Negotiations or market research? When Staples started, the founder proved the concept of an office-oriented superstore meticulously with a single store in the

Negotiations or market research? When Staples started, the founder proved the concept of an office-oriented superstore meticulously with a single store in the northeast. He picked a neighborhood, mapped every business around it, knew exactly how many accountants and offices were around his area through a survey, you get the idea. With the evidence, he talked to a number of investors. One investor gave him a pretty high valuation. In a meeting with another investor soon after, the investor asked a number of questions, hmm-ed the answers and escorted the founder out the door. In investor then promptly returned to his desk, opened up his rolodex and called the best retail exec on the list to start what is now Office Depot - in a different part of the country, to avoid a direct clash, because chains such as these expand geographically. While this is an extreme case, it is not uncommon. Many investors who like a business idea from one startup, look up and talk to every competitor in order to pick their best bet for the race to that market. If the research surfaces a better competitor, the firm doesn't invest or choses the competitor. If it didn't it is useful as "market research" to help the startup. Either way, the entrepreneurs share plenty of information to appear attractive, and probably feel good about the VC attention they are getting. The "ideas are worth nothing" mantra is out there for a reason - execution is everything at the end of the entrepreneurial race. The really sleazy negotiations happen when the competing firm starts applying "cloning" tactics to misinform or undercut its opponent. For example, having multiple uninterested parties call the seller with really low prices to create the impression the item for sale is worth little. Then the actual buyer comes in with a low offer that looks lush in comparison. Prepare for the worst and do your due diligence thoroughly if you are worried about this kind of stuff.