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Ouch. A sadly common outcome of talking to corp dev. http://paulgraham.com/corpdev.html http://paulgraham.com/corpdev.html Agreeing to no-fundraising and exclu

by tlb 9y ago

Ouch. A sadly common outcome of talking to corp dev. http://paulgraham.com/corpdev.html http://paulgraham.com/corpdev.html Agreeing to no-fundraising and exclusivity clauses during a long due diligence process really puts your head in their vise. And once it's there, people within the acquirer will start saying, Hey, we could built this ourselves! Let's run the clock out and kill the competition.

twblalock 9y ago
Maybe. But I'd like to see the other side of the story, including why a public company wanted to purchase a startup making a smart lock that cost $699 that hadn't even hit the market yet. Maybe the potential acquirer decided it wasn't a competitive product, and decided to back out.
michaelt 9y ago
Seems strange that anyone would agree not to raise more funds or negotiate with other parties for their entire remaining runway. I mean, it puts you in the situation that you either sell to that company or you go out of business. They could offer you a fraction of the amounts they were talking about before you signed, and you'd have no alternative. Hell, even asking you to agree to such unbalanced terms seems like a sign they're planning to pull a fast one on you and they don't intend to negotiate in good faith. What kind of chump would agree to shoot themselves in the foot like that, unless they'd exhausted every alternative?
- joshuahutt 9y ago
  A greedy one.
- siddharthdeswal 9y ago
  Not defending him, but seems like a chump who had exhausted every alternative, but won't talk about it honestly, and prefers to go with "this wasn't a failure, you were amazing, I was amazing, product was batshit amazing, onwards to our next adventure!"
  - xadhominemx 9y ago
    Yes, for sure.
valuearb 9y ago
They were trying to sell a $700 custom designed lock based on its “user experience”. How much sense do you think this management team had?
- coldtea 9y ago
  >They were trying to sell a $700 custom designed lock based on its “user experience”. And they were succeeding. That was not their problem. And the average penny pinching Joe wasn't their target at first anyway. You'd be surprised what people buy, and how many buy it, for way more than $700. Even smartphone covers.
  - brucephillips 9y ago
    > And they were succeeding. Were they? Source? How big was their beta? What was their revenue? Beta users will bias toward early adopters, and often not represent the mainstream market necessary to make a company profitable. EDIT: I just read that they had ZERO revenue. So they certainly weren't succeeding.
    - solarkraft 9y ago
      They took preorders.
      - brucephillips 9y ago
        Do you know how many they sold? If they received money from pre-orders, why does he say they were four weeks away from revenue?
      - valuearb 9y ago
        Their preorders weren’t near enough to keep the doors open. Management has sone wealthy people, and it wasn’t enough to even get them to toss in enough money to get to that “imminent” launch. The CEOs excuses make near zero sense.
        9y ago
bringtheaction 9y ago
Well actually > If you're doing really badly, meaning the company is about to die, you may as well talk to them, because you have nothing to lose.
tim333 9y ago
Yeah I was reminded of Graham's essays but more http://paulgraham.com/fr.html http://paulgraham.com/fr.html > Treat investors as saying no till they unequivocally say yes, in the form of a definite offer with no contingencies. >I mentioned earlier that investors prefer to wait if they can. What's particularly dangerous for founders is the way they wait. Essentially, they lead you on. They seem like they're about to invest right up till the moment they say no. > When you talk to investors your m.o. should be breadth-first search, weighted by expected value. You should always talk to investors in parallel rather than serially. If Otto had done the many investors in parallel thing they might still be launching.

by tlb 9y ago

twblalock 9y ago

Maybe. But I'd like to see the other side of the story, including why a public company wanted to purchase a startup making a smart lock that cost $699 that hadn't even hit the market yet. Maybe the potential acquirer decided it wasn't a competitive product, and decided to back out.

michaelt 9y ago

Seems strange that anyone would agree not to raise more funds or negotiate with other parties for their entire remaining runway. I mean, it puts you in the situation that you either sell to that company or you go out of business. They could offer you a fraction of the amounts they were talking about before you signed, and you'd have no alternative. Hell, even asking you to agree to such unbalanced terms seems like a sign they're planning to pull a fast one on you and they don't intend to negotiate in good faith. What kind of chump would agree to shoot themselves in the foot like that, unless they'd exhausted every alternative?

joshuahutt 9y ago
A greedy one.
siddharthdeswal 9y ago
Not defending him, but seems like a chump who had exhausted every alternative, but won't talk about it honestly, and prefers to go with "this wasn't a failure, you were amazing, I was amazing, product was batshit amazing, onwards to our next adventure!"
- xadhominemx 9y ago
  Yes, for sure.

valuearb 9y ago

They were trying to sell a $700 custom designed lock based on its “user experience”. How much sense do you think this management team had?

coldtea 9y ago
>They were trying to sell a $700 custom designed lock based on its “user experience”. And they were succeeding. That was not their problem. And the average penny pinching Joe wasn't their target at first anyway. You'd be surprised what people buy, and how many buy it, for way more than $700. Even smartphone covers.
- brucephillips 9y ago
  > And they were succeeding. Were they? Source? How big was their beta? What was their revenue? Beta users will bias toward early adopters, and often not represent the mainstream market necessary to make a company profitable. EDIT: I just read that they had ZERO revenue. So they certainly weren't succeeding.
  - solarkraft 9y ago
    They took preorders.
    - brucephillips 9y ago
      Do you know how many they sold? If they received money from pre-orders, why does he say they were four weeks away from revenue?
    - valuearb 9y ago
      Their preorders weren’t near enough to keep the doors open. Management has sone wealthy people, and it wasn’t enough to even get them to toss in enough money to get to that “imminent” launch. The CEOs excuses make near zero sense.
      - 9y ago

bringtheaction 9y ago

Well actually > If you're doing really badly, meaning the company is about to die, you may as well talk to them, because you have nothing to lose.

tim333 9y ago

Yeah I was reminded of Graham's essays but more http://paulgraham.com/fr.html http://paulgraham.com/fr.html > Treat investors as saying no till they unequivocally say yes, in the form of a definite offer with no contingencies. >I mentioned earlier that investors prefer to wait if they can. What's particularly dangerous for founders is the way they wait. Essentially, they lead you on. They seem like they're about to invest right up till the moment they say no. > When you talk to investors your m.o. should be breadth-first search, weighted by expected value. You should always talk to investors in parallel rather than serially. If Otto had done the many investors in parallel thing they might still be launching.