Getting a middleman advisor who does M&A to represent you for a commission may not be a bad idea.
Ask HN: My startup got an an acquisition offer. Please share your advice!
21–30 of 36 posts
Re: Ask HN: My startup got an an acquisition offer. Please share your advice!
#22First question in my mind is why would you sell? Are you in it for the money or to build a great product.
Would you still get to lead the project if they acquire you and the company?
Do you think you can be more successful on your own?
I think those the important questions first. But if you do want to work for them what ever you reasons. Meet them see if you like the people and the culture. The rest is negotiations and I wouldn't give them your source code what ever you do.
Do your self a favor and get your self a lawyer for the contracts and not one they supply you. A lawyer they supply you really just works for them.
Re: Ask HN: My startup got an an acquisition offer. Please share your advice!
#23Not that I'm an expert on this sort of thing, but I'll bite. * Get a good lawyer if you don't have one already. If they're a Silicon Valley company, consider getting a lawyer at a top SV firm (Orrick, Gunderson, Wilson-Sonsini, etc.) and asking them to defer fees until the acquisition goes through. That way, you're not out anything if things fall through. (Ask for a referral to an attorney on HN and I'm sure you'll g…
Are top SV law firms' fees in the price range where they'd make sense for low-six-figures acquisition? Not a rhetorical question; I have no idea if you can expect to pay closer to $10k or closer to $100k for their services.
I think they usually know how to scale their fees. Equity funding can easily run $50K+ in legal fees, but we paid $4K (count 'em) for a medium-sized angel round, using one of the top lawyers in the valley. We were able to do this by keeping the round structure simple. My guess is they could do the same for a small acquisition.
Re: Ask HN: My startup got an an acquisition offer. Please share your advice!
#241) The very first thing you need to do is keep working like the aquisition is not going to happen because these things more often fall apart than go through and it can really screw up your start-up if you start planning for it going through. 2) Next, you need to decide if you want to stop working on your own thing and start working for someone else and figure out the minimum price you would do that for. If you would…
Getting a lawyer as a first step is terrible advice
With respect, I think it's great advice. He's far enough along that he's interested in the price and already talking logistics. "Should they be able to see the full source code in advance?" "Which steps would be involved..."
And even before that point, experienced advice is important. A good lawyer can provide that, just as YC and good angels provided it in your case.
that will cost you a lot of money and a lot of time on something that 1) you many not be interested in 2) may not actually happen. ... It would have been a huge waste of time and money if we got a lawyer like some people on HN suggested, before actually figuring out steps 1-3.
But if you find an attorney who will defer legal fees until an acquisition is finalized, you wouldn't have that problem.
Re: Ask HN: My startup got an an acquisition offer. Please share your advice!
#25[deleted]
Re: Ask HN: My startup got an an acquisition offer. Please share your advice!
#26btw, i'd negotiate it to 7 digit, or make it working business and sell for 8-9 digit!
ps/ i have no experience just dreams
Re: Ask HN: My startup got an an acquisition offer. Please share your advice!
#27I concur with the rest that say don't get a lawyer too soon, but that you do need one if things get serious. The key questions to consider are:
1) have they proven that they are serious? Sometimes they are just fishing for competitive information or trying to steal code (don't get all paranoid and defensive, but be smart, don't show code. Show efficacy). Make them prove that your company and tech is specifically what they need and that they have a cash ready to pay. If they say ‘well, we can get money to buy you’ then I’d be suspicious.
2) What is the company worth to YOU? Its not just about cash, but is the offer of employment something positive or negative to you? Then ask yourself what the company is worth to THEM. Do they need this badly and can’t do it themselves? Or is your tech one of several vendors they can buy? There can be a large difference how you two value your company.
3) Consider your alternatives such as the following: keep going on your own, ask them to license the tech from you, ask them to invest in you, charge them for consulting
4) Consider their options: are there others to acquire and is the industry in consolidation mode right now where if you don't get acquired you loose your chance.
5) Overall DO NOT SHOW THEM CODE unless they buy it or license it or put up cash in escrow with an escrow entity that YOU choose. If they are buying tech, you can offer to let them test it out for efficacy. Seeing code does not prove efficacy. In the final due diligence of a deal they can inspect the code or you can mutually agree to a 3rd party inspecting the code.
Re: Ask HN: My startup got an an acquisition offer. Please share your advice!
#28When you get a lawyer make sure you know the jurisdiction you are going to do the acquisition in and make sure the lawyer not only says they know about that jurisdiction but has a case history. You may need more than one lawyer, e.g one in each jurisdiction.
It's incredibly important to not just get any lawyer but one that is familiar with both what's legal, and enforceable where the sale takes place, as well as the tax implications of the various payment options you will be negating on in whatever jurisdiction you want the money to end up in as well as the one it's leaving.
Re: Ask HN: My startup got an an acquisition offer. Please share your advice!
#291) The very first thing you need to do is keep working like the aquisition is not going to happen because these things more often fall apart than go through and it can really screw up your start-up if you start planning for it going through. 2) Next, you need to decide if you want to stop working on your own thing and start working for someone else and figure out the minimum price you would do that for. If you would…
The OP seems comfortable with the 100K-1M euro range. Do I understand the work involved? I am not a "business guy" but it looks to me like:
(1) is where potential is
(2) salary requirements
(3) negotiation
(4) paperwork
Having something of value should I retain a lawyer? At the hint of a possibility of a sale and regardless of real offers?
Re: Ask HN: My startup got an an acquisition offer. Please share your advice!
#30I'm in the UK and went through a similar situation 3 years ago (minus the being hired part). I wrote about it here: http://peterc.org/blog/2010/257-three-years-ago-i-sold-my-st...
While I think "get a lawyer" is good advice, I managed fine without (I'm no lawyer but I've studied law and have a good eye for legal jargon and contract wordplay). I think having financial advice is, perhaps, a better first step. Depending on how your "startup" is formed will depend on how you can sell it and how any proceeds would be taxed (or not). You may not even need to pay any taxes due to entrepreneur's relief (if you're in the UK.)
Ultimately, you'll also do well to use escrow - a third party who gets the money before you send anything of serious value to the buyer. This is the sort of stuff your legal advisor will talk to you about, unless you're doing it solo (I had a good idea about how to progress just from avid self-reading on the topic of acquisitions).
Legal representation and a visit would be particularly wise if the deal is contingent on you working for them afterward. After all, they may structure the deal in a way where you're indentured to them or only get certain shares of the cash after certain time periods. This could be complex and would benefit from legal advice on your side. If it were a simple "we'll pay X for Y" deal, that's a different kettle of fish.
You also need to be aware of visa issues if you need to work on-site. If the acquisition is sizable enough and you are established enough, they may be able to get you in an O-1 visa, especially if they'll pay you handsomely. But they need to be paying for that process and you need that in the contract ;-)