Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

A Classic Startup Horror Story

venturebeat.com

Post reply on HN
Print view View original

61–70 of 84 posts

Re: A Classic Startup Horror Story

#61

Post by Revisor »

larrys wrote: post #57
pg wrote: post #25

This sort of scenario is unfortunately very common. The antidote is never to allow acquisition talks to be the main thing you're focusing on. We advise startups who get approached by acquirers to treat it as a background process, and not to take things seriously until the very last stage. If acquisition discussions are just a side show, you can easily terminate them if anything goes wrong. Which, interestingly, proba…

"M&A guys can smell it when you really want a deal, and that makes them want it less." That smell thing is really important. Essentially anytime you are dealing with someone who does more of a particular transaction or negotiation than you do they will be able to sense and pickup things that you would never think of because of the quantity and quality of patterns they've experienced in the past. We find this happens…

Can you give us some obvious smells apart from "too eager to close"?

Re: A Classic Startup Horror Story

#62

Post by bproper »

dshah wrote: post #50
pg wrote: post #25

This sort of scenario is unfortunately very common. The antidote is never to allow acquisition talks to be the main thing you're focusing on. We advise startups who get approached by acquirers to treat it as a background process, and not to take things seriously until the very last stage. If acquisition discussions are just a side show, you can easily terminate them if anything goes wrong. Which, interestingly, proba…

Although this scenario is very common, it's not common for the story to get shared. Thanks to the entrepreneur that shared it. One of the reasons that folks don't share their horror stories around M&A is that often, in the back of their minds, they're still hoping that it was all just a big misunderstanding (wishful thinking). They're often also worried about creating a negative impression around the company -- there…

Kudos to the entrepreneur, but of course it would be more interesting and informative if the company was not anonymous, with no mention of the details around their business or the potential buyer.

Re: A Classic Startup Horror Story

#63

Post by chernevik »

pg wrote: post #25

This sort of scenario is unfortunately very common. The antidote is never to allow acquisition talks to be the main thing you're focusing on. We advise startups who get approached by acquirers to treat it as a background process, and not to take things seriously until the very last stage. If acquisition discussions are just a side show, you can easily terminate them if anything goes wrong. Which, interestingly, proba…

They surrendered control of the time frame, chiefly by ceding exclusivity but also with the technical due diligence. It's reasonable for a buyer to seek assurances their interest isn't being leveraged to other buyers, but it's too much to expect the seller to close down talks or let the phone ring on new interest.

That leads to stuff like "we'll discuss at the next scheduled board meeting". I don't know practices for this space, but a CEO can convey a meeting on a conference call for something he wants. Once they know they can wait that long, they'll think about whether they really want this -- the excitement cools down, they see other options, they move on.

People are asking how buyers can sense they're in control. One chief thing is the seller's neglect of their own inconvenient but reasonable interests. If a seller is making unreciprocated compromises of their interests to make things easier for the buyer, that says a lot.

Re: A Classic Startup Horror Story

#64

Post by TDL »

archangel_one wrote: post #27
rokhayakebe wrote: post #12

Dude, seriously, this isn't helping anyone unless you give some clues allowing people to figure out who The Company is.

Actually, I think the general lessons can be learned regardless. Naming The Company would turn it into mudslinging which would change the tone of the article, and IMO probably not for the better.

Agreed. The general case is much better in this regard. The drama from knowing who the players were would distract from the events and any lessons learned.

Re: A Classic Startup Horror Story

#65

Post by jacques_chester »

S4M wrote: post #49
cturner wrote: post #35

Earlier quoted context omitted.

When good people sign a NDA it counts for something. When you're dealing with lying buggers though, it represents an option to sue. Insurance is similar.

Yeah, except when you are not in position to enforce the NDA which was the case of the OP.

Many lawyers will take cases on contingency.

ie, they'll work for a percentage of any payout.

Re: A Classic Startup Horror Story

#66

Post by tptacek »

Revisor wrote: post #61
larrys wrote: post #57

Earlier quoted context omitted.

"M&A guys can smell it when you really want a deal, and that makes them want it less." That smell thing is really important. Essentially anytime you are dealing with someone who does more of a particular transaction or negotiation than you do they will be able to sense and pickup things that you would never think of because of the quantity and quality of patterns they've experienced in the past. We find this happens…

Can you give us some obvious smells apart from "too eager to close"?

Unfortunately some of them can involve just being easy to work with. A classic bizdev trick: schedule meetings at inconvenient times or in inconvenient circumstances; if the other party accepts, they want a deal to happen.

Similar logic applies to contact negotiations. Which sucks, because being fully diligent is can also set the "hard to work with" bit and kill the deal too.

It's likely that the best way to handle this is the simplest: renice the M&A conversation down to 19 or 20, beneath everything else you're doing; be legitimately annoying to work with, conveying the impression that you don't need the deal because it's the truth.

Re: A Classic Startup Horror Story

#67

Post by nknight »

jacques_chester wrote: post #65
S4M wrote: post #49

Earlier quoted context omitted.

Yeah, except when you are not in position to enforce the NDA which was the case of the OP.

Many lawyers will take cases on contingency. ie, they'll work for a percentage of any payout.

Yes, but that doesn't always help.

If your opponent is rich, they can hire an army of lawyers, and you'll generally need a correspondingly huge law firm prepared to invest their own time and money in countering that. The kind of law firms we're talking about are both few in number, and generally fully-engaged by well-paying clients -- clients like your rich opponent. The incentive to take on a case like this is pretty limited.

Re: A Classic Startup Horror Story

#68

Post by j_baker »

saturdayplace wrote: post #29
pg wrote: post #25

This sort of scenario is unfortunately very common. The antidote is never to allow acquisition talks to be the main thing you're focusing on. We advise startups who get approached by acquirers to treat it as a background process, and not to take things seriously until the very last stage. If acquisition discussions are just a side show, you can easily terminate them if anything goes wrong. Which, interestingly, proba…

> M&A guys can smell it when you really want a deal, and that makes them want it less. This seems perverse, but I'm guessing that there's some kind of economic intuition these guys have gained from being around deals all the time? Something like, "Wants a deal == needs it == a bad investment." This just seems to confirm that the best way to get money thrown at you is to not have a need for it.

It's not that different from any other type of selling. If you ask someone out, they'll probably say no if you seem to want to go out with them a little too much. Or at a job interview, you'll probably be told no if they sense that you want the job a little too badly.

The reason being that people tend to wonder why it is that you want it so bad, and they tend to assume that's because you can't get anyone else to acquire/go out with/hire you.

Re: A Classic Startup Horror Story

#69

Post by larrys »

Revisor wrote: post #61
larrys wrote: post #57

Earlier quoted context omitted.

"M&A guys can smell it when you really want a deal, and that makes them want it less." That smell thing is really important. Essentially anytime you are dealing with someone who does more of a particular transaction or negotiation than you do they will be able to sense and pickup things that you would never think of because of the quantity and quality of patterns they've experienced in the past. We find this happens…

Can you give us some obvious smells apart from "too eager to close"?

As an aside to answering your question the toughest thing is dealing with someone overseas because you can't sense the nuance in their writing or (if verbal) their voice. The english many times is broken and that messes up all the patterns.

Here's an example that is playing out right now.

Name offered for $6000. No other buyer for this name. If it doesn't sell it will probably never sell for 10 years.

First offer from buyer:

"Thank you for that. I could do $1200, but that is not really in his ballpark. If he changes his mind, please let me know. You are welcome to take that offer to him."

What he did right: Made offer and made it seem like that's pretty much the range he will pay. "If he changes his mind let me know" as if he is going away. So a seller would think he can probably get $2500 out of this type of guy maybe for this name. (Nobody ever makes the first offer the best offer.)

What he did wrong: No time frame to transaction. No sense on the sellers part that he could loose the deal. No sense that other names are even being considered (even though that's normally bs and can backfire).

Reply from seller:

(A short sales spiel showing why others would want the name) ending in "he might do $4000 but I have to clear that...".

Reply from buyer:

"Please ask him about how low he will go. I will see if I can get there."

What he did wrong: He essentially didn't barf at the $4000 for the name. He gave no kickback. So seller knows he can get that amount most likely. And maybe more.

Seller:

"Ok I will find out" (or something to that effect).

Buyer writes back quickly again:

"I am feeling pretty good about that. I think we can do it or very close to that."

Somewhat good: "I think we can do it or very close to that". That essentially says he will pay the price but he gave himself a little wiggle room.

Bad: He replied to quickly to the email showing he was very eager. Time and tempo are important.

Then he writes back again a minute later to say he is ok with the escrow company and will write back soon. So he completely telegraphed his intentions. Even though he hasn't really agreed to purchase.

By the way this was a lawyer as a buyer. And this is the same stuff that happens with 6 figure domain sales as well.

So the deal right now is going to happen at $4000. The seller is fine with that price and doesn't want to loose the deal for fear he will get nothing.

In this case the buyer overpaid if he handled it correctly he could have had this name for $1500 about.

And as mentioned multiply by 10 and the same stuff happens.

Re: A Classic Startup Horror Story

#70

Post by larrys »

tptacek wrote: post #66
Revisor wrote: post #61

Earlier quoted context omitted.

Can you give us some obvious smells apart from "too eager to close"?

Unfortunately some of them can involve just being easy to work with. A classic bizdev trick: schedule meetings at inconvenient times or in inconvenient circumstances; if the other party accepts, they want a deal to happen. Similar logic applies to contact negotiations. Which sucks, because being fully diligent is can also set the "hard to work with" bit and kill the deal too. It's likely that the best way to handle t…

"A classic bizdev trick: schedule meetings at inconvenient times or in inconvenient circumstances; if the other party accepts, they want a deal to happen."

Very true. Of course if a party makes this mistake they can easily put the fear of god in the other party by changing their pattern of response.

If you tend to reply in a quick fashion and appear very eager and then all the sudden there is radio silence the other side will intuitively know something is wrong. (Ever have that happen with dating where the girl all the sudden doesn't respond as quickly and you know something is up..)

The mistake that most sellers make is assuming that someone's eagerness is locked in. That a party doesn't change their mind or doesn't have another circumstance come up that makes a sale unlikely at any price. (Similar to what the OP was saying.)

No deal is done until the fat lady sings.

The domain in the example I gave I recognized would have no other buyers essentially. So I advised to close the deal as quickly as possible even though a little money was left on the table. But many sellers simply won't take that advice they are gamblers.

Post reply on HN