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The Art of Startup Acquisition: How To Identify Potential Buyers

In the world of startups, one of the critical challenges is figuring out who might be interested in finding the right buyers.
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In the world of startups, one of the critical challenges is figuring out who might be interested in buying what they have to offer. Creating a successful business involves not only building a great product or service but also finding the right people who see its value.

According to industry insiders, the process involves a mix of careful research, direct outreach, and a deep understanding of customer preferences. In this story, we explore the practical methods that startups use to identify their potential buyers – a journey that’s essential for sustainable growth and long-term success.

For Ivaylo Karmazov, whose startup Silverback Gaming was acquired two years ago, understanding the unique value proposition of a startup before embarking on the acquisition journey is of the utmost importance at the beginning of the process.


“In our acquisition process, we made sure we understood what made our business special, what we could offer to a bigger company, and how they would benefit from us. In short, know your value. After you understand your value, the next step is to do some deep research to see what the bigger players in your industry are up to. Look for gaps in their products or services that your company could fill. Ultimately, businesses want to increase their value for shareholders by offering better and more profitable products or services,” Karmazov tells The Recursive.

As businesses continuously strive to enhance shareholder value through improved offerings, a startup’s ability to address unmet needs becomes a valuable asset in acquisition negotiations, he adds.

Seizing networking opportunities

Most of the time however, buyers will already be aware of the target – they will either be a partner or competitor, or in an adjacent sector that they want to grow in, investment banker Ben Wong, who is a part of MA Moelis Australia, explains.

“I would expect that they would reach out to the founder to explore options.  My advice to founders is they should be always open to these informal discussions, even long before they are thinking of selling a company,” says Wong, who has overseen a number of acquisitions over the years.

Both Karmazov and Wong highlight the significance of networking as a conduit for initiating acquisition discussions. While Karmazov advises leveraging personal and professional connections, he also emphasizes that these connections need not always be high-level.

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“Once you’ve identified potential partners, start leveraging your network to get introductions. And remember, you don’t just have to aim for high-level connections. Sometimes a lower-level contact can help you reach key decision-makers like the CFO of a public company. We were eventually acquired by a public NYSE-listed company, which made the process more complicated,” Karmazov explains.

Initiating and navigating through the acquisition process

More often than not, it is the buyers who initiate the acquisition process, Wong explains. This usually arises from a strategic interest, such as growth in a specific sector or the desire to partner with or absorb a company with a proven track record.

“In most cases, the company is “bought”, rather than “sold” ie the buyers will tend to approach the target company as they will have followed the growth, built a relationship with the management team and the timing is right to make a bid as part of the strategic acquisition growth,” he tells The Recursive.

When the moment is ripe for a startup to explore the sale of their business, industry experts suggest seeking the guidance of advisors to gauge the market’s appetite and identify potential suitors.

This advisory consultation serves as a valuable compass for determining whether a targeted or broader approach to reaching out to potential buyers is most suitable.

“It will be clear to the founders when it is the right time to test the market for a sale, as the inbound enquiries to buy the business will become louder. At this stage, I am biased, but I think the company should start consulting advisors to get their view on the market appetite and who they think might be interested.  From there, a sale process could start and depending on the situation, it could be a very targeted process with only a few buyers contacted, or a broader set of potential buyers – this will depend on the company and market conditions,” Wong says.

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Proficient legal team to help with due diligence

On the other hand, Karmazov also notes that the process of startup acquisition becomes considerably more intricate when dealing with public companies, as it involves a rigorous due diligence process.

Therefore, a proficient legal team becomes indispensable in safeguarding the interests of the startup throughout negotiations and ensuring that all contractual obligations are met.

“They’ll look out for your interests and make sure all the small but important details are covered in the legal agreements. The last step was talking about the deal—like how much they’d pay and what would happen to our team after the sale. It’s important to add that the company buying you might offer a cash-and-shares deal, which is something normal in our industry. It’s a lot of work, but if you’re prepared and have the right people helping you, you can find a buyer that’s a great fit for your startup,” he concludes.


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Bojan is The Recursive’s Western Balkans Editor, covering tech, innovation, and business for more than a decade. He’s currently exploring blockchain, Industry 4.0, AI, and is always open to covering diverse and exciting topics in the Western Balkans countries. His work has been featured in global media outlets such as Foreign Policy, WSJ, ZDNet, and Balkan Insight.