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Hearing many horror stories over backing out at last minute, I wonder why breakup fees and escrow are not more popular in startup world. E.g. if you would like to acquire for $5mln you need to deposit $100k. If you walk out, this is a breakup fee. If startup bails it also have to pay same amount to the acquire.
Hearing many horror stories over backing out at last minute, I wonder why breakup fees and escrow are not more popular in startup world. E.g. if you would like to acquire for $5mln you need to deposit $100k. If you walk out, this is a breakup fee. If startup bails it also have to pay same amount to the acquire.
Hearing many horror stories over backing out at last minute, I wonder why breakup fees and escrow are not more popular in startup world. E.g. if you would like to acquire for $5mln you need to deposit $100k. If you walk out, this is a breakup fee. If startup bails it also have to pay same amount to the acquire.
Now the buyer knows exactly how much runway you have left and all they have to do is drag their feet until you get desperate to make a deal.
Either you have to be cashflow positive, or keep at least two buyers on the hook past whatever disclosure phase nets them this sort of information. I think maybe one company I ever worked for was clever and healthy enough to do this. And even on that one, things went a bit touch and go. One of the worst kludges we ever did, it came out later, was worth a month of payroll, which got us through that acquisition without bouncing checks.
(Still the longest single method body I've seen a human create, and from someone I thought would never write code like that.)
Earlier quoted context omitted.
Similar to a home purchase...and I imagine that even with an immaculate company or home you can always find something to satisfy that clause and give you an out.
Unless you’re in England, where people can drop out or change their price on a house sale or purchase at any time, even after months of legal red tape.
Two quick thoughts on this. 1) The amount of transparency that this company shows is insane. I have a hard time imagining any one else in this situation sharing the way they do. I hope it works out for them long term. 2) The due diligence work they did for this deal was absolutely not a waste (even if they never sell the company). Having gone through this process once will make it orders of magnitude easier if they s…
It's not uncommon for potential acquirers to feign interest in a purchase so they can derail your business for months while your competition (their actual investments) pull ahead.
If not derail then just to get a ton of valuable business insight that isn't available publicly. A while ago a large software company dragged us through this process for months, and eventually backed out at the last minute. A short while later they had a complete clone of our service ready for launch.
In the best position, I would assign a price as is no insider knowledge given. If they are interested they will buy because they already have research done prior.
Hearing many horror stories over backing out at last minute, I wonder why breakup fees and escrow are not more popular in startup world. E.g. if you would like to acquire for $5mln you need to deposit $100k. If you walk out, this is a breakup fee. If startup bails it also have to pay same amount to the acquire.
Part of any acquisition is getting a look at your books. Now the buyer knows exactly how much runway you have left and all they have to do is drag their feet until you get desperate to make a deal. Either you have to be cashflow positive, or keep at least two buyers on the hook past whatever disclosure phase nets them this sort of information. I think maybe one company I ever worked for was clever and healthy enough…
Earlier quoted context omitted.
Unless you’re in England, where people can drop out or change their price on a house sale or purchase at any time, even after months of legal red tape.
What would you spend months on when buying a house? Over here (NL) a buyer inspection is a 30 minute affair. Then you sign a purchase contract straight away, three days to back out.
Earlier quoted context omitted.
If not derail then just to get a ton of valuable business insight that isn't available publicly. A while ago a large software company dragged us through this process for months, and eventually backed out at the last minute. A short while later they had a complete clone of our service ready for launch.
Have you tried to getting a patent? Does this help in any way?
A patent in and of itself doesn't prevent that from happening.