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Here's some advice: The word "fair" stopped making sense in kindergarten. You don't get what's fair or what you deserve, you get what you negotiate. Now, hav

Here's some advice: The word "fair" stopped making sense in kindergarten. You don't get what's fair or what you deserve, you get what you negotiate. Now, having said that, you have to determine your goals and how to synthesize an ideal set of negotiating levels. Typically these levels are: 1. Possible Best Case 2. Likely negotiated agreement 3. Worse you'll take (walk away below) 4. BATNA - Your "Best Alternative to Negotiated Agreement." There are several methods used for calculating acqui-hire or acquisition: 1. Comparables on metrics such as revenue, profit, market share, impressions, downloads, average daily/monthly users 2. The company's (buyer)'s budget - "Well all we have is this" 3. The sellers demands (I won't sell for less than this) If I were looking at buying you, I'd consider it fair if I Can "buy" you for less than you'll make me, including opportunity costs. You're going to have give out more (anonymous) details before most people can help you too much: 1. Are you a 1-man shop? Including contractors? 2. How many people at acquirer? 3. How long have to both been in business? 4. How much revenue do you both have? How much profit? 5. What guarantees do you want if you're hired? What agreements are you willing to make (i.e. non-compete) If you're a one man shop with an app that's generated $30k this year, I'd buy you for $60k and pay you $140k with a non-compete for 2 years. I don't know if you thin that's fair, but it would be to me. Remember, a negotiation is a game in which both people agree things are fair, or both people agree that they get screwed equally. After the negotiation, if you have to work with the person, then try to focus on the former case.

vonklaus 11y ago
This seems like a good answer. I would add that you should be somewhat tactful until you have a suggestion of terms. The "give us a number" doesn't seem serious and it would be wise not to release financials, code and strategy until things become serious and it is evident they are negotiating in good faith. edit: I had a total brain malfunction as pointed out below. Do not be candid, use skepticism and protect your private information.
- carbocation 11y ago
  > somewhat candid until you have a suggestion of term "Candid" here might be a typo or might not be the word you're looking for. "Cautious" seems to be more fitting for what you're saying in the rest of the sentence.
etsll 11y ago
Thank you for that feedback. "Walk Away Before" and BATNA seem easiest to figure out, so maybe I'll start by determining that. My company is just me. They have 4 founders and will be hiring 5-10 people soon. Both companies had successful crowdfunding campaigns but neither is shipping a product yet.
- Udo 11y ago
  > Both companies had successful crowdfunding campaigns but neither is shipping a product yet. That sounds like you might have to refund some or all of your contributors. After the acquisition, your project will cease to exist. It's unlikely that both crowdfunding promises were exactly the same. Even if the intention is to fold your product into theirs, the realistic outcome is that your employers will ship the product as they intended, leaving your supporters with little to nothing. You need to clean this up now, rather than later.
  - etsll 11y ago
    We've discussed that at length and are committed to meeting our crowdfunding obligations to the full satisfaction of our backers.
- perlgeek 11y ago
  > but neither is shipping a product yet. I wouldn't call it "bootstrapped", then. For me, a company is bootstrapped if it makes enough money from its products to sustain itself and its founders/employees.
  - greglindahl 11y ago
    I've never run into anyone who's defined it the way you do; everyone I've heard define it does it in terms of not yet having taken a cash investment from a non-founder. "We've bootstrapped the company so far, but we don't think we will ship a MVP without taking at least a seed round" wouldn't draw any protests of misuse, in my experience. You are correct that most bootstrapped companies that have launched end up supporting themselves; that's survivor bias in action.
cpncrunch 11y ago
That seems a bit low, for a well-funded company. $1 million per employee is more like the going rate. See for example: http://www.quora.com/What-is-a-typical-deal-structure-of-an-acquihire http://www.quora.com/What-is-a-typical-deal-structure-of-an-...
- charlesdm 11y ago
  These numbers are totally irrelevant to this situation. We're talking two small companies here. If there's no leverage, the chances of negotiating a better deal than described above are relatively slim.
- ojbyrne 11y ago
  He says it's "bootstrapped."
  - cpncrunch 11y ago
    That won't make the difference between $60k and $1M. The main difference is that investors will be reluctant to lose money, so they'll push to at least get their principal back.
- AznHisoka 11y ago
  You assume those deals scale down. Just because a company will pay $50 million for 50 engineers doesn't mean it's going to pay $1 million for 1 engineer. 50 engineers is magnitudes more valuable than 1 engineer.
  - cpncrunch 11y ago
    Generally most startups have one or two "star" employees, who actually created the startup. I would say that the single engineer in a one-man startup is worth a lot more than the average engineer in a 50-engineer startup. Instagram had 13 employees and was acquired for $1BN. Ptch had 3 employees and was purchased for $6.5M. In those cases the technology and product took up most of that value. If the acquirer is actually going to use your technology, that will obviously be a large factor in determining the sale price.
ChuckMcM 11y ago
I really like this comment. There is no "right" answer, and there is no "fair", negotiate to terms you can live with.
saganus 11y ago
The word "fair" stopped making sense in kindergarten. You don't get what's fair or what you deserve, you get what you negotiate. This is very interesting. I hope you don't mind me quoting you.
sidarok 11y ago
"a negotiation is a game in which both people agree things are fair, or both people agree that they get screwed equally" Well said.

vonklaus 11y ago

This seems like a good answer. I would add that you should be somewhat tactful until you have a suggestion of terms. The "give us a number" doesn't seem serious and it would be wise not to release financials, code and strategy until things become serious and it is evident they are negotiating in good faith. edit: I had a total brain malfunction as pointed out below. Do not be candid, use skepticism and protect your private information.

carbocation 11y ago
> somewhat candid until you have a suggestion of term "Candid" here might be a typo or might not be the word you're looking for. "Cautious" seems to be more fitting for what you're saying in the rest of the sentence.

etsll 11y ago

Thank you for that feedback. "Walk Away Before" and BATNA seem easiest to figure out, so maybe I'll start by determining that. My company is just me. They have 4 founders and will be hiring 5-10 people soon. Both companies had successful crowdfunding campaigns but neither is shipping a product yet.

Udo 11y ago
> Both companies had successful crowdfunding campaigns but neither is shipping a product yet. That sounds like you might have to refund some or all of your contributors. After the acquisition, your project will cease to exist. It's unlikely that both crowdfunding promises were exactly the same. Even if the intention is to fold your product into theirs, the realistic outcome is that your employers will ship the product as they intended, leaving your supporters with little to nothing. You need to clean this up now, rather than later.
- etsll 11y ago
  We've discussed that at length and are committed to meeting our crowdfunding obligations to the full satisfaction of our backers.
perlgeek 11y ago
> but neither is shipping a product yet. I wouldn't call it "bootstrapped", then. For me, a company is bootstrapped if it makes enough money from its products to sustain itself and its founders/employees.
- greglindahl 11y ago
  I've never run into anyone who's defined it the way you do; everyone I've heard define it does it in terms of not yet having taken a cash investment from a non-founder. "We've bootstrapped the company so far, but we don't think we will ship a MVP without taking at least a seed round" wouldn't draw any protests of misuse, in my experience. You are correct that most bootstrapped companies that have launched end up supporting themselves; that's survivor bias in action.

cpncrunch 11y ago

That seems a bit low, for a well-funded company. $1 million per employee is more like the going rate. See for example: http://www.quora.com/What-is-a-typical-deal-structure-of-an-acquihire http://www.quora.com/What-is-a-typical-deal-structure-of-an-...

charlesdm 11y ago
These numbers are totally irrelevant to this situation. We're talking two small companies here. If there's no leverage, the chances of negotiating a better deal than described above are relatively slim.
ojbyrne 11y ago
He says it's "bootstrapped."
- cpncrunch 11y ago
  That won't make the difference between $60k and $1M. The main difference is that investors will be reluctant to lose money, so they'll push to at least get their principal back.
AznHisoka 11y ago
You assume those deals scale down. Just because a company will pay $50 million for 50 engineers doesn't mean it's going to pay $1 million for 1 engineer. 50 engineers is magnitudes more valuable than 1 engineer.
- cpncrunch 11y ago
  Generally most startups have one or two "star" employees, who actually created the startup. I would say that the single engineer in a one-man startup is worth a lot more than the average engineer in a 50-engineer startup. Instagram had 13 employees and was acquired for $1BN. Ptch had 3 employees and was purchased for $6.5M. In those cases the technology and product took up most of that value. If the acquirer is actually going to use your technology, that will obviously be a large factor in determining the sale price.

ChuckMcM 11y ago

I really like this comment. There is no "right" answer, and there is no "fair", negotiate to terms you can live with.

saganus 11y ago

The word "fair" stopped making sense in kindergarten. You don't get what's fair or what you deserve, you get what you negotiate. This is very interesting. I hope you don't mind me quoting you.

sidarok 11y ago

"a negotiation is a game in which both people agree things are fair, or both people agree that they get screwed equally" Well said.