Stories
You might be able to buy another company sooner than you think. At least, that's the experience of Josephine Philips, founder of clothing repair app Sojo.
Her app – which has the backing of Depop founder Simon Beckerman – has been described as the Deliveroo of clothing repair. It connects users to local tailors and clothiers, promising to collect your damaged or ill-proportioned outfits and return them to you as good as new within seven days.
Sojo could be the antidote to you throwing away those jeans with the tear in the crotch – and, subsequently, the wider environmental problem of textile waste. More than 200 million tons of clothing waste is sent to landfill in the UK each year, with an estimated £140 million worth of garments thrown onto the pile.
So far, Sojo has partnered with luxury fashion brand GANNI and collaborated with vintage retailer Beyond Retro and fashion rental marketplace Hurr. The brand has been having some teething problems with the logistical part of its business – particularly finding delivery partners that share its lofty ambitions of being emission-free. It'd previously tried other logistics companies for the collection and delivery part of the business, but many fell short of promises around sustainability. ‘They were saying they were using [electric] bikes [but] were using motorbikes,’ says Josephine.
As a result, using funding from its recent $2.4 million fundraise, Sojo decided to acquire a logistics company to help with that side of the business. Enter Spedal, a self-described zero-emissions courier with a fleet of riders and electric cargo bikes designed to carry big loads.
Sojo completed the deal via an asset purchase agreement, buying assets previously owned by Spedal. The acquisition means that Spedal's operation – including riders, e-cargo bikes and its technology – will now be part of Sojo's business.
Try before you buy
Josephine first met Spedal's co-founder Monica Pun in July this year. They were introduced by one of Sojo's angel investors who'd been brought on board specifically because of their logistics expertise, according to Josephine.
Spedal became Sojo's main delivery partner soon after the pair met and, within two months, Sojo kicked off conversations around a possible acquisition. For Sojo, acquiring a logistics firm allowed the business to skip the lengthy and costly process of building that arm of their operations from scratch – something that's always been part of its long-term strategy.
‘Two of the objectives of the last raise [were] to grow the team and to strengthen our in-house operations, whether that was our seamsters or our rider infrastructure,’ says Josephine. As a result of the acquisition, Sojo will now be able to offer emission-free pick-up and drop-off services to all customers and business partners in London.
All or something
Both founders agree that the most difficult part of the acquisition process was deciding between an asset purchase agreement (APA) or a share purchase agreement (SPA). An SPA would have seen Sojo buying most or all of the ownership shares of Spedal; an APA would have allowed Sojo to buy some of Spedal's existing inventory without becoming the owner of the entire company, which carries significant legal implications.
For Sojo, which, unlike Spedal, had already been through its first round of investment, a full SPA would have been a hard pill for investors to swallow because the process is ‘more complex’, says Josephine.
Her main piece of advice to other founders considering buying another company is to try and make the acquisition before the target company has raised external investment: ‘Think about what stage they are at. Can you do this as early as possible?’
Impact over ego
When considering the best course of action, Spedal was more focused on what would have the biggest impact on both the environment and society (it's a company born out of Year Here, a postgraduate social innovation course in London).
For social impact businesses, it can be notoriously difficult to find investors who are focused on impact over returns, particularly in the current difficult economic climate. Monica says that she felt that Sojo would be a better platform to make a long-term impact. But that wasn't a decision she took lightly. ‘Being the seller, it's definitely a process that you need to prepare yourself for mentally,’ says Monica. ‘You need to be slightly pragmatic and unemotional about what you can bring over, but also what you might have to let go of.’ Namely, no longer being in charge of the company you built from scratch.
The fact that both Josephine and Monica are female founders and women of color also played a significant role in the final decision. ‘It's important in terms of diversity in our team,’ says Josephine. As part of the deal, Spedal's two co-founders will become a part of Sojo's fabric. Monica will become Sojo's new head of operations and community, with her fellow co-founder, Mike Austin, coming on board as product lead.
How to get to the yes
1. Don't be scared of acquisitions. ‘Acquisitions can be seen as something really huge. But, if you approach it correctly, any sized company can do it,’ says Josephine. That's because you don't always have to buy the whole company outright; you can just buy their assets – like Sojo did. According to Josephine, if you're buying a young company that hasn't taken on external investment, it shouldn't cost the earth. To learn more about the two different types of acquisition, check out our guide on how to sell your business.
2. Take the advice of people who've done it before. ‘I'm really lucky to have really supportive investors who I go to with every single drama,’ says Josephine. ‘They're a great sounding board because they've watched loads of different companies do this before.’ People who typically oversee multiple acquisitions – such as angel investors, venture capital firms or deal brokers – are worth consulting for advice.
3. Work together beforehand. You need to get along – ‘It's like a marriage,’ says Josephine. So, test the relationship before signing the dotted line. This was one of the main pieces of advice that Josephine got from her investors. As a result, Sojo and Spedal worked together for two months before starting sale negotiations.
4. Both parties need to benefit. If you're going to be on the same side, both parties need to come away from the deal satisfied. For Monica, Spedal's most important goal was to make a positive impact on the environment and society, which is why the team agreed to the eventual sale. ‘We felt that Sojo would be a better platform to make and create impact for the long term,’ says Monica.
