Learnings from fuboTV’s acquisition of Balto

We often hear about startup acquisitions through the celebrations that follow them. Founders thank their teams, VCs congratulate their founders, then everyone moves on. The cycle of celebration buries an uncomfortable truth about selling companies: the process kills a lot of them before they even get an offer. The founders think they’re just networking and creating options for themselves, but they’re actually changing their vision to make potential acquirers like them. And invariably their new vision is more transactional, less ambitious, and less worth fighting for than the original.

This week I sat down with Joel Karacozoff (YC W19), who sold his fantasy gaming startup to fuboTV (NYSE: FUBO), to discuss how he navigated these challenges and others through a successful acquisition. Joel and his team did something unusual during their acquisition process: they took jobs at other companies to cover their expenses. Many investors would disagree with their decision, but from Joel’s perspective they had no choice. The industry their product was based on - live sports - had shut down because of the Covid-19 pandemic. Growth ground to a halt as customers no longer had use for their product. Their funding, which included prestigious firms like Y Combinator, dried up as investors waited to see how sports would return.

The conventional wisdom for a founder in Joel's position is to either pivot or shut down.

Pursuing an acquisition would only waste time, the thinking goes. Since potential acquirers can sniff out that you’re running on fumes, they’ll just wait for your startup to die before scavenging the remains at a deep discount. As the old adage goes:

"Startups are bought, not sold."

And distressed assets aren’t worth much. But Balto’s story highlights a different adage coined by Y Combinator founder Paul Graham:

"Just don't die."

You can watch the segment of our conversation with Joel below or listen to the full episode wherever you get your podcasts.