Navigating the Complexities of an AI Startup Acquisition

Artificial intelligence (AI) changes the playing field for many industries. Companies may be well-advised to purchase an AI startup to expand their capabilities or increase revenue by serving others in their industry. If you’re acquiring a brand already in place, you must consider a few factors to create a successful transition when merging the AI startup with your current operations.

Evaluate Intellectual Property (IP)

AI startups have increased in value, with a 60% higher cost than non-AI counterparts. You’ll be investing a lot of money, but these startups have little physical property to analyze. Instead, you must look at IP to evaluate the strength of proprietary data. Does the startup have unique algorithms with copyrights, trademarks, and patents?

• Ownership: Does the startup own the intellectual property rights? If it licenses an idea or software from another entity, it could create a bottleneck in acquiring the technology you most want.
• Patents: Look at what patents the company owns. They should be crucial to how the
  startup operates. Patents that are pending or missing that are vital to processes
  could add expense or create issues.
• Competitors: Do any of the company’s processes or services impact competitors
  negatively? Perhaps another brand has a very similar patent to one pending by the
  startup.

Before acquiring an AI startup, do your due diligence to ensure it’s the deal you think it is.

Analyze Scalability

Machine learning technology is still a rapidly changing field. Make sure anything you invest in can scale with company growth and industry changes.

• Analyze performance based on likely scenarios.
• See if the technology integrates with current systems.
• Consider additional expenditures to create infrastructure during the next five years.

If a company’s assets become outdated shortly after you buy them, the acquisition costs might not be worth the investment. Strategic buyers likely want to acquire the company because of a need the startup meets. Will the software perform as well in the future?

Retain Top Talent

The skilled people who got the company going are part of the benefit of buying a startup. How can you keep the best employees after you buy it?

• Offer competitive salaries and benefits if they stay.
• Give them a chance for personal growth and pay for skills development.
• Create a clear path to promotion.

Before acquiring another brand, ensure you offer an inclusive workplace with a strong company culture that embraces newcomers. With the high demand for specialists, keeping the most skilled workers is crucial to acquisition success.

Comply With Data Privacy Laws

When you acquire a startup, you must ensure you are complying with the data privacy laws they fall under. Compliance varies by industry and depends on the people you serve. Some regulations you may need to consider include:

• General Data Regulation Protection (GDPR) Act, which applies if you serve European Union members

• California Consumer Privacy Act

• Health Insurance Portability and Accountability Act for health care entities

  
  

Be transparent with customer data gained through acquisition and allow them to opt-out if desired.

Plan the Integration

Plan the transition when you’re closer to the purchase date and closing.

• Create a team to welcome new employees and reach out to customers.

• Keep stakeholders apprised of the process.

• Set and track deadlines for integration.

  
  

A seamless merger requires careful planning and pivoting when needed as bottlenecks occur.

AI Startup Acquisition Is Worth the Effort

Companies that must implement AI capabilities into what they already offer their customers or to better manage client relationships are better served working with a startup already adept at navigating AI.

Acquiring a company and integrating its processes into what you already do requires careful planning and effort but will be beneficial in the long run. You’ll gain talented people who know about technologies current workers don’t know about, and they’ll gain a more secure job with an already established brand.