Build companies, not acquisition targets

In the recent months we’ve seen three Norwegian startups acquired by larger companies. Dragonbox and Poio were acquired by a local company (Kahoot), while Nabobil, was bought by US-based GetAround.

While the Kahoot-acquisitions were met with applause, not surprisingly people react to the Nabobil-acquisition saying it’s a shame ownership leaves the country (likes in this article). I weighed in on the matter on Twitter last night:

Every company is a special case, and it’s difficult to make an outside-assessment of what the right choice for each shareholder is. In many cases founders are hungry to keep building, but facing an incumbent with a “buy or build” decision it’s understandable that they decide to sell instead of taking on bigger competitors in a fight that might lead to bankruptcy. Or the offer might just be that good. Or something completely different. My point is, we shouldn’t go at specific companies for choosing to sell.

That said, I think there’s a proper discussion to be had around how to build Norwegian companies, not acquisition-targets. I think we can all agree it would be beneficial if we had more locally owned large tech companies. The question is how to get there.

Incentives rule the world, and I believe this is the way to go at improving things. And incentives can be both monetary and non-monetary.

Obviously, the more valuable a company is the better for the founders. But at a certain point, when their stock is worth a life-changing amount of money, the mindset can shift from offense to defense. And the most comfortable next step is then to seek an acquisition. It is common to allow founders to sell some shares along the way to mitigate this, but that in itself is not enough.

Funds can play a part in this. Bigger funds need bigger outcomes, and generally speaking an IPO (independent company) is a bigger outcome than an acquisition. But the only Norwegian fund (Northzone) that went bigger suddenly shifted their focus away from Norway, so incentives work many ways. We could do something like this on the regulatory side,

But just fixing the monetary incentives probably won’t fix it. There’s only so much money can buy. There are soft aspects that needs to be addressed as well. Founders need to want to build something “enduring”. This “want” can be nurtured, both through having a culture that embrace this attitude and appetite, and through having role models that both show it’s possible and set a benchmark that others might want to beat. Probably a lot of other things I haven’t thought of as well.

We can all agree on the importance of more companies being built and owned locally. But let’s not go at specific companies choosing what they believe is their best alternative - rather let’s discuss the systemic part of things. But first, let’s congratulate the Nabobil team and owners on a great outcome!