Entrepreneurship-through-Acquisition (EtA) vs. Startup Entrepreneurship

A brief explanation of the differences between ETA and Startup entrepreneurship.

Entrepreneurship-through-Acquisition (EtA) vs. Startup Entrepreneurship
Article by
GTE Staff Writer
Article Date
August 22, 2022

Entrepreneurship through acquisition, otherwise known as “EtA”,is the process by which an aspiring entrepreneur (i.e. searcher) spends up to two years searching for and acquiring an existing enduringly profitable business. Acquiring an existing business is often seen as a less risky proposition compared to startup entrepreneurship because the company already has customers, revenue, and a proven track record. Additionally, the new owner can learn from the mistakes of the previous owner. 

There are several advantages to EtA:

 1) An existing customer base: One of the biggest challenges for startups is acquiring new customers. With an existing business, you already have a group of people who are interested in your product or service. This will help smooth the transition to ownership by ensuring that the company still has steady business.

2) Proven revenue streams: Another big challenge for startups is generating revenue. An existing business already has established channels for generating income, which gives you a head start on making money. This might or might not include revenue streams that are subscription-based services, which are recurring to the firm.

3) A team of employees: One of the biggest disadvantages of starting a business from scratch is that you have to build a team from scratch. When you acquire an existing business, you inherit a team of employees who already know how to do their jobs. This can include the previous owner, who can be a valuable asset because they know the ins and outs of the business.

4) Name recognition: If you're starting a business from scratch, it can be difficult to get your name out there. An existing business already has name recognition, which typically saves you a ton of money on marketing and advertising costs relative to a startup.

5) Simpler Deal Financing: Startups require building a company from scratch, which in turn requires many different rounds of fundraising depending on the stage and strategic direction of the company itself. In contrast, acquiring a business requires only one round of fundraising for the acquisition itself (and zero rounds if the individual is 100% self-funded).