Notion’s Mergers and Acquisitions Playbook in Tough Times – Protocol
Hello and welcome to Pipeline. My name is Biz Carson and I would like to wish my brother a very happy golden birthday.
This Week in Startup World: VCs Want to Fight IRL, LA gets its own tech week and my exclusive report on Notion’s takeover bid and what it means to play offense in a downturn.
Play offense in a downturn
Venture capitalists have all given the same advice to startups: cut costs, lay off, become more disciplined, and get positive cash flow to survive a downturn.
For Notion though, the game has in many ways returned to its own turf.
“We’re in an interesting position because we’ve always had positive cash flow and we don’t need to do these things,” Notion COO Akshay Kothari told me. “So we’ve been thinking a lot over the last six months about the question, ‘Well, if everyone zigzags, how do we zigzag?'”
Notion goes on the offensive while other startups play defense.
- It acquired the Cron calendar app in June and added the Flowdash team earlier this month.
- He launched a global advertising campaign – the opposite of cutting marketing spend.
- It also launched an employee tender offer in June, allowing current and former employees to sell stock so they know it’s more than paper money. Sequoia and Index also had the chance to buy more at the same price as in its last funding round (a post-money valuation of $10.3 billion). “It’s not something that people feel like they can just retire, but I think it gives them peace of mind,” Kothari said.
This is not a position every startup finds itself in right now. Companies have implemented hiring freezes and cut staff, ICT Tac individually at Sub-stack. Klarna saw its valuation drop from $45.6 billion last June to $6.7 billion in July in its last round of funding. Stripe, following other startups like Instacart, cut his own internal valuation of 28%.
- Notion is not immune to headwinds either. Many of its customers are startups, so any downturn that leads them to cut costs could mean tools like Notion could be on the chopping block. Kothari says the company is watching the turnover of its small businesses closely right now because of this, but it’s also seeing the number of its mid-tier businesses increase.
- After reading about The regrets of Marc Benioff on not investing more in 2009 when Salesforce was doing better than expected, Kothari said he realized that Notion’s decision in this environment was to watch its numbers closely, but to play the offensive where she could.
Notion isn’t the only one looking at the recession. Companies like cryptocurrency exchange FTX saw this time as a privileged moment of purchase, and FTX founder Sam Bankman-Fried has invested in numerous companies in the struggling crypto space. Notion hasn’t been on the same scale as the M&A frenzy, but Kothari has noted a definite shift in entrepreneurs’ attitude toward deals. As funding has dried up and there are fewer exit routes, he’s found more founders willing to be part of bigger companies — and Notion is open to more conversations.
“I would say we’re very much in the market to continue talking to companies on both the product side and the acquisition side and see how we can accelerate our roadmap internally,” Kothari said.
My story about Notion’s takeover bid first appeared on Protocol.com. Read it here.
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