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A buyer can cut what founders can't
Why founders can't cut
Cutting 80 to 90% of a cost structure means demolishing what the founders built, and they are loyal to their team. Their board wants a venture outcome. The cap table also sits behind a giant liquidation preference owed to investors who came in at an $11 billion valuation.
What slowing does
The cuts are harder than they look in a company that has slowed down. Morale drops, customer turnover begins to spike, and good salespeople and developers want to work on AI instead.
The buyer's advantage
A buyer with an existing playbook has an easier job. Bending Spoons already has a core team managing dozens of properties. The old reason for keeping engineers was institutional memory, and AI can now learn a code base instantly, which makes maintenance mode much easier. Airtable grew about 20% a year on product-led growth while only 30% of its sales team made quota. At $400 million a year in EBITDA, the $1.28 billion price would pay for itself in about three years.
Why do liquidation preferences complicate selling a company?
Investors who hold preferred shares are paid before common shareholders when a company is sold. A common arrangement lets them take back their original investment or convert to common stock, whichever pays more. When the sale price is below the valuation of their funding round, the preferred holders can absorb most of the proceeds. Founders and employees, who hold common stock, receive what is left over.
Why does morale fall when a company slows?
Employee stock options and equity grants are worth less when growth stalls, which removes a big reason to stay. Promotions slow because there are fewer new roles to fill. Ambitious people tend to leave first, since they have the most options elsewhere. Their departure leaves the remaining team with more work and fewer allies.
How does one buyer run dozens of software companies?
The buyer keeps a central team for shared functions such as engineering, billing, support, and marketing, so each acquired product needs only a small staff of its own. Fixed costs are spread across many products instead of repeated in each one. Constellation Software, founded in Toronto in 1995, built its business on buying and holding many small software companies.
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