The Three-Legged Stool is Down to One
The value of your business is ultimately the value you create for customers.
Mike Troiano asked a great question the other day: has the Build vs. Buy calculation changed for acquirers?
Potential acquirers are fundamentally valuing a mix of three assets - the “3 T’s”.
Talent
Technology
Traction
Every valuation calculation is a three-legged stool. Kick one out and it tips. Kick out two and you’re left with a post.
The Talent leg has been getting wobbly for some time. Silicon Valley figured out the acqui-hire - if the team is the primary asset, it’s quite easy to strip it out and just buy it directly. From an operator’s perspective, this can be a decent outcome - assuming you’re part of the core team - but from an investor’s perspective it’s almost always bad.
Now AI is coming hard for the Technology leg. When anyone can vibe-code a working product in a weekend, the technology itself stops being scarce. The head start you thought you had — gone. That’s the real shift Mike is pointing at, and it’s the one many founders are understandably reluctant to price in.
So what’s left standing? Traction. Paying customers and revenue you can bank. In many respects, that’s how it always should have been.
A story that rhymes
About a dozen years ago I was advising the CEO of a social media startup, where over time I got deeply enough involved that I effectively became part of the founding team. We had a prototype that (mostly) worked. We had early “design partner” customers - not yet really paying us but helping us refine. In other words, we didn’t have much Traction yet, but we had Technology, and we had Talent (of course…).
We were also highly dependent on the large social media providers for our data - one in particular. This was early enough in the social media era that the big social networks were more focused on growing their audiences than on providing analytics around their data - so they made that data available to their “ecosystem” - fed through a small set of approved data partners. Like scores of startups, we were floating our business in that “partner” ecosystem.
One day the CEO called, excited: the big company invited us out to the Bay Area to show them what we were building. My first reaction was a flicker of “wait, why.” Acquisition interest, investment interest, market validation — could be any of those. Could also be none of them.
One of our advisors, watching from further out, told us not to take the meeting without protection. But no NDA was on the table — “just an introductory conversation” — so that was that.
A well-known VC we saw the day before said it was a bad idea. But tickets were already bought. So we went.
The meeting itself was pleasant. Polished. They loved what we’d built, talked about “exploring how we could work together,” and by the time we wrapped it was late so we headed back to the hotel to rest up for some potential investor meetings the next day.
The next morning my phone rang early. Our lead engineer, a few hours ahead in the UK, had already informed the CEO: our data feed had been cut off.
Of course, there was no way prove a direct line from the prior day’s meeting to the cutoff. Nor was there any smoking-gun email. But the timing was not subtle. And it turned out we weren’t special — over the next few weeks and months, nearly every startup in that ecosystem suffered the same fate.
In hindsight, it was closer to a mercy killing than a betrayal. We’d come close to raising a few times, but our early product was never the same thing as a business, and the path forward was foggy at best. I don’t carry regrets. I carry the lesson.
“Partnerships” are about self-interest. Nobody sits across the table from you out of charity — they’re there for their own self-interest, full stop. Walk in with that mindset, and you won’t be surprised by the outcome.
Traction is the only leg that matters
For struggling startups today, that lesson matters more, not less. You may be thinking that AI has handed you new leverage - but it’s at least as likely that it’s taken more away. The technology head start you were counting on is worth less than it used to be, because everyone can build fast now.
Which brings me back to that 3-legged stool. Two legs are going if not gone. The one that’s left — the one that was always the most important one — is your Traction. Traction isn’t just usage, but real customers paying you real money because you solve a real problem for them.
Go find some. And then go find some more. It’s still the only leg that holds weight.