It sounds to me like you are getting worked. The way you have been approached is not how someone with good intentions does it. Reject the "joint launch" proposal. Put together a Memorandum of Understanding with a break up fee that will cover you. If they are serious, they'll take you up on this and if nothing red flags they'll buy you. If they aren't serious, you'll see them show their teeth pretty quickly as you are…
Assuming they are "getting worked" is probably a bit too cynical.
I've been though this also and would be more careful about massive time sink and distraction that is not serious inquiry.
Figure out if you are talking to a decision maker. A good way to do that is simply ask the person you are talking to "Are you the decision maker?". If you aren't talking to the decision maker, you are wasting your time.
Possibly a less offensive question is "how high would this deal have to go for final sign-off"
Lawyer up. It's worth the $10k it will probably take you to paper this correctly. Since it will be difficult to estimate damages should this not work out, consider writing a liquidated damages clause with clearly spelled out triggers.
Here is a suggestion, tell them to state their intentions or go away. Once they state their intentions tell them they have to sign a Memorandum of Understanding about what you're going to talk about and if they walk away it will cost them $X million (pick a number that would be able to resolve your debts and pay off any investors with a slight return). What ever you do, do NOT be lured into thinking they are thinking…
Excellent advice. We lost a lot of time "working with" a large company, including building a detailed demo using part of their platform – and it ended up coming to nothing.
Right, I get that, but at the same time how can we expect them to buy something or commit cold hard cash when they are pretty much in the dark?
I'll give you a more specific example from my past. A startup seemed interesting to the large fortune 50 company I was working with. We, the large company, had a rather large budget to buy them, like 7 figures, not bad for a company without a published v1 and with no revenue. We did not specifically say how much we were willing to give or what we were willing to do for them, because that is negotiation. On the other hand, they hide behind lawyers, talked to us only generally, and left us in the dark. In the end we decided the time wasn't worth it (their technical skills and product offering sure were, but that's another story), so we ended the discussions. Ultimately they ran out of funding and said it was our "large companies distractions" that kept them from "making it big". Maybe that is true, I can't rewrite history to know for sure whether it is or not. However, what I can say is if they had said "Sure we're willing to show what we can do, we want $x,000,000 if we can show we are capable", we would have given it to them. Hell we would have paid for the due diligence ("We want $200,000 to go through your due diligence whether we make a deal or not" would have been a very acceptable request). Your milage WILL vary, but remember business, funding, and moving forward can take a number of routes.
If the MnA team of that XYZ company is willing to take the talks forward, just take things forward. People who have been through MnA can tell you easily that such processes like Acquihire or an Acquisition takes time. So keep at it, but also maintain a strictly professional relation with them in terms of paper work (Make sure you get an MOU signed before they talk investments/Acquisitions).
If they have something else in mind, openly ask them what is it that they want to explore with your company & see if it works & even if it doesn't works, launch your product anyway.
Here is a suggestion, tell them to state their intentions or go away. Once they state their intentions tell them they have to sign a Memorandum of Understanding about what you're going to talk about and if they walk away it will cost them $X million (pick a number that would be able to resolve your debts and pay off any investors with a slight return). What ever you do, do NOT be lured into thinking they are thinking…
As a former M&A guy and later a founder - It's not just that your interests aren't aligned in terms of financials or IP, your timelines aren't aligned and your desired outcomes aren't aligned.
There is ZERO hurry with a lot of BigCo acquisitions - there are layers and layers of board approvals, analysis, opportunity costs, competitor research, etc.
There may not be any actual interest in an acquisition of people or technology, but rather a curiosity about the space - e.g. "what are smart and hungry people in X space capable of actually building?" or "what does technology Y in the wild actually look like?"
It's all fun and games for the BigCo but can absolutely kill a startup with delays and 180 degree turns on the product roadmap.
Excellent advice. We lost a lot of time "working with" a large company, including building a detailed demo using part of their platform – and it ended up coming to nothing.
Right, I get that, but at the same time how can we expect them to buy something or commit cold hard cash when they are pretty much in the dark?
Right, I get that, but at the same time how can we expect them to buy something or commit cold hard cash when they are pretty much in the dark?
What sort of information have you shared already?
Enough for them to realize they can either buy us or spend the next year with a team of at least 5 people replicating it. We didn't share anything that got them to realize we are now unnecessary, quite the opposite in fact.