What Do Acquirers Want Before Buying a Device Startup?

Proof that the product sells and stays sold. Strategic buyers look for three things: new accounts, deep adoption inside those accounts, and customers who keep buying over time. They want to see it in a small number of markets, and they don't want to inherit a big sales force along with your technology.

That is a real change. Buyers used to come in and purchase technologies before they went to market. Now everybody wants to see a sales motion first.

What do new logos, adoption and retention look like in practice?

If I were sitting in your seat, these are the three questions I would ask every week.

• How many new accounts can I get into? And which ones should I go after first?
• Once I'm in, how deep can I go? You have already invested your way through the door. Now there is a second physician, then another department, then the sister hospitals in the same community. One sale should become an order network.
• Am I keeping them? Are the accounts that bought two years ago still buying today?

The third one is operational, and founders underestimate it. You need an infrastructure that makes it easy to reorder and easy to get a question answered. It takes about four times the time and energy to win a new customer as it does to keep one. Once you have worked that hard to create a customer, losing them is the most expensive mistake you can make.

Buyers tell me they want this shown over 24 to 36 months, in a handful of markets. They don't need 30.

How much revenue do I need before a buyer is interested?

Less than most founders assume. If you do those three things really well, you don't need $10 million, $20 million or $30 million in revenue. You might need four or five.

There is a trade-off. Selling earlier may mean a smaller exit. Maybe you sell at $7 million or $8 million in revenue instead of $30 million. But you get there sooner, you raise less along the way, and you keep more of your company.

Timing matters too. Early on, your growth curve looks like a hockey stick. At some point it starts to flatten, and buyers will ask what is happening. There is an optimal window in that life cycle, and you want to be in the conversation while the curve is still steep.

Why does the size of my sales team matter to a buyer?

Because the buyer usually already has a sales force. Most strategic buyers don't want to buy a sales organization. They want the customers, the revenue and the knowledge.

When a buyer acquires a startup with 20 or 30 reps, those people often sit for months waiting to find out what happens, and then they get a package. I estimate that can cost a buyer around $15 million in transition. I have been on that side of the table. After one acquisition, I let go of 32 people over 12 months.

So a lean commercial setup is not just cheaper for you. It makes for a cleaner deal. What a buyer does want to lift in place is your system: the CRM, the customer data, the account history. Keep that clean from day one.

What should I avoid?

• Spreading thin across many markets to look national.
• Chasing new logos while ignoring depth and reorders in existing accounts.
• Hiring a large team you will have to explain in diligence.
• Keeping customer data in reps' heads instead of your CRM.

Where should I start?

Build a simple scorecard now, even before your first sale. Track new accounts per market, the number of physicians and departments using the product in each account, and reorder rates over time. Pick a few markets where you can show all three. Review it monthly, and treat any account that stops reordering as a fire to put out that week.