Investor Deck is a six-article series presented by Sage, offering tips for SaaS startups from Canadian VCs. Read the most recent installment here.

In the early days of Wattpad, Eva Lau remembers a piece of advice she often heard for founders: craft your exit strategy early.

The company already knew something about building narratives. Wattpad, founded by Ivan Yuen and Lau’s husband, Allen, was quickly convening a global community of writers and readers.

“If the most obvious acquirers are easy to spot, you can bet other companies are already knocking on their doors.”

Lau was Wattpad’s head of community and content until 2013, and said that, back then, many people believed the company would be bought by someone in the traditional world of book sellers.

“Initially, there were many guesses, saying, ‘Oh, you have so many stories on your platform—one of the publishers will, for sure, buy you,’” Lau said.

But that’s not the story they crafted.

In 2021, Wattpad was acquired by South Korean Internet conglomerate Naver Corporation in a deal worth $754 million CAD.

Naver was far from a traditional publisher. The South Korean web conglomerate was an early pioneer in user-generated content, and Wattpad became a vital part of Naver’s digital storytelling ecosystem, anchored by Webtoon.

The deal reflected a larger play by Wattpad and a deeper understanding of the potential for storytelling to be a catalyst for new content formats and creative opportunities, from comics to screen adaptations. It unlocked endless new ways to bring Wattpad’s stories to life.

Lau said that Wattpad’s acquisition defied what she describes as a common investor-driven narrative in Canada, which often pushes founders to shape their companies around obvious, short-term exit strategies. She believes the job of a founder, first and foremost, is to build an amazing business.

In Wattpad’s case, that meant they had been pushed to look for obvious buyers instead of a global company that was aligned with their larger value proposition.

“I think this narrative was being pushed by early-stage investors who are not necessarily visionary,” she added, referencing fund managers who are often looking for a return in three to seven years.

It is a narrative she is looking to defy with Two Small Fish Ventures, where she is co-founder and general partner. Her firm, which recently closed its third fund, has seen several successful portfolio exits via mergers and acquisitions, including SkipTheDishes and Printify.

Eric Sleeth, Senior Product Marketing Manager at Sage said many startups and growth-stage companies have turned to M&A as a viable path to scale or exit, especially with the IPO window closed at the moment.

“M&A is a core business strategy, whether it’s about achieving an exit or expansion. It can be enabling entry into new markets, acquiring new capabilities or consolidating competition and responding to industry trends, while also addressing financial goals.” Sleeth said.

Lau believes that successful M&A requires strategic vision, thoughtful execution, and a focus on building long-term value. It starts, she says, with thinking beyond the obvious.

“If you are the darling in your field, opportunities for exit will become apparent along the journey.”

“If the most obvious acquirers are easy to spot, you can bet other companies are already knocking on their doors,” she said. 

Instead, she encourages founders to explore markets where their company can become the “crown jewel” of a potential acquirer’s vision. 

This strategy was evident in the exit of SkipTheDishes, which had Two Small Fish as one of its earliest investors. The startup focused on food delivery in low-density markets like Winnipeg, rather than major cities where most food delivery apps were focused. 

This approach positioned SkipTheDishes uniquely for its eventual buyer, Just Eat, which needed a solution for other low-density markets like Australia.

“They had something the other company didn’t have. It was the missing piece,” Lau said. “If you are the darling in your field, opportunities for exit will become apparent along the journey.”

The same logic applied to Wattpad’s acquisition. Lau explained that by focusing on customers and leveraging AI to promote the best stories, Wattpad seamlessly integrated into Naver’s global strategy instead of being absorbed into a traditional publishing model.

This kind of foresight is only one side of the equation. Sleeth said in order to execute a truly successful M&A strategy, only companies with strong operational foundations will uncover these unique levers. 

“The backbone behind M&A is the financial reporting,” Sleeth said. “A M&A requires thorough financial due diligence, accurate valuation, and careful integration to streamline operations and achieve cost synergies. If you are seeking to get acquired or to have an exit of some sort, unified reporting with robust forecasting is what can determine whether or not that exit is successful.”

For founders looking to exit, Sleeth said Sage Intacct helps them quickly create accurate, reliable data rooms that showcase the health of the business, giving investors far more confidence than what manual tools can provide. For acquirers, the platform streamlines the challenges of managing multi-entity businesses, whether that means integrating them into core operations, or maintaining them as independent businesses.

This efficiency becomes critical once the deal is signed, with Lau describing the post-acquisition phase as akin to adopting children. “One is already a teenager, one is still a toddler, and another is throwing tantrums all the time.”

“On both sides of M&A, you’re introducing a ton of operational and financial complexity,” Sleeth added. “Sage Intacct makes all of that very simple and very easy.”

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The post Lessons from Wattpad’s $754-million exit first appeared on BetaKit.