“I think CEOs that are interested in a future acquisition need to be building relationships or at least awareness with potential buyers at least 2–3 years in advance, especially with strategics. If you’re not on the list, it’s rare for a deal to happen.” Joe Hyrkin on Selling Issuu to Bending Spoons, and More….

I ran into Joe Hyrkin after his company Issuu (where he’d been CEO) was been purchased by Bending Spoons. Since I’m always interested in startup outcomes — especially those where there’s a private equity-like exit, Joe was kind enough to share the backstory with me, and here with you! Five Questions with Joe Hyrkin

Hunter Walk: You sold Issuu to Bending Spoons, which has recently acquired a number of legacy products including Evernote, Meetup, WeTransfer and Brightcove. Were you already engaged in a sales process with multiple parties, or was it really more of an opportunistic conversation between your company and them?

Joe Hyrkin: I first started learning about and paying attention to Bending Spoons when they announced their acquisition of Evernote in January 2023. At the time, I thought they could be an interesting potential acquirer if we got to that point. By early 2024, we were sustainably profitable for a second time, on track to generate over $30 million in revenue and starting to get some PEs and strategics showing interest in Issuu.

We hired a strong mid-market banker, Lightning Partners to help us with the process and got an introduction to Bending Spoons in April of 2024. They [Bending Spoons] knew about us, but didn’t have extensive detail. In many ways, we fit their model, a primarily product led growth self service platform with good retention and a large global footprint of users. So we were in the early stages of a process when we had our first discussion with Bending Spoons and had a handful of seriously interested acquirers. Once Bending Spoons indicated real interest in May, discussions progressed very quickly with them, while we continued engaging with the other parties. We ultimately signed a term sheet with a short exclusive period and finalized the transaction by July 18.

Generally, I think CEOs that are interested in a future acquisition need to be building relationships or at least awareness with potential buyers at least 2–3 years in advance, especially with strategics. If you’re not on the list, it’s rare for a deal to happen, even with a good banker. In the case of Issuu and Bending Spoons, we were aware of each other a year or so before the transaction, but didn’t really have meaningful discussions until three months prior to consummating the deal.

HW: If a CEO wants to understand whether there’s a M&A market for their company, how can they ‘take the temperature’ without scaring their team or investors? When is it right to engage your stakeholders?

JH: While we don’t discuss this very often, venture backed companies are expected to contribute to their investors providing a return to their LPs in a timely fashion.. In other words, an exit of some sort is needed. Exits come in many forms, from an IPO at the high end, to secondary sales, private to private merger, strategic or PE acquisition, or sometimes, an acquihire or bankruptcy. No one wants to be in the latter two categories! While every CEO and founder wants to create the next impactful IPO oriented company, IPOs are rare, even in the best of times. In the 2021 boom, there were 215 tech and media IPOs. At the same time, there are in the range of 75,000 venture backed companies at any given moment. So that means, the vast majority of successful companies will get acquired, if they’re lucky. There is a myth in Silicon Valley that companies are bought not sold. In fact the opposite is true. Buyers need to know who you are and why you matter to their customers, product offering and how you deliver value, before they can make an evaluation about you. CEOs should be prioritizing connecting with folks in the transaction ecosystem relevant to them, so that potential acquirers have familiarity with the rationale for a potential acquisition. It doesn’t mean you hang a “for sale” sign on your front door or website, but get to know people. It can never hurt.

Go to Banker conferences, like Goldman Sachs’ PICC or AGC’s annual event, where you can meet up with dozens of PEs, Bankers and some strategic buyers. These events are organized as a conference format, so the discussions are casual and mixed with networking, planned appointments and good content. In 2–3 days, you can have dozens of conversations where you get to socialize your company and get a sense of what buyers might be looking for and how you fit. This is a good way to start exploring and getting connected and educated without spooking investors or employees.

In addition, take calls with bankers. Make them short meetings, but take the calls. Bankers that show interest in you are constantly talking to everyone in and around your industry/ecosystem. In courting you for a future engagement, they’ll often share what they are learning in the market. It’s a great way to learn both about the process of an acquisition, and more importantly about what’s happening in the market from an objective well connected source. There’s no obligation and it also allows for you to get a sense of which banker has the right expertise and connections for you.

Most importantly, identify the larger companies in your ecosystem that could be potential buyers and get to know the senior most people in Product Management, Corp Dev, BD and the management team. Help them understand why you matter to their customers and their business. Focus on a deep integrated business and real growth oriented partnership. Understand that there are dozens and maybe hundreds of other companies trying to do the same, so figure out how to stand out. The point here is to build a partnership with the companies whose products are also used by your customers. There might be half a dozen to a few dozen companies that fit this bill. Get to know the people (not just one person) in these companies, so that you’re familiar to them as they prioritize.

For Issuu, Canva was a natural potential acquirer. I went to Sydney, Australia 4 times in the 18 months prior to us getting acquired to build a relationship with a range of people within Canva. While they didn’t buy us, those trips did turn into a deep partnership, where Issuu was one of only 3 companies featured at their large developer conference, which led to being promoted, a much higher profile for us in the ecosystem and value for our joint users.

HW: Debt financing for startups can sometimes seem like ‘cheap money’ but it’s definitely more complicated than most founders realize. I saw your essay about this form of capital being a ‘Growth Engine or Growth Killer?’ Folks should read it fully but if you were going to stress one aspect of venture debt to a CEO, what would it be?

JH: Debt should be looked at as a legitimate financing tool for a start up as long as you’re clear about how it really works. As you mentioned, I shared my thoughts and experiences with debt in an article on Linkedin.

The most important aspect of venture debt is to fully understand the covenants, essentially business operations collateral, to which you are agreeing. These generally include revenue and cash in the bank commitments, and can sometimes include other elements. Do not go into a debt deal unless you have full confidence that you can exceed those commitments. I can’t emphasize this enough. Most lenders expect you to miss the covenants. It’s why they are in the agreements and they make money in the form of more interest, penalties or a larger percentage of the company when you miss. Too many CEOs go into a debt deal, thinking they’ll get pretty close and the lender will be flexible. That’s a mistake. Debt financing itself is not bad. It turns sour if you don’t take the covenant element seriously. Too many CEOs treat covenants like a company KPI. If you miss revenue by 10%, but exceed the product, NPS or number of customers, the Board generally treats the miss with some flexibility. Debt lenders don’t. Do not treat it like you’re sharing a range of possible outcomes.

HW: You’ve seen several waves of technology over the last few decades — Internet, Cloud, Mobile, etc — how have these experiences shaped your opinion on the AI boom?

JH: In each of these waves, we see a large number of companies offering very similar products and services where it’s challenging to identify who the winners will be. In every cycle, a few emerge to be dominant and sustainable. We’re in a similar mode right now. There will likely be a few foundational companies that become the primary platforms that will be used and everyone else will build applications or the equivalent on top of these models.

Facebook is a great model to use for learning from the past. When Facebook made it possible for developers to create games and other applications around 2007, they only had about 15–20 million uniques per month and they were struggling to figure out how to really grow. At the time, there were dozens of smallish social networks and community sites. The debate was around continuing to build a destination and fight for users or leverage the platforms and distribute. In 2007, it wasn’t clear which strategy was correct. Companies like Gaia where I worked or Second Life, stayed independent and companies like Zynga, Slide and Playdom built for the “containers” allowed on Facebook. These latter distribution companies grew quickly and Facebook took full advantage of the new users that these creators drew to their games and content on Facebook.

Initially Facebook allowed developers to keep the revenue generated within their product and was satisfied with the combination of monetizing around the developer’s content and huge influx of users. Over time, as we’ve seen, Facebook, now Meta, has continually updated the ways they extract revenue and value from the developers to the point that in the case of some content, like news or particular games, it was no longer worth it for the developer, but Facebook/Meta already gained the users and could start monetizing them on their own. We’ve seen the same situation with Apple where developers have to meet very specific requirements, have to pay for exposure and in many instances see their growth plateau, while Apple continues to expand their control.

I think everyone building on top of the LLMs today will be well served to pay attention to how this all unfolded with social network and marketplace ecosystems. I’m confident that the future of AI will revolve around a few powerful LLMs and a massive number of application builders. But, we don’t yet know if the real money is in applications, who will own the marketplaces or if the LLMs themselves will build applications and compete with developers. Even if they don’t compete with developers, we’re already seeing rapid business model changes. ChatGPT was free, then there was a $20 version and now a $200 version and enterprise offerings. Even as prices for access fall, it’s likely the LLMs will roll out something akin to what we’ve seen in the past in terms of extracting more of the revenue, once reserved for developers. It’s not necessarily bad. A rising tide lifts all boats. It’s just important not to overly rely on a partner’s current business model in a fast evolving ecosystem. No one wants to be the next Mic.

HW: What are one or two of your favorite questions to ask folks during job interviews?

JH:

• What do you do to consciously refine your intuition and wisdom? Do you have particular practices or ways you pay attention to this.
• What’s the biggest mistake you made in a job? What was the actual impact? How did you resolve or address it and how did you win confidence back?
• How can you impact the evolution from SEO reliance to LLM reliance for driving awareness, and growth? And give real examples of what you know and can execute. (This is important across all disciplines in a company)

Thanks Joe! GET ALL MY POSTS VIA EMAIL (first and free)

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Originally published at https://hunterwalk.com on April 17, 2025.