Startups often turn to crowdsourcing sites like Kickstarter and IndieGoGo to get their ideas off the ground. But at a later stage, when they’re ready for an exit, can they crowdsource knowledge from the experts?
Likewise, companies often make erroneous decisions when it comes to M&A; they are losing millions of dollars in the process. Tech companies that frequently buy-up rising startups (Cisco, Oracle, Salesforce, Google, Facebook to name a few) aren’t immune from making mistakes. How can we bring the wisdom of the crowd to corporate development teams?
Merjerz has built a website to bring together acquirers with desirable startups — it’s like dating site for M&A. Anyone can lend their expertise to the process by reviewing a startup, and offering their take on the company culture, the market opportunity, and more.
On Merjerz, which has been in beta for over a month, professionals from any industry propose deals. Users can login with Facebook, LinkedIn or register on the site, and vote for, comment on and follow deals, which will push updates to their email. According to Schreiber, corporate development and M&A officers at several large-sized tech companies have already taken notice of relevant deals.
Other deal management software tools on the market include Midaxo and Axial Market. But this is the first attempt at applying the crowdsourcing thesis to M&A — the challenge will be to pique enough people’s interest in the topic and to convince the experts to contribute to the site. Merjerz will be most valuable if they can convince employees to anonymously tip off potential acquirers about potential problems with the company culture before the deal takes place.
“We collect the insights and knowledge of the informed crowds and [we] make that available to companies doing M&A,” explained Arye Schreiber, the cofounder and chief executive. Prior to forming Merjerz, the Israeli entrepreneur worked at power-supply company, Lighttech Electronic Industries and Lehman Brothers. He has experienced first-hand how companies can be thoughtless when it comes to M&A.
When he was working at Lighttech, a light bulb went off. Schreiber told me his company was approached by bankers representing a small public Canadian company, Carmanah, who made an acquisition offer.
“The deal didn’t make much sense, but they never asked for our opinions,” he said. “This was pure empire-building. We ended up signing a Merger Agreement, and they spectacularly announced the deal as dead.”
According to news reports, a lawsuit was filed, the executive who led this transaction was let go, and the company’s stock plummeted. In the end, Lightech was acquired by GE, “a happy ending” despite the circumstances, according to Schreiber.
“There has to be a better way for people to avoid stupid deals,” he added. “So I set about building one.” The team of three founders is based in Tel Aviv, Israel. They are in talks with investors, and are already in the process of closing a first round of funding.