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June 6th, 2018

Business Acquisitions Boost Charleston’s Tech Economy

Insight

In the past twelve years, acquisitions of local tech companies by both publicly traded and privately held companies have exceeded a billion dollars with the pace of such acquisitions increasing in the past few years as some of Charleston's startup tech companies mature. Examples of recent acquisitions of these startups include SnapCap by Lending Tree, SPARC by Booz Allen Hamilton, Peoplematter by Snag and Pure Cars by Raycom Media.

When most people, including employees, hear about a start-up being acquired, they think of the intellectual property of the company being stripped out and consolidated by the parent at their headquarters far away and the existing employees given an option to move or get laid off. This has not been an issue in Charleston.

The acquisition of tech startups for Charleston has been demonstrably beneficial all around - a real win for the company, employees and most certainly the Charleston community.

Most tech startup companies in Charleston that have been acquired have benefitted from substantial capital investments by way of expansion in staff and office facilities, expanded employee benefits and working capital to take on new projects.

Many companies report that their parent has even worked to preserve the startup culture by limiting their influence to adding a little more rigor around business practices, a necessity in larger enterprises.

As an example, upon acquisition by Booz Allen Hamilton in 2015, SPARC's headcount rose to 400 employees, up from 250, the office footprint of their Charleston Digital Hub doubled to 72,000 square feet and staff have access to a more robust benefits package, including tuition reimbursement, a perk not typically available at tech startups. This pattern has also been experienced by other companies who have seen staffing increases of between 25% - 30% annually and more attractive compensation packages.

There is no denying that some friction will surface from integrating a nimble startup into a larger, publicly traded or privately held enterprise. But in an industry where cyber threats abound, the enhanced business practices and hardened security policies brought in by the parent companies are clearly beneficial to the smaller startups they acquire.

Companies with several hundred or thousands of employees and remote business units typically install more rigor around their products, adopt enhanced business practices and develop policies and procedures to increase shareholder value. They are also big proponents of purpose driven innovation and collective ingenuity.

While acquisitions can provide for stability and a higher level of support from the parent, employees are often concerned about the loss of culture that can result from the acquisition. The reality is that as companies mature and become more sophisticated, the casual startup lifestyle takes a back seat as office parties and free beer gives way to structure, stability and stock options.

Companies that have been running lean in the early days and focused on the bottom line can now benefit from pushing the creative envelope while retaining and rewarding employees as access to capital becomes a little easier.

SnapCap's co-founder, Hunter Stunzi, summed it up by saying that any employee apprehension around their acquisition by LendingTree quickly dissolved as they realized the enhanced stability and creativity that comes from being part of a larger enterprise -- a sentiment that was echoed by other companies that were also acquired.

Another benefit of tech business acquisitions in Charleston is that hiring becomes easier as seasoned professionals are attracted to working at marquis companies offering nationally competitive compensation packages, being able to occasionally rotate between company locations or just living a coastal community lifestyle.

While Charleston's tech economy is relatively young, companies making up this sector have contributed handsomely to raising per-capita wages in the region, attracting and retaining tech professionals, and diversifying Charleston's economy, all important issues for the region's economic resilience.

Ernest Andrade  /  Charleston Digital News