Here in the era of remote work, digital meccas, and increasingly complex technological advances, many non-tech business owners have turned towards investment in tech. It’s a reasonable conclusion to reach, given how much of both our personal and professional lives are moving online, and how many others have done so to significant financial reward. For those looking to get involved in the scene without starting their own business from scratch, the decision to buy a tech company is often the next option on the list.
Doing so is a risk, but it can be nearly infinitely rewarding if done well.
If you’re getting ready to purchase a technology company at any point in the near future, you may want to keep these tips in mind:
Get Specialized
There’s a wealth of niches for tech companies out there—from AI to blockchain to the IoT, you can dig down deep in almost any area. Before purchasing a tech company, do some research to determine high-growth areas and consider investing in a company that specializes in one of those niches. For instance, AI and automation are predicted to completely change the way we interact with the world in the next few decades. So, it might be worth specializing in that area or a similar one!
Determine the Intellectual Property (IP)
When you take a risk on a technology that’s new and maybe even untested, make sure that all the right boxes are checked in the IP department. The current owners may not have done their due diligence at the beginning, but if you’re assuming responsibility for the company you need to make sure that they actually own and have all the rights to their technologies. Make sure to check that your new company’s intellectual property is in order before proceeding.
Secure a Letter of Intent
Getting down to the wire? If you can, it’s always wise to negotiate a letter of intent, or LOI, no matter what type of company you’re purchasing. This non-binding statement will help you ensure that everyone is on the same page regarding the terms and conditions of the sale before your lawyer drafts the legal contract. For a tech company, which often has lots of moving parts, this is a must-have.
Value the Team
When you buy a tech company, one of the most important things to remember is that you’re not just acquiring a product—you’re acquiring the team that made that product. Especially with SaaS operations, retaining and valuing the team that developed the technology is critical. You’ll need them to solve problems, catch bugs, continue innovating, and ultimately manage the day-to-day operations that require technical expertise. If you can secure a retention agreement, so much the better. You want to keep that highly valuable team on board if at all possible.
With the right resources, research, and guidance throughout the process, buying a technology company can be one of the most lucrative decisions you’ll make as a business owner or investor. At Richards Rodriguez & Skeith, our team has decades of experience assisting with mergers, acquisitions, business structuring, contracts, intellectual property, and more. When you’re ready to embark on your journey with a technology company, don’t hesitate to get in touch.
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