August 15, 2022

‘A cricket bat to the face’: The story of one startup’s 'gruelling' road to acquisition

Rental platform Fat Llama talks about its $41.5m acquisition by Swedish rival Hygglo.

Naomi Ackerman

7 min read

Fat Llama cofounders Chaz Englander and Rosie Dallas

Chaz Englander and Rosie Dallas, cofounders of rental platform Fat Llama, are speaking to Sifted as they prepared to pop the cork on a long-awaited bottle of champagne. The entrepreneurs, both 30, have just signed the final paperwork on a buyout from Swedish rival Hygglo. 

The Stockholm-based company paid  $41.5m for UK-based Fat Llama, a deal which will create one of the largest peer-to-peer rental platforms in the world. 

While it means a payday for Fat Llama and its investors, it hasn't been an easy road to exit. The team's been through two sets of acquisition negotiations and “gruelling” legal processes over the last 18 months, one of which fell through days before completion.


How did the cofounders cope with tricky acquisitions — from negotiating with potential partners to managing expectations — and finally get to the finish line? 

Acquisition by a Canadian competitor falls through

Dallas and Englander, along with third cofounder Owen Turner-Major, launched Fat Llama in 2016 and were accepted into the elite US accelerator Y Combinator the following year. The platform allows people to rent out anything from designer clothes to DJ decks to their neighbours and currently takes a 25% service fee on each transaction. It offers an insurance guarantee for up to £25k per item in the UK and verifies users. 

The team raised a total of $13m from investors including YC and London-based VCs Blossom Capital and Atomico, before pivoting from focusing on growth to turning a profit in 2019. They reached this goal in March 2021, despite being hit badly by Covid lockdowns. 

Then they were approached by Ottawa-based competitor Ruckify about a merger. The cofounders say a deal seemed like an efficient way to expand even further in the US and Canada and propel the company to the next stage of growth.

The drama started when that plan collapsed just days before completion last December. 

“We’re no strangers to a cricket bat to the face, as we always call it when things don’t pan out. We’ve been battered left, right and centre since we began [the startup],” Dallas says. 

We’re no strangers to a cricket bat to the face, as we always call it when things don’t pan out. We’ve been battered left, right and centre since we began

“It was super disappointing, especially given the amount of Chaz’s time that went into it — it was gutting. But the deal is never done until it’s done. We’ve learnt that the hard way so many times.”

The merger had aimed to see the startups combine and then go public via a special-purpose acquisition company on the Canadian TSX Venture Exchange (no dollar amount was made public for the deal). But there was already some market volatility, and the price of the deal changed at the last minute. The numbers “just didn’t work” anymore. 

Looking back now, Englander sighs with relief. 

“That deal fell through, and in all honesty the only thing I can say is ‘Thank God it did’, given where markets landed at the beginning of the year. We may not even exist today, it is honestly that bad, particularly for a smaller listing like that on a growth exchange,” he says.

Ruckify did not survive. The company, which had approached Fat Llama about a merger as a survival bid, folded after the deal collapsed.  

Englander says trying to see the positives from the process helped him keep going. He “learned a lot” from Ruckify and its CEO Bruce Linton, a serial entrepreneur who made his name as founder of listed Canadian cannabis giant Canopy Growth. 


Regrouping and focusing full-time on a sale

When any acquisition deal fails, founders have to regroup. 

Dallas and Englander had already stepped back from the day-to-day running of the startup and now needed to look for a new CEO as their interim leader was only set to stay until the merger was completed. They prepared to spend the first quarter of 2022 reviewing potential next steps, including a raise. 

Fat Llama hadn't raised any cash since 2018 when Blossom Capital led its $10m Series A funding round, and its founders were no longer at the coal face. Was selling up the only option? 

Englander concedes that the company “wouldn’t have necessarily been able to raise” the equivalent $41.5m from VCs in a Series B funding round “in this current [market] environment”. But he insists that Fat Llama was acquired “in a position of strength”. 

An acquisition is an incredibly long process. It’s complicated, it’s something you have to jump into with two feet

“We’re profitable, we are not a business that was burning money and needed to exit,” Englander says. 

The duo also argue that not being in the weeds of operations can help founders make better, clear-headed acquisition decisions. “I think it helped us make the correct choice,” Dallas says. “When you’re there day-to-day you’ve got your pride, your career, all your personal stuff.”

“The decision we’re making is not for us and what we want to do day-to-day, it’s about making the best decision for the shareholders,” Englander adds. 

He also points out that managing a takeover deal is a full-time job. “An acquisition is an incredibly long process. It’s complicated, it’s something you have to jump into with two feet,” he says.

The team stopped considering options and jumped back into the process within weeks of the Ruckify deal falling through. 

A call from an unknown number: Fat Llama meets Hygglo

In January, Englander received a call out of the blue from an unknown number. It turned out to be Hygglo cofounder and CEO, Ola Degerfors. 

“Ola said ‘Let’s talk’, and by the end of February we were speaking every day, Monday to Friday,” Englander says. 

In an email, Degerfors tells Sifted that he was motivated to acquire Fat Llama because of its “sophisticated verification system” and its brand presence in the UK and US — indeed, Fat Llama’s name will live on in the UK and US post-acquisition.  

The founders were more nervous the second time around, but they had also gained valuable experience. Having now sealed the deal with Hygglo, Englander suggests trying to “build trust as fast as you can” with any potential buyer and to create a relationship where CEOs on both sides “wear your hearts on your sleeves”. For this it's important to try to meet in person, he says.

Dallas says: “I always think it’s like playing chess. Your job is to try and work out what is driving that person, what their incentive is, what’s making them make that decision?

“[Ask for] as much contact time as you can get, so you can get that read on the person as fast as you can.”

I always think it’s like playing chess. Your job is to try and work out what is driving that person, what their incentive is, what’s making them make that decision?

Englander also found those daily meetings between parties crucial, if intense. “Do daily one-to-ones, even if they’re five minutes,” he says. “A deal process can be anything from two months to over a year, and the only way to keep things moving is just to check in.”

The founder also advises addressing things head-on — and recognising that you might be tempted to make a deal at any price. 

“Being a CEO, you are a bit of a salesperson sometimes, and salespeople tend to hear what they want to hear… You can be a bit biased towards getting it done, rather than getting it done right,” he says. 

"What I learnt is that throughout the deal process if something is bothering you, say something… Keep throwing back to what you originally agreed through the legal process. When you think something is not quite what you agreed, don’t push it to the next week — address it head on.”

Dallas said that she tried to be “incredibly transparent” with her wider team through the whole process. It also helped that the Hygglo acquisition would not involve any redundancies. Degerfors will head up the combined team, and Hygglo is planning to make further hires and expand. 

For any startup founder, seeing your company acquired can be a bittersweet moment. Dallas says that she and her old university friend and cofounder may have drunk the champagne and signed the acquisition paperwork, but Fat Llama “is like our baby, so we’re here for it as and when”. The two will retain board seats and stick around to help with the transition.

She says: “We’re founders, and we will always be founders.”

Naomi Ackerman

Naomi Ackerman is a freelance business journalist and tweets from @nomiackerman.