Startup innovation depends on acquisitions

I’ve spent my career starting businesses, taking risks on new ideas, and building innovative technologies. Over the past 15 years, I’ve founded multiple startups and successfully exited several of them. These experiences have shaped my approach to building and scaling my current company, BadVR. However, policymakers in California are considering changes to state law that would make it harder for me to continue to create, build, and innovate by making it harder to “exit” or sell businesses. Selling businesses, or “getting acquired,” is an essential part of the startup ecosystem. Any changes that jeopardize the acquisition process threaten the entire entrepreneurial landscape, and, consequently, American innovation and success.

Earlier in my career, I built companies focused on data analytics and emerging technologies. Those companies were ultimately acquired, allowing the technology to scale within larger organizations and reach more users. That experience directly informs how I approach developing products and bringing them to market. Today, as Co-founder and CTO of BadVR, I’m working on building immersive analytics technology that uses virtual and augmented reality to make finding insights within complex datasets more accessible to everyone. For example, my company produces an application called “SeeSignal” that allows telecom companies to put on a pair of glasses to see their telecom networks. I know it sounds like science fiction, but the product takes live RF signal data (from telecom networks) and visualizes it, allowing network technicians to easily find and fix coverage issues. SeeSignal is also used to help plan, deploy, and troubleshoot 5G networks, as well as in-home WiFi set-ups. It’s saved telecoms around the world time, money, and resources, allowing them to better serve their customers by providing faster, stronger coverage, even in difficult areas. 

When startups exit through acquisitions, talent and capital are cycled back into the ecosystem. Investors reinvest their returns into new companies. Founders launch new startups, empowered with more resources. Going through this process myself, multiple times, has helped establish greater credibility with investors and potential partners, while the capital I’ve gained with each exit makes it possible for me to move faster with each new business. For example, I exited a company I co-founded, Remine, in 2016. By the end of 2017, I had founded my current company, BadVR. I provided the initial funding for this business with money I made exiting my prior company. This scenario is extremely common for technology entrepreneurs, and this cycle, where capital, knowledge, and experience carry forward, is essential to the growth of startup ecosystems. Acquisitions don’t end innovation; they strengthen and enable it.

For decades, the United States has had a consistent and transparent federal framework for reviewing large proposed mergers and acquisitions, searching for potential competition problems. Deal values subject to that process were typically in the nine figures, so most startup acquisitions weren’t called into question. Since the vast majority of transactions benefit consumers and businesses and eventually move forward, this system supported a dynamic startup economy where companies grew, innovated, delivered, and exited.

However, changes in policy could easily disrupt this process. One proposed idea in California would set a new state M&A standard that could create considerable barriers and uncertainty for startups. The most concerning idea, however, proposes that any merger or acquisition would be assessed on its “appreciable risk of lessening competition more than a de minimis amount”. This is a clear departure from the federal standard as set by the Clayton Act and would create a vague, unpredictable legal environment for potential acquirers and startups alike and would negatively impact companies of all sizes – not just the “tech giants” of Meta, Google, and the like. Any new M&A standards in California risk having far-reaching and unintended impacts, as most potential acquirers and most startups are located in California. Creating a separate state legal standard for mergers and acquisitions introduces conflicting requirements, increases costs, and delays or forgoes transactions that are critical to the innovation and growth cycles of startups across the country. Any reduction in an entrepreneur’s ability to sell their startup, and any reduction in the demand to acquire startups, will harm startups across the country. Acquisitions help scale and distribute valuable innovations, while providing returns for founders, investors, and employees. They stimulate the economy and create new jobs. They provide incentive for small businesses to be founded and a path to wealth for many. In short – the process is a win-win for everyone. Why do we want to change it? 

Policymakers should be careful not to disrupt the mechanisms that allow startup ecosystems to thrive. Acquisitions help recycle talent, knowledge, and capital into new companies and create jobs and innovation. If we want to continue building an economy defined by entrepreneurship, we need policies that support the startup cycle, not proposals that make the entire process harder for everyone.