3 ms·

Is it a common practice to provide that level of detail to a potential buyer who can just walk away with no penalty? How is this position not abused? Reputati

Is it a common practice to provide that level of detail to a potential buyer who can just walk away with no penalty? How is this position not abused? Reputation damage?

tedmiston 5y ago
Yes. See Silicon Valley, Season 2, Episode 2. https://m.youtube.com/watch?v=JlwwVuSUUfc https://m.youtube.com/watch?v=JlwwVuSUUfc https://www.quora.com/Silicon-Valley-Season-2-Episode-2-Runaway-Devaluation-Do-large-companies-and-VC-firms-really-brain-rape-early-stage-startups https://www.quora.com/Silicon-Valley-Season-2-Episode-2-Runa... https://en.m.wikipedia.org/wiki/Silicon_Valley_(season_2) https://en.m.wikipedia.org/wiki/Silicon_Valley_(season_2)
- gojomo 5y ago
  I don't recall those episodes, but I would say that in real life, yes, larger companies can 'kick the tires' for a long time, costing the target immense amounts of focus/time, then walk away. Older incumbent companies, especially, may have giant 'business development' teams who almost recreationally do deep x-rays of emerging threats/opportunities. All their staffing/trips/flirtatious-discussions/legally-drafted-non-binding-letters-of-intent may be a rounding error in their bottom line, a cheap research expense. They can go through all the motions of an acquisition, appearing serious to the hopeful founders, with a negligible interest in actually completing the deal. I mean sure, they'd bite if they saw a can't-lose bonanza - their talks are panning for gold in your stream, before buying or even renting your land. Even if 99/100 envisioned deals eventually fall-through, they're just happy to learn all the proprietary business internals. See also: ~pg's 'Don't Talk To Corp Dev': http://www.paulgraham.com/corpdev.html http://www.paulgraham.com/corpdev.html
  - tempnow987 5y ago
    Great write-up, and I see PG also had a separate post that overlaps with my other comment here: "When a sufficiently high-up decision maker decides he/she wants to buy your startup, he/she will attempt to meet with you constantly and put time pressure on you, so as to prevent you from shopping the deal and getting a better offer. The absence of this behavior indicates the other company is not serious about acquiring your business."
  - tedmiston 5y ago
    That Silicon Valley episode and PG's Don't Talk to Corp Dev essay have a very similar takeaway. Interesting that they both came out around the same time in 2015 as well. One counter I would make to PG's essay is: investors, whether accelerators, VCS, or otherwise, predominantly benefit from big exits... and so they have that effect of pushing towards polarized outcomes ($0 or big). But "small" exits can still be very meaningful for founders.

Is it a common practice to provide that level of detail to a potential buyer who can just walk away with no penalty? How is this position not abused? Reputation damage?

tedmiston 5y ago

Yes. See Silicon Valley, Season 2, Episode 2. https://m.youtube.com/watch?v=JlwwVuSUUfc https://m.youtube.com/watch?v=JlwwVuSUUfc https://www.quora.com/Silicon-Valley-Season-2-Episode-2-Runaway-Devaluation-Do-large-companies-and-VC-firms-really-brain-rape-early-stage-startups https://www.quora.com/Silicon-Valley-Season-2-Episode-2-Runa... https://en.m.wikipedia.org/wiki/Silicon_Valley_(season_2) https://en.m.wikipedia.org/wiki/Silicon_Valley_(season_2)

gojomo 5y ago
I don't recall those episodes, but I would say that in real life, yes, larger companies can 'kick the tires' for a long time, costing the target immense amounts of focus/time, then walk away. Older incumbent companies, especially, may have giant 'business development' teams who almost recreationally do deep x-rays of emerging threats/opportunities. All their staffing/trips/flirtatious-discussions/legally-drafted-non-binding-letters-of-intent may be a rounding error in their bottom line, a cheap research expense. They can go through all the motions of an acquisition, appearing serious to the hopeful founders, with a negligible interest in actually completing the deal. I mean sure, they'd bite if they saw a can't-lose bonanza - their talks are panning for gold in your stream, before buying or even renting your land. Even if 99/100 envisioned deals eventually fall-through, they're just happy to learn all the proprietary business internals. See also: ~pg's 'Don't Talk To Corp Dev': http://www.paulgraham.com/corpdev.html http://www.paulgraham.com/corpdev.html
- tempnow987 5y ago
  Great write-up, and I see PG also had a separate post that overlaps with my other comment here: "When a sufficiently high-up decision maker decides he/she wants to buy your startup, he/she will attempt to meet with you constantly and put time pressure on you, so as to prevent you from shopping the deal and getting a better offer. The absence of this behavior indicates the other company is not serious about acquiring your business."
- tedmiston 5y ago
  That Silicon Valley episode and PG's Don't Talk to Corp Dev essay have a very similar takeaway. Interesting that they both came out around the same time in 2015 as well. One counter I would make to PG's essay is: investors, whether accelerators, VCS, or otherwise, predominantly benefit from big exits... and so they have that effect of pushing towards polarized outcomes ($0 or big). But "small" exits can still be very meaningful for founders.