Founders Circle Capital, whose mission is to provide a “pressure release” of liquidity for founders who face exactly these kinds of situations. FCC just closed its second fund, you can read more here. And yes, they invested in Dollar Shave, and yes, I made money as an investor when Unilever came a-knocking. But I’d have been just as happy, if not happier, to see Dollar become the next great CPG company.
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