13 ms·

Don't Talk to Corp Dev (2015)

199 points by tracyhenry 5y ago

Huiokko 5y ago
Never heard of this and I'm not sure how common this is at all. Anyone else has experience with this?
- capableweb 5y ago
  You mean you haven't heard of "corporate development" in general or are you referring to something specific here?
SquibblesRedux 5y ago
I was courted by corp dev from a big public company. It was quite an experience -- events, dinners, wine, private meetings, large groups of the corp folks hanging on every word. They got pretty pushy, demanding to know trade secrets to keep going with a negotiation. At the end of it I pulled the plug because it was clear they were not working in our interest. (The word "pillage" comes to mind.) The experience was nice to have, but as the essay claims, it ultimately was a poor use of time.
- dalbasal 5y ago
  Time is cheap, relatively to focus, IMO. I think it takes a pretty seasoned businessman to pursue or negotiate (even half-seriously) an acquisition... and paying the "price" in time only.
- deleted 5y ago
  [deleted]
- hpcjoe 5y ago
  Yup. Had a similar experience with a BigCo and an investment. Part of the terms they were insisting on was an irrevocable global license to use our tech, name, trademarks, etc. for them and their partners. Our lawyers said they were trying to buy us on the cheap.
jchonphoenix 5y ago
This is out of date. At this point, many larger corp dev teams act like a recruiting team for acquisitions. They find leads and pass them to VPs
- jboydyhacker 5y ago
  No the advice is still spot on- acquihires are considered the firesafe scenario he is referring to.
lnanek2 5y ago
He actually didn't even cover one of the worst parts about the whole process - fake buyers who just want to steal your tech. I was working at a startup with a ground breaking product no one had released before, we had shipped hundreds of prototypes and gotten good reviews and had plenty of orders, but board redesigns and setting up a factory assembly line for the production models was eating into our cash and runway. A big company in an adjacent space made it known they were willing to buy us. We set up a data room, gave them tours of the office and technology, intros to all the staff, and they liked everything they saw. Offer never came through. A year later they announced they would be developing a knock off. Entire process just seemed like a way to get internal development info for their own clone they were starting development on. Amusingly, I've seen this process go the other direction in the finance world. Sometimes an employee will go out and interview with another fintech company, pretend they are willing to jump ship, and pick up as much information on how their competitor works as they can at the fake job interview. Employee then happily continues at the fintech startup with the extra knowledge.
- yjftsjthsd-h 5y ago
  Wouldn't acquisition talks be covered in NDAs to prevent precisely this?
  - ufmace 5y ago
    Possibly, but even if it's airtight, good luck with actually filing a lawsuit about it, getting it through the courts, getting a decision in your favor, and actually enforcing it against a corp with a much bigger legal budget than you before they eat you for breakfast in the market.
  - splistud 5y ago
    Sure. Creates a lot of nice evidence for you to present in the lawsuit over the next decade (if you can afford it).
  - bumbada 5y ago
    Who cares about NDAs when the company that breaks the law is thousands of times bigger than your company. They have a football team of very good lawyers working full time in order to delay things for years. You can be right and go broke just dealing in Courts and distracting your company from your technical work.
idbehold 5y ago
Is there a reason he doesn't have HTTPS on his site? Firefox throws up a giant warning when I try to visit.
- mistrial9 5y ago
  side note - I have some misc content that is http today in 2021 - I feel that the original HTML spec is better than modern web in some ways, therefore I like sticking to http here and there, when I chose, based on first principles
  - yjftsjthsd-h 5y ago
    Old HTML might be fine, but sending it over an insecure connection isn't.
    - rsj_hn 5y ago
      These words "secure" and "insecure" when used as synonyms for "encrypted" and "plaintext" obscure more than they illuminate and have done a lot of damage to the world of software security. They stop thought. You would not believe how many times I've talked to a company with some complex webapp and asked for their security policy and they respond with some statement about using TLS. It's absurd. Then even in books or standards, you are starting to see chapters called "security/cryptography". As if encrypting something was a type of security pixie dust. I am not trying to relitigate the battle of SSL's naming scheme, that battle was lost, and now people associate "security" with encryption. Who knows, maybe in the future they will associate "security" with bitcoin. But it's certainly not true that every plaintext connection is an insecure connection in the sense of actual security. Not everything needs to be or should be encrypted, and many things obtain no benefit whatsoever from being encrypted.
      - rgj 5y ago
        In TLS context, “secure” and “insecure” don’t just mean (un)encrypted, but also whether the connection is authenticated, i.e. whether you can be fairly sure you’re looking at the “real” website. This is a far more important property of a site using https. Especially in a world full of disinformation, authenticity and integrity of information are often a much greater good than confidentiality.
gumby 5y ago
This is good advice (though it only needed to be a couple of paragraphs long)
dalbasal 5y ago
This is from 2015? Wow. My memory had it much earlier than that. Feels like the world has changed a lot since then. I wonder if pg would revise the advice today, given how big M&A has become. I suspect it's all still relevant, except that actual deals are more common and prices are higher. That might change the balance, but the general description of what you're dealing with is still valid. Companies constantly flirting with acquisition though... I feel like this sort of thing is way more prevalent now.
davesque 5y ago
I think I've really gotten into the habit of disagreeing with Paul Graham's blogs lately but this one felt different. Felt like a lot of practical, common sense advice that is just barely beyond the horizon that most people consider. Of course, it won't apply in every situation but it felt hard to disagree with the overall sentiment. Note: I say I've been disagreeing with him lately and, of course, this blog wasn't written "lately." So maybe that says something.
- scubbo 5y ago
  This was _precisely_ my reaction. "Life Is Short"[0] remains a great piece that I return to time-and-again, but most of his other stuff that I've read recently seems to miss the mark - unlike this one. [0] http://www.paulgraham.com/vb.html http://www.paulgraham.com/vb.html
  - markus_zhang 5y ago
    This is a good one. I can immediately identify many "bullshits" in work and life. But I then realize that the key is that I need to have something to be passionate in so that those time saved from bullshits can be used on them.
- kordlessagain 5y ago
  I’ll disagree then because Corp Dev, like most tags, can mean something else like a group at a corporation responsible for strategic decisions to grow and restructure its business, establish strategic partnerships, and/or achieve organizational excellence.
  - diego 5y ago
    No, he's right on this one. Corporate Development means "the group in charge of acquiring companies." I have never seen a Corp Dev team that did anything else (and I have dealt with quite a few including my company's acquisition).
  - jedberg 5y ago
    The only reason Corp Dev is establishing a partnership is because they want to buy you but they aren't sure yet, so it's like a trial. It's also a good way to convince you to sell to them while also locking out competitors. If you have a partnership with Google, it makes a lot harder for Amazon to buy you because first they have to unwind the partnership.
fukmbas 5y ago
SaaS is trash
sabj 5y ago
Points not covered in this piece, but worth noting: (1) If a counterparty is interested in you, it can help accelerate valuable partnerships you care about (2) You may want someone to invest in you, not to buy you; or you may want them to invest in you in the future Now, for CorpDev, a conversation about investment is always a sliding scale... n% (invest) <--> 100% (buy you). But whether it's from the corporate balance sheet or as a referral to the corporate VC arm, there can be value there, and value in the relationship building, depending on circumstances. As with so much, the risk is not knowing what you want and getting carried along by the process -- lettings things "happen" to you. If you have a conversation with corpdev, you're trading some information and receiving some information. Is that ride worth the price of admission? You have to decide based on the circumstances. This piece has an edge that helps to provoke and draw attention to the themes (don't let others shape the narrative of your business engagement) and that's fine. There are places and indicators that a CorpDev conversation is 200% M&A, and there are times when it has more BizDev dimensions. Many companies want to develop partnerships first to determine if a potential acquisition is accretive. And, those partnerships can actually be valuable to small companies, even if there have tricky strings that can trip you up. ¯\_(ツ)_/¯
hemloc_io 5y ago
Ha this reminds me of a video of Justin Kan talking about selling Twitch to Amazon.[0] Most of the tactics in this blogpost by Paul G. show up in that negotiation, include the 11th hour 20% off move. [0]https://www.youtube.com/watch?v=RwUA5i-QolY https://www.youtube.com/watch?v=RwUA5i-QolY
- pbronez 5y ago
  I really enjoyed that video, thanks for sharing.
KryptoKlown 5y ago
That is definitely a good article but I especially like the part about haters
irrational 5y ago
>"What happened to Don't be Evil?" I asked. "I don't think corp dev got the memo," he replied. Why is it that every company that starts with good intentions eventually succumbs and becomes that which they claimed to not like?
- diamond_hands 5y ago
  For the same reason many companies software gets lower quality over time. They grow and hire people who don't care. Everyone who did care leaves to start their next company that cares.
- duxup 5y ago
  When your metric is dollars... what else could happen?
- arduinomancer 5y ago
  As my economics teacher repeated probably 20 times in one semester: the purpose of a corporation is to increase shareholder's wealth
  - pbhjpbhj 5y ago
    Your economics teacher was wrong. The purpose of a corporation is to fulfill their chosen corporate mission. Corporations are no more bound to choose financial accumulation _above all else_ than are any of the people that form those corporations. Cooperatives and public interest companies are corporations, for example.
  - avereveard 5y ago
    you should probably ask for a refund
- pbhjpbhj 5y ago
  If you're genuinely asking: when companies get controlled by greedy people then morals take a back seat compared to financial gain (for those people). The greedy people have the money, they can structure society using the power they have because of it, they can corrupt others (who are also greedy) to support them. The people whose ancestors weren't as greedy, or lacked the violent capabilities to satisfy their greed, lack the resources to oppose the greedy. The greedy people get rewarded with more power to continue being greedier; they pass on their moral outlook and power to those who are similarly greedy. The pattern seems to be that after a lifetime of wealth acquisition one buys a cloak of respectable benevolence by donating a fraction of that wealth to good causes (which you'll probably carefully choose to provide the best tax benefits and as a marketing tool to help the next generation of super-wealthy to get a good start). Any company prepared to be sold off, if profitable, will be acquired by greedy people. People who want a quiet unassuming life living in harmony with those around them don't acquire the wealth in the first place, they have the morals to run companies for good, they don't have the wealth to acquire them. Capitalism appeals to [immoral] greed, it's a natural successor to feudalism.
duxup 5y ago
>If they can, corp dev people like to turn the tables on you. They like to get you to the point where you're trying to convince them to buy instead of them trying to convince you to sell. I worked for an established company (not a startup) and had a run in with Wal-Mart. Wal-Mart managed to buy some stuff at an ultra low discount because ... someone thought maybe if we get in there we could sell tons to their IT team. Meanwhile I'm working with their IT guys. They hate the product. They tell me in no uncertain terms and in every unprofessional way you can imagine (that part was pretty shocking). Of course what they're really doing is just buying the minimum and pounding the hell out of support with complaints as they pump 20 gallons into 10-gallon hat of our product. What happens? We keep providing them free services, extra services. The folks at the top think they're at the tip of a big sale, big money despite myself and others telling them "These guys don't like our widget, they don't want it... and they're not capable of even making good use of it. All while giving it to them for free, why would they pay a dime more?" By the end I hear we've made like our 5th pitch to them that is barely profitable for us... just on the face value of the product and support. Somehow Wal-Mart convinced these guys to take a 'big sale' moment and turn it into a loss if you consider all the time put into working with them. And they were happy to do it. Finally we had a stroke of luck, we were acquired, and the new CEO had worked with Wal-Mart before as a customer and cut them lose. Finally all that effort and energy that went into this big deal that never happened (probably for 18+ months) could be put to use with better customers. It's amazing how some folks can over time convince other people to actually propose a bad deal... for themselves.
- vb6sp6 5y ago
  Sometimes it isn't about the "big sale" but having the big company on your list of customers. It can give your company a lot of credibility.
  - duxup 5y ago
    I don't doubt it for a start up... but I also wonder what value that is vs. 18 months of work and turn that into a deal that is really a loss, and the customer struggles to use the product ... and now you've got a big dominating customer who is going to continue to eat up time ... I wonder how many profitable customers could be had in that time.
rstephenson2 5y ago
I wonder how analogous this is to “don’t talk to VC associates” advice. Corp dev is interested in buying a company, any company, at a low price but even once corp dev is sold they’ll have to sell the deal to someone who matters. People confuse “this corp dev person is interested” with “this company is interested”. If you’re not actively looking to sell, _definitely_ don’t bother taking the meeting unless there’s a champion high up who is personally interested. Come to think of it, recruiters aren’t all that far off this either…
- gnicholas 5y ago
  Yep! The question I ask myself when deciding whether to take a meeting is: Does this person look good in his job if he does a deal with me, or can he look good in his job if he just meets with a bunch of people like me? VC associates and others who look good merely from having lots of meetings (deal flow) are much more likely to be wasting your time.
tester756 5y ago
>Don't Talk to Corp Dev it sounds kinda edgy, especially that "corp dev" bonus points that "dev" seems to refer more often to "developer" than "development"
- CamelCaseName 5y ago
  No, Corp Dev is definitely "Corporate Development". No one outside tech in this field would ever think of "Dev" as "Developer". It's not edgy at all. It's just the name for the job. This is how people refer to themselves as. E.g. "I work in corp dev".
  - tester756 5y ago
    >No one outside tech in this field would ever think of "Dev" as "Developer". Who's the majority of audience of PG's posts?
breck 5y ago
I think there are good perspectives in here that are accurate, and worth the read for the perspectives, but I don't spot any great advice. In other words, no pithy strategy that is testable. Difference between the 2 explained here: https://breckyunits.com/wisdom-a-tiny-language-for-great-advice.html https://breckyunits.com/wisdom-a-tiny-language-for-great-adv....
timoth3y 5y ago
I've worked with (but not in) CorpDev in two large enterprises, and I've had a startup acquired via CorpDev. Paul is overstating his case to the point of it becoming bad advice. Just like there are good VCs and bad VCs, there are good CorpDev teams and bad CorpDev teams. The mistake many founders make, however, is confusing the quality of the brand with the quality of the CorpDev team. The best approach is not a simplistic "never meet with CorpDev" but to ignore the brand power and first treat a CorpDev team the way you would an unknown VC. Do some research. Ask other founders about their dealings with the team. I've been on both sides of the CorpDev table. Just like VCs, there are plenty of people who will waste your time, but there are also people who are very generous with advice and introductions. The trick is to ignore the brand and learn about the people you will be dealing with. Edit: It's also good to remember that many large enterprises have multiple (sometimes competing) teams working on investments and acquisitions. Quality can vary widely even within the same company.
- sombremesa 5y ago
  > Do some research. Ask other founders about their dealings with the team. For a founder who doesn’t otherwise have interest in talking to corp dev, what is this if not a waste of time?! This 100% takes focus away from building your business.
mikelanza 5y ago
I've started and run five companies. I've had nothing but great experiences with Corp Dev and nothing but horrible experiences with VCs. Corp Dev wants to give you cash (usually!) for your company. VCs want to put you into their portfolio of companies, and they know ahead of time that they will destroy nine out of ten of their portfolio companies in order to coddle the tenth to Google-dom.
ChuckMcM 5y ago
The only response you should make to these sorts of things are "Give me a number, if it is close we can go to the next step." That is it. If they give you a number, then you say "Put it in a MOU where you will pay us 10% of that number if these discussions break off for ANY reason." Only after you have a number you would actually sell the company for, and you know that if they are wasting your time you will still get enough cash to cover the extended runway you will need to keep going after they leave, then it is possible they have enough skin in the game to be aligned more with your interests.
- mysterypie 5y ago
  > "Give me a number, if it is close we can go to the next step." If they reply that they need to know your revenue, expenses, number of sales, etc., before they can even guess at a number, then what? Do you give them your financial info? Or do you stick to your guns and ask them to come up with some number by themselves before you engage with them at all?
  - avereveard 5y ago
    If corpdev is interested in a startup acquisition they're looking to complement their offering to gain an advantage against their own competitors, a startup little sales figures are irrelevant to them, they're after the product, the talent or the user headspace and have a pretty good idea of what your company is worth to them. Anchoring negotiations to your business value and not the synergic value of your product in their offering is a mistake, usually. So no they don't really need your economics. Also, if they came to acquire a company without knowing the cpany worth or without it being part of a bigger strategy, chances are they're the bad kind of corpdev
  - ChuckMcM 5y ago
    I don't give them any of that. They ALREADY know what they think it would cost them to get into your space. They figured that out long before they called you and talked to you. That they called you means one of two things; Either the number they came up with was large and so they are looking to see if they can get a discount by buying something, or there are some employees in your company they want for their effort. This litmus test will tell you which it is. If their number is reasonably high, they know it will be hard to get into your space. If the number is low, they just want to poach employees. There is zero value in talking to them without a number you like on the table. You must defensively reduce the information asymmetry in any way possible.
ToJans 5y ago
We are currently talking with a few potential buyers for our SaaS, and had talks in the past as well... Here's my lessons learned: One didn't proceed at the very last step, without any explanation or feedback, so I have become very careful when engaging into these kinds of conversations. All of our serious negotiations are small and medium sized organizations, both customers and competitors where we can extend their offering or have an important tool that generates a lot of their leads, so we usually don't reply to exotic candidates. We had a few chats with large organisations, but this was mostly a bullying kind of relation, so we did not proceed... I think this is a bit like a poker game: to maximize your odds of winning you need to play in your own league... The advantage is that, in this "little league”, discussions tend to take anywhere from 3 to 5 meetings and some emails, nothing more; that's the advantage of talking with the company owners directly and not with a big-corp M & A cell... IME you can be blunt and open, and I strongly suggest to avoid a technical due diligence until the latest phase. No need to exaggerate numbers, just be open and explain your valuation model; this might be anything, but it needs to buy them good ROI, time, a competitive advantage or a decrease in risk. IME it works the best if they have the capacity to scale up your product, so it's a win-win. I haven't considered a 10% deposit, but I think this might be a bit too aggressive for European standards in the early talks. However, I think it is a good idea to go through with it once you have an LOI. It is a challenging process that's not over until the fat lady sings, so try to manage your expectations and be prepared to walk away if it is not a win-win. If you fail to see what their motivating factors are in the deal, just walk away...
- ToJans 5y ago
  Just a small addendum: these negotiations are mostly about buying a percentage of our shares as a commitment for a serious engagement, mostly intertwined with something acqui-hired-ish. To sell all of it, they'd have to "make an offer we can't refuse" ;)
yugene 5y ago
IMO business is a kind of a “war game”. Unlucky those ones who doesn’t realize it. Paul Graham reminds me of an officer training the soldiers :-)

199 points by tracyhenry 5y ago

Huiokko 5y ago

Never heard of this and I'm not sure how common this is at all. Anyone else has experience with this?

capableweb 5y ago
You mean you haven't heard of "corporate development" in general or are you referring to something specific here?

SquibblesRedux 5y ago

I was courted by corp dev from a big public company. It was quite an experience -- events, dinners, wine, private meetings, large groups of the corp folks hanging on every word. They got pretty pushy, demanding to know trade secrets to keep going with a negotiation. At the end of it I pulled the plug because it was clear they were not working in our interest. (The word "pillage" comes to mind.) The experience was nice to have, but as the essay claims, it ultimately was a poor use of time.

dalbasal 5y ago
Time is cheap, relatively to focus, IMO. I think it takes a pretty seasoned businessman to pursue or negotiate (even half-seriously) an acquisition... and paying the "price" in time only.
deleted 5y ago
[deleted]
hpcjoe 5y ago
Yup. Had a similar experience with a BigCo and an investment. Part of the terms they were insisting on was an irrevocable global license to use our tech, name, trademarks, etc. for them and their partners. Our lawyers said they were trying to buy us on the cheap.

jchonphoenix 5y ago

This is out of date. At this point, many larger corp dev teams act like a recruiting team for acquisitions. They find leads and pass them to VPs

jboydyhacker 5y ago
No the advice is still spot on- acquihires are considered the firesafe scenario he is referring to.

lnanek2 5y ago

He actually didn't even cover one of the worst parts about the whole process - fake buyers who just want to steal your tech. I was working at a startup with a ground breaking product no one had released before, we had shipped hundreds of prototypes and gotten good reviews and had plenty of orders, but board redesigns and setting up a factory assembly line for the production models was eating into our cash and runway. A big company in an adjacent space made it known they were willing to buy us. We set up a data room, gave them tours of the office and technology, intros to all the staff, and they liked everything they saw. Offer never came through. A year later they announced they would be developing a knock off. Entire process just seemed like a way to get internal development info for their own clone they were starting development on. Amusingly, I've seen this process go the other direction in the finance world. Sometimes an employee will go out and interview with another fintech company, pretend they are willing to jump ship, and pick up as much information on how their competitor works as they can at the fake job interview. Employee then happily continues at the fintech startup with the extra knowledge.

yjftsjthsd-h 5y ago
Wouldn't acquisition talks be covered in NDAs to prevent precisely this?
- ufmace 5y ago
  Possibly, but even if it's airtight, good luck with actually filing a lawsuit about it, getting it through the courts, getting a decision in your favor, and actually enforcing it against a corp with a much bigger legal budget than you before they eat you for breakfast in the market.
- splistud 5y ago
  Sure. Creates a lot of nice evidence for you to present in the lawsuit over the next decade (if you can afford it).
- bumbada 5y ago
  Who cares about NDAs when the company that breaks the law is thousands of times bigger than your company. They have a football team of very good lawyers working full time in order to delay things for years. You can be right and go broke just dealing in Courts and distracting your company from your technical work.

idbehold 5y ago

Is there a reason he doesn't have HTTPS on his site? Firefox throws up a giant warning when I try to visit.

mistrial9 5y ago
side note - I have some misc content that is http today in 2021 - I feel that the original HTML spec is better than modern web in some ways, therefore I like sticking to http here and there, when I chose, based on first principles
- yjftsjthsd-h 5y ago
  Old HTML might be fine, but sending it over an insecure connection isn't.
  - rsj_hn 5y ago
    These words "secure" and "insecure" when used as synonyms for "encrypted" and "plaintext" obscure more than they illuminate and have done a lot of damage to the world of software security. They stop thought. You would not believe how many times I've talked to a company with some complex webapp and asked for their security policy and they respond with some statement about using TLS. It's absurd. Then even in books or standards, you are starting to see chapters called "security/cryptography". As if encrypting something was a type of security pixie dust. I am not trying to relitigate the battle of SSL's naming scheme, that battle was lost, and now people associate "security" with encryption. Who knows, maybe in the future they will associate "security" with bitcoin. But it's certainly not true that every plaintext connection is an insecure connection in the sense of actual security. Not everything needs to be or should be encrypted, and many things obtain no benefit whatsoever from being encrypted.
    - rgj 5y ago
      In TLS context, “secure” and “insecure” don’t just mean (un)encrypted, but also whether the connection is authenticated, i.e. whether you can be fairly sure you’re looking at the “real” website. This is a far more important property of a site using https. Especially in a world full of disinformation, authenticity and integrity of information are often a much greater good than confidentiality.

gumby 5y ago

This is good advice (though it only needed to be a couple of paragraphs long)

dalbasal 5y ago

This is from 2015? Wow. My memory had it much earlier than that. Feels like the world has changed a lot since then. I wonder if pg would revise the advice today, given how big M&A has become. I suspect it's all still relevant, except that actual deals are more common and prices are higher. That might change the balance, but the general description of what you're dealing with is still valid. Companies constantly flirting with acquisition though... I feel like this sort of thing is way more prevalent now.

davesque 5y ago

I think I've really gotten into the habit of disagreeing with Paul Graham's blogs lately but this one felt different. Felt like a lot of practical, common sense advice that is just barely beyond the horizon that most people consider. Of course, it won't apply in every situation but it felt hard to disagree with the overall sentiment. Note: I say I've been disagreeing with him lately and, of course, this blog wasn't written "lately." So maybe that says something.

scubbo 5y ago
This was _precisely_ my reaction. "Life Is Short"[0] remains a great piece that I return to time-and-again, but most of his other stuff that I've read recently seems to miss the mark - unlike this one. [0] http://www.paulgraham.com/vb.html http://www.paulgraham.com/vb.html
- markus_zhang 5y ago
  This is a good one. I can immediately identify many "bullshits" in work and life. But I then realize that the key is that I need to have something to be passionate in so that those time saved from bullshits can be used on them.
kordlessagain 5y ago
I’ll disagree then because Corp Dev, like most tags, can mean something else like a group at a corporation responsible for strategic decisions to grow and restructure its business, establish strategic partnerships, and/or achieve organizational excellence.
- diego 5y ago
  No, he's right on this one. Corporate Development means "the group in charge of acquiring companies." I have never seen a Corp Dev team that did anything else (and I have dealt with quite a few including my company's acquisition).
- jedberg 5y ago
  The only reason Corp Dev is establishing a partnership is because they want to buy you but they aren't sure yet, so it's like a trial. It's also a good way to convince you to sell to them while also locking out competitors. If you have a partnership with Google, it makes a lot harder for Amazon to buy you because first they have to unwind the partnership.

fukmbas 5y ago

SaaS is trash

sabj 5y ago

Points not covered in this piece, but worth noting: (1) If a counterparty is interested in you, it can help accelerate valuable partnerships you care about (2) You may want someone to invest in you, not to buy you; or you may want them to invest in you in the future Now, for CorpDev, a conversation about investment is always a sliding scale... n% (invest) <--> 100% (buy you). But whether it's from the corporate balance sheet or as a referral to the corporate VC arm, there can be value there, and value in the relationship building, depending on circumstances. As with so much, the risk is not knowing what you want and getting carried along by the process -- lettings things "happen" to you. If you have a conversation with corpdev, you're trading some information and receiving some information. Is that ride worth the price of admission? You have to decide based on the circumstances. This piece has an edge that helps to provoke and draw attention to the themes (don't let others shape the narrative of your business engagement) and that's fine. There are places and indicators that a CorpDev conversation is 200% M&A, and there are times when it has more BizDev dimensions. Many companies want to develop partnerships first to determine if a potential acquisition is accretive. And, those partnerships can actually be valuable to small companies, even if there have tricky strings that can trip you up. ¯\_(ツ)_/¯

hemloc_io 5y ago

Ha this reminds me of a video of Justin Kan talking about selling Twitch to Amazon.[0] Most of the tactics in this blogpost by Paul G. show up in that negotiation, include the 11th hour 20% off move. [0]https://www.youtube.com/watch?v=RwUA5i-QolY https://www.youtube.com/watch?v=RwUA5i-QolY

pbronez 5y ago
I really enjoyed that video, thanks for sharing.

KryptoKlown 5y ago

That is definitely a good article but I especially like the part about haters

irrational 5y ago

>"What happened to Don't be Evil?" I asked. "I don't think corp dev got the memo," he replied. Why is it that every company that starts with good intentions eventually succumbs and becomes that which they claimed to not like?

diamond_hands 5y ago
For the same reason many companies software gets lower quality over time. They grow and hire people who don't care. Everyone who did care leaves to start their next company that cares.
duxup 5y ago
When your metric is dollars... what else could happen?
arduinomancer 5y ago
As my economics teacher repeated probably 20 times in one semester: the purpose of a corporation is to increase shareholder's wealth
- pbhjpbhj 5y ago
  Your economics teacher was wrong. The purpose of a corporation is to fulfill their chosen corporate mission. Corporations are no more bound to choose financial accumulation _above all else_ than are any of the people that form those corporations. Cooperatives and public interest companies are corporations, for example.
- avereveard 5y ago
  you should probably ask for a refund
pbhjpbhj 5y ago
If you're genuinely asking: when companies get controlled by greedy people then morals take a back seat compared to financial gain (for those people). The greedy people have the money, they can structure society using the power they have because of it, they can corrupt others (who are also greedy) to support them. The people whose ancestors weren't as greedy, or lacked the violent capabilities to satisfy their greed, lack the resources to oppose the greedy. The greedy people get rewarded with more power to continue being greedier; they pass on their moral outlook and power to those who are similarly greedy. The pattern seems to be that after a lifetime of wealth acquisition one buys a cloak of respectable benevolence by donating a fraction of that wealth to good causes (which you'll probably carefully choose to provide the best tax benefits and as a marketing tool to help the next generation of super-wealthy to get a good start). Any company prepared to be sold off, if profitable, will be acquired by greedy people. People who want a quiet unassuming life living in harmony with those around them don't acquire the wealth in the first place, they have the morals to run companies for good, they don't have the wealth to acquire them. Capitalism appeals to [immoral] greed, it's a natural successor to feudalism.

duxup 5y ago

>If they can, corp dev people like to turn the tables on you. They like to get you to the point where you're trying to convince them to buy instead of them trying to convince you to sell. I worked for an established company (not a startup) and had a run in with Wal-Mart. Wal-Mart managed to buy some stuff at an ultra low discount because ... someone thought maybe if we get in there we could sell tons to their IT team. Meanwhile I'm working with their IT guys. They hate the product. They tell me in no uncertain terms and in every unprofessional way you can imagine (that part was pretty shocking). Of course what they're really doing is just buying the minimum and pounding the hell out of support with complaints as they pump 20 gallons into 10-gallon hat of our product. What happens? We keep providing them free services, extra services. The folks at the top think they're at the tip of a big sale, big money despite myself and others telling them "These guys don't like our widget, they don't want it... and they're not capable of even making good use of it. All while giving it to them for free, why would they pay a dime more?" By the end I hear we've made like our 5th pitch to them that is barely profitable for us... just on the face value of the product and support. Somehow Wal-Mart convinced these guys to take a 'big sale' moment and turn it into a loss if you consider all the time put into working with them. And they were happy to do it. Finally we had a stroke of luck, we were acquired, and the new CEO had worked with Wal-Mart before as a customer and cut them lose. Finally all that effort and energy that went into this big deal that never happened (probably for 18+ months) could be put to use with better customers. It's amazing how some folks can over time convince other people to actually propose a bad deal... for themselves.

vb6sp6 5y ago
Sometimes it isn't about the "big sale" but having the big company on your list of customers. It can give your company a lot of credibility.
- duxup 5y ago
  I don't doubt it for a start up... but I also wonder what value that is vs. 18 months of work and turn that into a deal that is really a loss, and the customer struggles to use the product ... and now you've got a big dominating customer who is going to continue to eat up time ... I wonder how many profitable customers could be had in that time.

rstephenson2 5y ago

I wonder how analogous this is to “don’t talk to VC associates” advice. Corp dev is interested in buying a company, any company, at a low price but even once corp dev is sold they’ll have to sell the deal to someone who matters. People confuse “this corp dev person is interested” with “this company is interested”. If you’re not actively looking to sell, _definitely_ don’t bother taking the meeting unless there’s a champion high up who is personally interested. Come to think of it, recruiters aren’t all that far off this either…

gnicholas 5y ago
Yep! The question I ask myself when deciding whether to take a meeting is: Does this person look good in his job if he does a deal with me, or can he look good in his job if he just meets with a bunch of people like me? VC associates and others who look good merely from having lots of meetings (deal flow) are much more likely to be wasting your time.

tester756 5y ago

>Don't Talk to Corp Dev it sounds kinda edgy, especially that "corp dev" bonus points that "dev" seems to refer more often to "developer" than "development"

CamelCaseName 5y ago
No, Corp Dev is definitely "Corporate Development". No one outside tech in this field would ever think of "Dev" as "Developer". It's not edgy at all. It's just the name for the job. This is how people refer to themselves as. E.g. "I work in corp dev".
- tester756 5y ago
  >No one outside tech in this field would ever think of "Dev" as "Developer". Who's the majority of audience of PG's posts?

breck 5y ago

I think there are good perspectives in here that are accurate, and worth the read for the perspectives, but I don't spot any great advice. In other words, no pithy strategy that is testable. Difference between the 2 explained here: https://breckyunits.com/wisdom-a-tiny-language-for-great-advice.html https://breckyunits.com/wisdom-a-tiny-language-for-great-adv....

timoth3y 5y ago

I've worked with (but not in) CorpDev in two large enterprises, and I've had a startup acquired via CorpDev. Paul is overstating his case to the point of it becoming bad advice. Just like there are good VCs and bad VCs, there are good CorpDev teams and bad CorpDev teams. The mistake many founders make, however, is confusing the quality of the brand with the quality of the CorpDev team. The best approach is not a simplistic "never meet with CorpDev" but to ignore the brand power and first treat a CorpDev team the way you would an unknown VC. Do some research. Ask other founders about their dealings with the team. I've been on both sides of the CorpDev table. Just like VCs, there are plenty of people who will waste your time, but there are also people who are very generous with advice and introductions. The trick is to ignore the brand and learn about the people you will be dealing with. Edit: It's also good to remember that many large enterprises have multiple (sometimes competing) teams working on investments and acquisitions. Quality can vary widely even within the same company.

sombremesa 5y ago
> Do some research. Ask other founders about their dealings with the team. For a founder who doesn’t otherwise have interest in talking to corp dev, what is this if not a waste of time?! This 100% takes focus away from building your business.

mikelanza 5y ago

I've started and run five companies. I've had nothing but great experiences with Corp Dev and nothing but horrible experiences with VCs. Corp Dev wants to give you cash (usually!) for your company. VCs want to put you into their portfolio of companies, and they know ahead of time that they will destroy nine out of ten of their portfolio companies in order to coddle the tenth to Google-dom.

ChuckMcM 5y ago

The only response you should make to these sorts of things are "Give me a number, if it is close we can go to the next step." That is it. If they give you a number, then you say "Put it in a MOU where you will pay us 10% of that number if these discussions break off for ANY reason." Only after you have a number you would actually sell the company for, and you know that if they are wasting your time you will still get enough cash to cover the extended runway you will need to keep going after they leave, then it is possible they have enough skin in the game to be aligned more with your interests.

mysterypie 5y ago
> "Give me a number, if it is close we can go to the next step." If they reply that they need to know your revenue, expenses, number of sales, etc., before they can even guess at a number, then what? Do you give them your financial info? Or do you stick to your guns and ask them to come up with some number by themselves before you engage with them at all?
- avereveard 5y ago
  If corpdev is interested in a startup acquisition they're looking to complement their offering to gain an advantage against their own competitors, a startup little sales figures are irrelevant to them, they're after the product, the talent or the user headspace and have a pretty good idea of what your company is worth to them. Anchoring negotiations to your business value and not the synergic value of your product in their offering is a mistake, usually. So no they don't really need your economics. Also, if they came to acquire a company without knowing the cpany worth or without it being part of a bigger strategy, chances are they're the bad kind of corpdev
- ChuckMcM 5y ago
  I don't give them any of that. They ALREADY know what they think it would cost them to get into your space. They figured that out long before they called you and talked to you. That they called you means one of two things; Either the number they came up with was large and so they are looking to see if they can get a discount by buying something, or there are some employees in your company they want for their effort. This litmus test will tell you which it is. If their number is reasonably high, they know it will be hard to get into your space. If the number is low, they just want to poach employees. There is zero value in talking to them without a number you like on the table. You must defensively reduce the information asymmetry in any way possible.

ToJans 5y ago

We are currently talking with a few potential buyers for our SaaS, and had talks in the past as well... Here's my lessons learned: One didn't proceed at the very last step, without any explanation or feedback, so I have become very careful when engaging into these kinds of conversations. All of our serious negotiations are small and medium sized organizations, both customers and competitors where we can extend their offering or have an important tool that generates a lot of their leads, so we usually don't reply to exotic candidates. We had a few chats with large organisations, but this was mostly a bullying kind of relation, so we did not proceed... I think this is a bit like a poker game: to maximize your odds of winning you need to play in your own league... The advantage is that, in this "little league”, discussions tend to take anywhere from 3 to 5 meetings and some emails, nothing more; that's the advantage of talking with the company owners directly and not with a big-corp M & A cell... IME you can be blunt and open, and I strongly suggest to avoid a technical due diligence until the latest phase. No need to exaggerate numbers, just be open and explain your valuation model; this might be anything, but it needs to buy them good ROI, time, a competitive advantage or a decrease in risk. IME it works the best if they have the capacity to scale up your product, so it's a win-win. I haven't considered a 10% deposit, but I think this might be a bit too aggressive for European standards in the early talks. However, I think it is a good idea to go through with it once you have an LOI. It is a challenging process that's not over until the fat lady sings, so try to manage your expectations and be prepared to walk away if it is not a win-win. If you fail to see what their motivating factors are in the deal, just walk away...

ToJans 5y ago
Just a small addendum: these negotiations are mostly about buying a percentage of our shares as a commitment for a serious engagement, mostly intertwined with something acqui-hired-ish. To sell all of it, they'd have to "make an offer we can't refuse" ;)

yugene 5y ago

IMO business is a kind of a “war game”. Unlucky those ones who doesn’t realize it. Paul Graham reminds me of an officer training the soldiers :-)