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Don't Talk to Corp Dev

paulgraham.com

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Re: Don't Talk to Corp Dev

#31

Post by mark-r »

clairity wrote: post #26

i appreciate this as a first approximation of what a founder should do, but it presumes some specific clarity that is somewhat rare (which i'd guess even pg would concede). for example, sometimes you don't know that the person contacting you is corp dev, sometimes founders differ on when they should sell, and sometimes you may have differing feelings from day to day. in my limited experience, these kinds of discussio…

Nobody's going to throw out even a ballpark without due diligence, and that's the distraction factor. You really don't want to be roped into that unless you're serious.

Re: Don't Talk to Corp Dev

#32

Post by gaius »

Remember a VC doesn't want a company to have a 10% chance at a million dollars, they want a 1% chance of a billion, because that's how it works.

But if you are a founder, a million dollars is probably the best deal for you, and your people, and you should grab it with both hands. Numbers made up but you get the idea.

Re: Don't Talk to Corp Dev

#33

Post by smacktoward »

djb_hackernews wrote: post #8

I think anyones answer to "Do I want to sell my company right now?" is mostly going to be "It depends, what's the offer?" There are of course circumstances where people absolutely do not want to sell their company, but for the rest of us... it depends.

Of course your VCs don't want you talking to Corp Dev types. Their interests in this matter are not aligned with yours. They want you focused on turning your startup into one of those Big Companies yourself, because that is the outcome that would maximize their return on their investment.

The flip side of that is that the odds of you actually pulling that off are pretty slim, historically speaking; and if you try it and fail you walk away from the table with nothing. Whereas if you get acquired, you walk away with money in your pocket. Maybe not as much as theoretically would have been there if you had persisted, but real money in your pocket beats theoretical money any day.

So the logical role model for a founder looking out for her own self-interest is Kenny Rogers: "You got to know when to hold them, know when to fold them; know when to walk away, and know when to run." (https://www.youtube.com/watch?v=Jj4nJ1YEAp4)

To your VCs, a modest exit is not really that much better than a complete loss; all that really matters is how many home runs they can put on the board. If you happen to swing and miss, that's no great tragedy for them. But it could be a tragedy for you, since you'll only get a few times at bat in your life, and if you whiff them all you could be worse off at the end of your career than you were at the beginning.

Re: Don't Talk to Corp Dev

#34

Post by api »

danielweber wrote: post #14

Earnest: Aren't there other things that corp-dev does, like arrange strategic partnerships and reseller agreements, that can be very valuable for a business? (My personal experience is that these partnerships never live up to their hype, but my feeling is that one time out of a hundred they give the company a huge boost.)

I'd love to hear PG and other knowledgable folks around here talk a bit about partnerships: when, whether, why?

My experience too is that most partnerships are only valuable for social proof. Often nothing much else happens, maybe one or two customer connections. At the same time with some partnerships there is a risk of brand dilution. If you are letting someone re-sell or bundle, there's a risk that they might downplay your brand in favor of theirs and sort of appropriate your brand equity.

These sorts of things do sometimes make me feel out of my depth as I try to put on biz-dev shoes as someone who's primarily technical.

Re: Don't Talk to Corp Dev

#35

Post by cpncrunch »

I think if anyone pulls the "my boss won't do the deal for the price we've already agreed on" I'd just tell them to politely fuck off. If they really want to buy you, they'll pay the agreed price. Or you might decide you don't want to do business with immoral fuckers :)

Although given that this was google, I would probably just contact one of the higher-ups and tell them "I'm still interested in discussion the acquisition, but I was screwed around by your corp dev guy".

Re: Don't Talk to Corp Dev

#36

Post by kbenson »

mark-r wrote: post #9

I once worked for a company that was acquired - the founder wanted to cash in on his success and retire early. In the first all-company meeting after the closing, the CEO gloated over how cheaply he was able to get us. That was really grating. The advice about watching for unsavory tactics is spot on.

Maybe it's a fine line between praising how useful the new acquire is and how much value they can add. The opposite would be stating that they paid too much, which may imply the company will underperform. Finally, if they paid the exact value of the new company, including it's future uses and newly imparted abilities, that doesn't really imply anything useful was done besides keeping the status quo.

Obviously I wasn't there to interpret the remark, but maybe it was intended as a compliment as to how useful the new company and it's employees were, and how much they can now do without breaking the bank to do it?

Re: Don't Talk to Corp Dev

#37

Post by jamoes »

chollida1 wrote: post #4

> Corporate Development, aka corp dev, is the group within companies that buys other companies. If you're talking to someone from corp dev, that's why, whether you realize it yet or not. Can someone piece this together? > I remember once complaining to a friend at Google about some nasty trick their corp dev people had pulled on a YC startup. "What happened to Don't be Evil?" I asked. "I don't think corp dev got the…

> Can someone piece this together?

I think he means this:

If you're talking to someone [from another company] from corp dev, [they want to acquire you], whether you realize it yet or not.

Re: Don't Talk to Corp Dev

#38

Post by ebiester »

api wrote: post #17
kintamanimatt wrote: post #13

Earlier quoted context omitted.

It's that "it depends" that initiates the chain of events that PG is cautioning against. Judiciously reining in curiosity when history has demonstrated it to be a fruitless endeavor and a distraction is the message of this essay.

Well if you do what to at least have the discussion, one tactic might be to throw an optimistic-but-reasonable valuation at them. "Yeah, that'll be $50 million..." Then when they push back or ask for more info, just more or less repeat that and say you're too busy managing your growth to spend more time on it unless they're willing to move forward with an offer on paper. Just turn the whole thing around. If they go a…

I would use a bigger number -- say $250m.

Go outrageous. Honestly, it's not worth letting them see in with DD for a small enough amount.

Re: Don't Talk to Corp Dev

#39

Post by gaius »

ph0rque wrote: post #10

Imagine what it would do to you if at mile 20 of a marathon, someone ran up beside you and said "You must feel really tired. Would you like to stop and take a rest?" I wonder if PG knows about The Wall that occurs at ~mile 20 in a marathon, or if it was a lucky coincidence? http://adventure.howstuffworks.com/outdoor-activities/runnin...

I've been at mile20 many times and every time I think next Marathon I'm going to arrange for someone to meet me here with a picnic, and have a rest, then really cane the last 10km. Never quite gotten round to it yet!

Re: Don't Talk to Corp Dev

#40

Post by gaius »

cpncrunch wrote: post #35

I think if anyone pulls the "my boss won't do the deal for the price we've already agreed on" I'd just tell them to politely fuck off. If they really want to buy you, they'll pay the agreed price. Or you might decide you don't want to do business with immoral fuckers :) Although given that this was google, I would probably just contact one of the higher-ups and tell them "I'm still interested in discussion the acquis…

Their boss didn't say this - it's purely a negotiating tactic.
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