Allen Lau’s Four Pillars of a Successful Exit

April 14, 2022 | Stefan Palios

Selling your company is no easy decision. It has to be right for all stakeholders. When Allen Lau opted to sell Wattpad instead of pursuing an IPO or mega growth round, he did so because he felt it was the fastest path to Wattpad’s continued success. Speaking with TechExit.io ahead of his conference keynote, Allen shared his four pillars of a successful exit.

Key takeaways:

  • Look for an acquirer whose strategy and vision already align with yours.
  • Find ways to strengthen each other versus simply merge.
  • An acquisition should speed up everyone’s goals.
  • Navigate culture issues carefully.

When Wattpad exited for $750 CAD million to South Korean tech company Naver, the Canadian tech community celebrated the new wealth and opportunity.

For founder Allen Lau, though, the exit wasn’t about the money. At the time, he was focused solely on Wattpad’s growth and was considering an exit, an IPO, or a larger growth round to become an active acquirer.

Speaking with TechExit.io ahead of his conference keynote[1] , Allen looked back on the acquisition and shared why selling made the most sense and his four pieces of advice for founders considering an exit.

1. Pre-existing vision and strategic alignment

When Allen founded Wattpad, he focused on community growth rather than a big vision. But by the time the company raised a Series C in 2014, Allen had a grand plan in place.

“It took me a while to realize Wattpad is not just a story company, we’re an IP company,” said Allen. “We not only surface new stories, but we can tell through engagement on our platform what people like and why, which is incredibly valuable information that people didn’t have before.”

As a result, Wattpad’s vision became to revolutionize entertainment with data, leveraging Wattpad’s story platform to seed TV shows, movies, and traditional publishing success stories.

Recounting his early meetings with Naver, Allen said the South Korean company had a “virtually identical” strategy.

“We’re not dreaming up something new,” said Allen. “We’ve been on the same mission for many years and it aligned perfectly with Naver.”

2. An opportunity to build more together

Usually when two companies have nearly identical visions, they could be in competition. For Wattpad and Naver, Allen said it was the opposite.

Naver had built a significant user base in Southeast Asia and had WEBTOON, the world’s largest digital comics platform, embedded in its model. It also had its own studio division - WEBTOON Studios in North America and Studio N in Korea - with deep connections in the South Korean movie and TV landscape.

Wattpad was considering a comic book business line, but didn’t have one. Further, Wattpad Studios already built significant relationships in North America and Europe while Wattpad Books  had broken into traditional publishing in ways Naver had not yet.

“The acquisition unlocked multiple obvious synergies,” said Allen. “Our expertise amplified their business and vice versa.”

3. The ability to accelerate goal achievement

On top of synergies for growth, Allen said the Naver acquisition provided nearly instant resolutions to a lot of Wattpad’s mid-term growth goals and vice versa. For example, Allen said the ecosystem of potential readers doubled “overnight” with the acquisition, since both Wattpad and WEBTOON have massive complementary user bases. Wattpad could also take advantage of WEBTOON’S experience in visual formats and comics versus needing to build their own.

While this added business value, the real benefit for Allen was time.

“If we did it ourselves, we’d have to build it all and that could take years,” said Allen. “But the merger was attractive because we got new capabilities instantly.”

4. Let your cultures shine

The merger officially happened throughout 2021, meaning the two companies had to deal with varying rules relating to the COVID-19 pandemic. However, Allen said this was almost a good thing because it brought up everyone’s emotional quotient (EQ).

When there was an issue, teams hopped on video chats instead of flying 16 hours for a face-to-face meeting. Where possible, the teams met in person in between lockdowns - for example at WEBTOON’S’s Los Angeles headquarters  when California had opened its borders but Canada and South Korea had not.

These types of changes made the merger difficult at times, but Allen said they also opened up everyone to new ways of working together that produced even more synergies.

“It took a lot of EQ and managing relationships to overcome those initial pandemic issues,” said Allen. “But it helped discover the parts of an acquisition - like cultural understandings - that don’t show up on a PowerPoint or in financial documents.”

Exiting one world to take over another

Entertainment is at an inflection point. Streaming players are dominating, traditional TV and movie studios are unsure what’s next, and the global demand for high-quality content is insatiable.

This is exactly where Allen wants to be.

In his 10 year vision for the company, Allen outlined how Wattpad is perfectly suited to lead this new world. Not only do they have the IP and analysis capabilities to uncover amazing stories, they have the collective of brands and in-depth relationships from Hollywood to Bollywood necessary to bring those stories to life.

“Entertainment is going through major disruption,” said Allen. “And us building not just an IP powerhouse but also a defensible ecosystem is timely to take advantage of that disruption.”

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