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Don't Talk to Corp Dev

paulgraham.com

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Re: Don't Talk to Corp Dev

#51

Post by mark-r »

kbenson wrote: post #36
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'…

Unfortunately it was long enough ago that I can't remember the exact speech, but the meaning was very clear at the time. And he never seemed to care much about the company or products, merely about the revenue it was going to add to their bottom line.

Re: Don't Talk to Corp Dev

#52

Post by NhanH »

djb_hackernews wrote: post #47
greggyb wrote: post #18

Earlier quoted context omitted.

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 Inst…

That scenario seems extremely unlikely though. If you talk to FB with the mindset of "just to see what price you can get", I doubt they would have gotten anywhere near the 19B price tag. That was an extremely well negotiation process that leads to the price: they must have at least some idea what's going on.

Re: Don't Talk to Corp Dev

#53

Post by dsugarman »

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 opinion, it is often useful to take the meetings but most won't be fruititious. You are likely to gain industry knowledge especially from other startups. If you are talking to a big company and you get to a meeting with an hour+ powerpoint, you have to really reconsider whether it is a good use of your time. If the deal is really you selling your SaaS software, it is probably worth it, otherwise probably not. Definitely don't take a sharp turn and sit in startup no-man's land while considering some big new partnership that will likely never work within the scope of your current vision.

Re: Don't Talk to Corp Dev

#54

Post by oxryly1 »

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.

Sounds like the CEO mixed up his shareholder speech and his all-company meeting speech.

Re: Don't Talk to Corp Dev

#55

Post by cj »

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…

I experienced the same thing when I was at the pre-seed stage.

I got an email from an exec at our competitor trying to hire me. I figured I'd grab dinner with them to see what they had to say, and they ended up being completely transparent with their business and sales strategy, competitive advantage, their opinion on our other competitors, etc. All while I reciprocated very little information about my business.

The cost was a few days of distraction, but it turned out to be tremendously valuable in understanding the market (and this particular competitor).

Re: Don't Talk to Corp Dev

#56

Post by emmett »

gaius wrote: post #32

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.

This is completely, 100%, wrong about how YC thinks about things.

If you've not advised a large number of fledgling startups, you wouldn't know, but really truly talking to corpdev is demoralizing and dangerous. If they really want you they'll reach out with an dollar figure (albiet probably a low one). If they haven't done that, they aren't serious. Don't waste your time.

If actually you've raised from a VC, a small acquisition means you'll not clear preferences, which means you get nothing other than retention. The VC/founder conflict only comes up when you have a medium successful company that could be really successful. But in that case you can almost certainly sell secondary stock, lock in your $1 million today, and still go for it.

But more than that, YC (and Paul) truly want to support the founders whatever they want. We celebrate the small sales as well as the big ones. It's simply not true this is selfish advise that you should disregard.

Re: Don't Talk to Corp Dev

#57

Post by AnimalMuppet »

phkahler wrote: post #6
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…

I deleted my comment with the same complaint. He means if someone from another company's corp dev is talking to you it's because they may want to buy your company. This was unexpectedly unclear coming from PG.

The (unstated) context is that PG is talking to startups. They don't have CorpDev of their own, because they're startups. So the only CorpDev they could be talking to is someone else's.

I'll agree that it could have been clearer. But it was probably clear enough to be workable for the target audience.

Re: Don't Talk to Corp Dev

#58

Post by oxryly1 »

api wrote: post #28
thirdtruck wrote: post #24

Earlier quoted context omitted.

Sounds like they were "negging" you pretty hard. The parallels with dating seem numerous when I look through the lens of you (in a technical hire context) as "the attractive woman at the bar" and corp dev as "the pick-up artist."

Two out of three were. The third was polite and professional but the offer just wasn't quite good enough. When I turned it down they just kind of went dark, which I interpret as a no. Interesting the third was a big successful late-stage startup, while the rude ones were early stage startups. Negging? New to me. Shows how little I know about sleazy dating (and hiring?) tactics. http://www.urbandictionary.com/define.p…

> Should I now worry about waking up with a headache, being unable to remember what I did the previous night, but with a folded up copy of a signed asset transfer agreement in my pocket? :)

If they literally try to wine and dine you... maybe?

Re: Don't Talk to Corp Dev

#59

Post by thirdtruck »

api wrote: post #28
thirdtruck wrote: post #24

Earlier quoted context omitted.

Sounds like they were "negging" you pretty hard. The parallels with dating seem numerous when I look through the lens of you (in a technical hire context) as "the attractive woman at the bar" and corp dev as "the pick-up artist."

Two out of three were. The third was polite and professional but the offer just wasn't quite good enough. When I turned it down they just kind of went dark, which I interpret as a no. Interesting the third was a big successful late-stage startup, while the rude ones were early stage startups. Negging? New to me. Shows how little I know about sleazy dating (and hiring?) tactics. http://www.urbandictionary.com/define.p…

It sounds like you kid, but I wouldn't put it past them. :) We are talking about millions of dollars for some acquisitions, after all.

Re: Don't Talk to Corp Dev

#60

Post by emmett »

djb_hackernews wrote: post #47
greggyb wrote: post #18

Earlier quoted context omitted.

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 Inst…

You don't need to take the meeting. If they're serious, you will get another phone call with "How does $1 billion sound?"

If a company really wants to buy you, saying no will not make them go away. It will make them up their price.

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