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Don't Talk to Corp Dev

paulgraham.com

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Re: Don't Talk to Corp Dev

#41

Post by bradleybuda »

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.)

Usually corp dev = acquisitions, biz dev = partnerships, but it varies across companies, and could be the same people in some companies.

I've been in about five of these "corp dev" conversations (low N, but nonzero), and every single one started with an entreaty of "you should partner with us", which very quickly dissolved as it became clear they were solely interested in an acquisition.

Re: Don't Talk to Corp Dev

#43

Post by spydum »

[deleted] wrote: post #12

[deleted]

Better phrased:

>Corporate Development, aka corp dev, is the group within companies that buys other companies. If you're talking to someone from corp dev, that is likely the reason, whether you realize it yet or not.

Re: Don't Talk to Corp Dev

#44

Post by jordanthoms »

7Figures2Commas wrote: post #25

Can talking to corporate development be a huge distraction? Sure. But talking to investors can be a huge distraction as well, and a lot of the things that PG writes about corporate development folks are true of investors. Is PG next going to suggest that startups avoid the Sand Hill Road dog and pony show? I don't think so. Broadly-speaking, investors today are overvauling startups. Seven figure valuations and ridicu…

Actually PG says to avoid investors unless you are in fundraising mode: http://www.paulgraham.com/fr.html

Re: Don't Talk to Corp Dev

#45

Post by pquerna »

api wrote: post #34
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 down…

In my experience partnerships in a SaaS-like thing tend to be binary:

0) Press-release and a few links on a website: Basically worthless.

1) Sales-team integration: you train the partners sales force, they get quota retirement (somehow, this can be complicated), this has some great customer outcome -- you give them margin on re-selling/kickbacks/discounts/whatever to get access to their sales/marketing machines, making it worth their time/effort.

Re: Don't Talk to Corp Dev

#46

Post by Crito »

api wrote: post #15
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.

He gloated like this with you in the room? I'm only a little shocked... not that he'd gloat, but that he wouldn't think about the effect this might have on the morale of his new hires.

Seems kind of like keying the used car you just bought. It only damages the value of something you just paid money for; even if you think you got a good deal it is still a stupid thing to do.

Re: Don't Talk to Corp Dev

#47

Post by djb_hackernews »

greggyb wrote: post #18
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.

Out of a link from the essay[0]: >Do not enter acquisition talks unless you are ready to sell your company. Negotiating an acquisition is the most distracting thing you can do in a startup: going through M&A is an order of magnitude more distracting than raising money. All of your ability to run the day-to-day operations of your company will grind to a halt. You should only enter an acquisition process if 1) you are…

Yes, easier said than done.

Suppose I am a cofounder of WhatsApp. We just booked 10M[0] in revenue and are seeing a lot of success. I'm pretty proud of myself and see big things for WhatsApp.

Though really, my ultimate goal is to compete with Elon Musk putting humans on Mars. I figure I need a few Billion to do that. But that's just a dream.

Facebook "corp dev" comes knocking. I read the news and see they bought Instagram for 1B, which isn't going to get me to Mars, and I'm not sure what they are offering, so I take PGs advice and tell them no thanks. However, if I take that meeting, I end up with several Billion dollars...

[0] http://www.sec.gov/Archives/edgar/data/1326801/0001326801140...

Re: Don't Talk to Corp Dev

#48

Post by hnriot »

This seems to be written very much from the perspective of a VC backer and not the company itself. There are lots of reasons to sell a company, many are ignored by this blog article which does little more than make the M&A guys look like a bunch of used car salespeople. Having been on both sides of the arrangement, getting acquired (twice) both times by Fortune 50 tech companies, and then buying companies I really haven't seen the robber-baron tactics. Obviously every M&W guy worth his salary will try to get the best deal for his company and any CEO getting bought out should have the experience to know the way deals go down. If you're worth X to one Fortune 500, odds are you're worth that to another, meaning the acquiring company has leverage to walk away. This either helps set the price, or the price was artificially inflated in the first place.

There are a lot of very naive startup CEOs out there, that's the real problem, from the Fortune 500 side of the table it's like babysitting most of the time.

Re: Don't Talk to Corp Dev

#49

Post by driverdan »

api wrote: post #7

Great essay. I'm at an earlier stage than PG's target audience for this -- still bootstrapping but experiencing 20-30% month/month growth and getting ready to go that next step (probably seed). At this stage I've gotten what after reading this essay sounds like the baby brother of this: the oddly aggressive hire attempt. These companies have been not necessarily direct competitors but people in related spaces who mig…

Are you looking to be hired? Whenever a company comes to me with a "great open position you'd be a perfect fit for" I tell them no, I'm working on my startup and I'm not interested. I'm not going to waste my time talking to them.

Re: Don't Talk to Corp Dev

#50

Post by api »

driverdan wrote: post #49
api wrote: post #7

Great essay. I'm at an earlier stage than PG's target audience for this -- still bootstrapping but experiencing 20-30% month/month growth and getting ready to go that next step (probably seed). At this stage I've gotten what after reading this essay sounds like the baby brother of this: the oddly aggressive hire attempt. These companies have been not necessarily direct competitors but people in related spaces who mig…

Are you looking to be hired? Whenever a company comes to me with a "great open position you'd be a perfect fit for" I tell them no, I'm working on my startup and I'm not interested. I'm not going to waste my time talking to them.

They weren't really clear about their intentions right away. If they were, I'd probably just say no. In two out of three cases it sounded like they were interested in being a customer.
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