What To Do When a Megacorp Wants To Buy You? 412
Anonymous Entrepreneur writes "I run a small technology startup company; so small that our offices are still located in a room in my home. We are just some young friends, fresh from college, and we haven't started having regular sales, as 99% of our time is invested in development. A large corporation has just approached us, trying to persuade us to sell our company. The money is fair enough, and the employment conditions would seem excellent, since they would enable us to manage good-sized motivated teams, but we are very emotionally attached to our development and we place great importance to being independent. We founded our company because we didn't want to follow rules. We wanted to be the ones who make the rules instead. Money really doesn't mean much to us as long as we can do whatever we want while excelling at our passions. We feel that by accepting the offer, we couldn't achieve the maximum of our potential, and one of us joked that if we get in contact with the corporate environment and accept their money, we risk becoming lazy. Another member is more pragmatic, saying that accepting some money now is better than waiting for the development to go gold, even though all of us agree that if we finished our thing, we'd earn more than what the corporation has offered us. We would be very interested to know your thoughts and viewpoints, especially if you have ever faced a similar dilemma."
Could you be more vague? (Score:5, Insightful)
You have given us nothing to go on here as far as your business case, so I'll be brief:
Money really doesn't mean much to us as long as we can do whatever we want [...]
The first you will learn about money is that it lets you do exactly that. Make sure it's enough that in case things don't work out with Megacorp, you can get back to doing whatever it is you enjoy.
Michael Scott Paper (Score:2, Insightful)
Somebody doesn't watch The Office.....
Re:Michael Scott Paper (Score:5, Informative)
EMC purchased a small IT service management company and screwed the directors. And EMC are actually not to bad as a mega-corporation (except they are inefficient, and don't give very good service to their customers). Yes, the directors got a lot of money, but unfortunately for at least one of them, they had expected to stay on and help manage the company to greater heights. They all got shafted and soon left. If you want to continue to have a hand in managing your teams, then I would advise not selling the company. If you don't mind leaving and starting up another company, go for it. Just make very sure a competent lawyer reads the contracts so you can, in fact, start a similar company, or a company within the same field!
Oh, and I'm going to post this anonymously, though I suspect that I've said enough that I can be identified. But you have been warned!
Re:Could you be more vague? (Score:5, Insightful)
I could not have put it any better.
It just matters at this point to how much the offer is, and how realistic your changes are looking forward to see if you can make that much more.
It is hard to think of it, with your first company, but, while it is ok to be enthusiastic about your work maybe even a little emotional about it, you can NOT be emotional about the business itself. Work it to make money...to free yourself more and more to do what you want along the way. Many super successful people started a company, worked it up, sold and made a mint....and went on to do more and more interesting things.
Life's a journey....not a destination.
For the most part, a job is nothing more than a means to make money. Making that money allows YOU to do what YOU want to do...and if that is living a life of luxury, sleeping with lots of women, travel....or, even more work, you can't do it or anything they way YOU want to do, without sufficient funding.
Re:Could you be more vague? (Score:5, Insightful)
Yes and no. The problem here is that what you're trading for money is *time*, which is a non-renewable quantity. You only have a limited lifespan, and there are no extensions. Moreover, the value of time is a diminishing quantity once you're an adult.
If what you want to do is something simple like sleeping with girls a lot younger than yourself, enjoying luxuries as long as they can be bought etc., then trading in a chunk of your life in exchange is a good choice.
If it's something hard to get, like a skill or comprehensive education, then making money first is typically a disaster. There aren't many basketball stars who concentrated on becoming well off before they started practicing hoops. There aren't many top surgeons who learned medicine from scratch only in their 50s. If that's the kind of thing you want to do with your life, then you should ignore the money, as it's the best way to kill your dream.
The key is to figure out what you want early in life, before you waste a chunk of it collecting the means to achieve it.
Re: (Score:3, Interesting)
I also find it hard to believe your not really interested in the money, otherwise, why would you have started your own business in the first place?
Re:Could you be more vague? (Score:5, Insightful)
Re:Could you be more vague? (Score:5, Insightful)
Yikes, what a terrible answer.
A) The reason to retire is so they can go off and do what ever they want. Original poster is already doing that.
B) The reason to make money is to survive, then engage in whatever hobbies you want. #1 doesn't seem to be a problem, and original poster is already engaged in #2.
C) Leading (or even participating) in a startup already makes a great resume.
D) They're already developing their new idea/concept.
This kid doesn't need to join a corp to support his dream, since he's already living it.
Re:Could you be more vague? (Score:5, Insightful)
The key is to figure out what you want early in life, before you waste a chunk of it collecting the means to achieve it.
Sadly, this is significantly harder than it seems. Many people I know (myself included) have thought they knew what they wanted, started working toward it, and then found a decade later that their priorities have changed
To address OP, rather than wailing and gnashing teeth about how my life didn't turn out like I'd hoped: if you value your autonomy and will derive benefit from the opportunity to turn your microproject into something amazing (benefits like pride), then keep doing what you're doing.
If you want to work 40 hours a week, see your family and derive benefits from things like health insurance and paid vacations, sell out and start singing the megacorporate hymn.
If you're like me, you wouldn't feel right about seeing phrases like "Your Precious Baby: a division of MegaCorporate Ventures, Inc" in the marketplace, and the nice car just wouldn't make up for that pain. A lot of people I work with have no problem with that sort of thing, however, and have much nicer cars.
TLDR: Are you an artist or a businessman? Your answer lies within.
Re:Could you be more vague? (Score:4, Insightful)
the VC two step (Score:4, Insightful)
At some point you need a sales conduit if it's like most products. Developing that will take more people and cash.
THe standard VC process is to give you almost but not quite enough cash to bring the device to fruition but not enough to market it and keep your salaries going while you wait for it to catch fire. Then at that point it's round 2 for cash raising: and this is when you find you need a lot of cash and it's gonna cost you most of your company. Oh and there's one more thing...they'll want you to appoint a director of their choice to watch their money. THis is when you are screwed.
So unless this thing can market it self you gotta know what your path to raising capital is before you decide if you'd rather go corporate.
Re: (Score:3, Interesting)
I don't think of it that way. I love life, there are things I love to do....hang with friends, work out, travel, buy 'toys'....I like to play with computers, work with pgp and nym servers, etc.
Money allows me to live in a place and lifestyle I love...
If I won the pow
Make Decision Executive-style (Score:5, Insightful)
If you decide in favor, make certain the process moves as quickly as possible. Make sure you have put in place -- before taking each and every step -- provisions for backing out (at no cost to you). At the slightest sign of foot-dragging, stop the process and pull out. Decide from the beginning what your triggers will be for backing out. Then stick to the plan.
Being bought out is time-consuming. Think of it as a huge distraction to your business. A huge distraction could be the only thing Magacorp wants to "buy". If they're earnest, they'll understand and appreciate caution as well as haste. (Time is money.)
If you decide against, let Magacorp know immediately. Then get back to work, pronto. Looking back, second thoughts and re-negotiations are distractions, too. Let Megacorp know that your decision is final.
Good luck!
Re:Make Decision Executive-style (Score:5, Interesting)
If you decide against, let Magacorp know immediately. Then get back to work, pronto. Looking back, second thoughts and re-negotiations are distractions, too. Let Megacorp know that your decision is final.
And get working on market share fast. If megacorp is Google, they have a history of copying what they don't buy.
Re: (Score:3, Insightful)
If you decide against, let Magacorp know immediately. Then get back to work, pronto. Looking back, second thoughts and re-negotiations are distractions, too. Let Megacorp know that your decision is final.
And get working on market share fast. If megacorp is Microsoft [www.ecis.eu] , they have a history of taking what they don't buy.
There. Fixed that for you.
Other than those typos, you're spot on. The offer to buy is often more a threat for extortion. See Sendo [independent.co.uk] and a long list of corpses [groklaw.net]. Over the years, MS has taken what was a diverse and thriving industry and killed it through secret APIs and undocumented formats and protocols [slashdot.org], price dumping and giveaways [usdoj.gov], and predatory marketing [usdoj.gov].
Re:Make Decision Executive-style (Score:5, Insightful)
Re:Make Decision Executive-style (Score:5, Informative)
Re:Make Decision Executive-style (Score:5, Interesting)
Anyone who is able to get a venture to the point where people are queuing up to buy it (especially in this economic climate) should have no trouble coming up with an equally interesting idea to pursue.
I Am Not An MBA, but it seems intuitive that knowing when to get out of a business must be a large part of the strategy. To harvest a good offer while having had to put in a relatively small amount of work sounds like a winner to me.
Re:Make Decision Executive-style (Score:5, Insightful)
"If the OP hasn't even started getting sales, now might be an excellent time to accept the offer."
Interestingly, I've heard the exact opposite. Once you start generating sales, then your company becomes self-propelling, and its perceived value is much higher. Sales also put pressure on a potential buyer, because they know that the value of your company is increasing day-by-day. Therefore, you should also try to demonstrate that (even if you're not selling now), you will be selling soon. That will make you more valuable. Having said this, it of course all depends on specifics ;-)
Are You Looking For Success? (Score:5, Insightful)
* Marketing -- finding out if there is a need for a product, creating requirements for a new products based on emerging needs in a market
* Sales -- getting the word out, building relationships and closing deals
* Distribution -- fulfilling orders, positioning goods for easy access and generally getting products into the hands of your customers
* Support -- keeping the brand alive in your customer's mind, keeping the relationship positive and creating secondary opportunities to, say, up-sell or repeat-sell
* Accounting -- getting paid for all of the above, keeping current with accounts payable (esp. taxes) and paying employees and shareholders
* Product Development -- (the easy part) research, design, testing and documentation
* Production -- parts procurement, assembly, verification, bundling and shipping (on time and under budget)
* Human Resources, Legal and Staff -- people named "Peter"
Does you company have all of these in place? If it's missing even two or three components, you may be headed for real trouble. If Megacorp can fill in some of the blanks, consider being bough out a real win-win!
Re: (Score:3, Funny)
You're in luck! I'm available for hire right now!
Peter
Depends on the Megacorp and on you (Score:5, Interesting)
Have you worked in a big corporation before? And for a few years where you're well past the 'new kid on the block, not a threat to anyone, we don't know if he's a maverick or a loyalist but we're worried he might be a slacker yet we don't know' time? Big corporations are populated by people who don't know what to do with mavericks.
Starting your own company is a very big act of non-conformism. You might do it again, they will fear. So you're time there will only be short or you'll be locked into a 'certain level' and promotions (aka bigger money) will be difficult. You'll yearn for the simple days in a small office.
So TAKE THE MONEY, agree to work to transition the new team to the project over 12 to 18 months, set up and train a traditional manager-leader and then gracefully exit. You'll want to get stock options that vest when you exit.
Your responsibility, assuming you did get the big cash, is to put a portion of that money toward starting someone else's startup - just a little seed money to get it going, not so much they get drunk on it, but also enough that you're going to stay interested in their success. Help them along. Teach them what you know.
The next portion of your cash you need to shoe-string your next venture. You should be thinking about what that needs to be while you're transitioning that big company in your old project. And it's old already. Big companies are slow, they think they are fast, but they are not. And if they think your idea is great enough to acquire then you've slipped away from the front of the wave already.
The last part of your cash should be put into a diversified portfolio outside of the companies and markets you work in. Seek a professional wealth manager on how to place those bets relative to your age and needs horizon. This is your safety net.
Then focus on that next idea and the next startup. You did what you did because you couldn't take the boredom of a typical large company. You shouldn't stay in one. I had an early mentor once tell me "When it's not fun anymore, get out of the business" if you've lost your passion you're done.
So negotiate a reasonable price, take the money, get them set up for a smooth transition, and get working hard on that next business startup.
Re:Depends on the Megacorp and on you (Score:5, Insightful)
This is good advice.
I had a startup 10 years ago with a similar situation and a head full of ideals. We passed over two such opportunities.
With experience, we now know that was a mistake.
Developing a product and making real money is 100 x harder than anyone realises, no matter how talented you are.
If you take a good chunk of money now, it will set you up and free you to explore bigger and better things. Plus, the big corporate may teach you a valuable business lesson or two.
Consider that to make $100k clear cash, your company would have to sell c. $1M of product taking into account staff costs, taxes, cost of sale, legal fees, etc.
Work out how long it would take you right now to generate $1M revenue and that is how much time $100k cash would save you.
Believe me, if you can save 2-5 year's of grind, do it. Anything can happen to your product including total failure in the Market. So if someone's willing to put a value on it now, cash in.
As a startup you have no idea how hard it is to turn great code into hard cash. Take the cash now and get where you want to be quicker.
P.S. just because you work with suits doesn't mean you have to become one. But it's surprising how some business methodology can bring order to creative chaos.
The economy is disintegrating, take the money now (Score:3, Insightful)
The economy is disintegrating, take the money now. You can always give it back later if you feel bad about it.
Let me repeat, the 20th century is over. The dot-com boom is long over. The bubble economy is over. Serious economists are predicting deflation. Sell out while you can. Take the money and let them deal with the problems that will happen if the economy does tank and the market for your currently-popular product goes away.
Let me sum it all up in one three letter word: AOL. Ten years ago
Re:Could you be more vague? (Score:5, Insightful)
Typically the kind of money that frees you comes with strings that bind you. No business incorporates without the intent to exploit the protections provided by being a corporation.
If you don't know what those are, then you are in no position to negotiate what you describe. If you have to ask this question here, then you clearly need representation to ensure you're getting what you think they're offering. And I don't mean a SlashDot user with good karma.
And don't just look up a corporate lawyer, look up a real estate lawyer, a civil lawyer, hell even divorce lawyers, to find who acquaintances of corporate lawyers recommend. They hear all the goods and their reputations won't suffer from recommending someone outside their circle of peers.
Re: (Score:3, Interesting)
The first you will learn about money is that it lets you do exactly that.
Precisely. The obvious contradiction in his statement reveals naivety in this regard - he's perhaps just used to mom paying for everything, so hasn't quite learned this yet. Speaking as someone now in his 7th year of working his ass off at growing a small business, and still at least a few years of hard slog away from being able to "retire - precisely so that I will be able to do whatever I want" - I would strongly recommend taking this deal, especially if you can negotiate a bit of a higher price (if they
No advice to give (Score:2, Insightful)
From what you wrote, there does not seem to be any real question in (most) of your minds as to what to do, so not really sure what you are asking.
Please don't be one of those "I'm asking for advice, though I really just want affirmation" people.
Re:No advice to give (Score:5, Insightful)
Re: (Score:2)
Chance of success * estimated payoff, compare that to the offer and adjust for how highly you value stability/independence.
I'd usually say even if the question is simple it might still spark good conversation, but really this is too vague to be useful.
Re: (Score:3, Insightful)
I tend to agree with your assessment; it certainly sounds like they don't want to sell.
What I would add, though, is that's actually a great position to be in. It means the worst potential outcome of this negotiation is the one they're sort of hoping for. So my advice is this: Treat it as exactly that: A negotiation. Worst case, they say "screw that we're not negotiating!" which it sounds like you almost want. No harm. Best case, you may be able to get any number of beneficial things, just a few of wh
run! (Score:2, Insightful)
if it is your dream to see you idea into fruition then be prepared for it to be raped and then brutally murdered.
you will loose any control that you have, and even if you can leave the company you still won't be able to do anything since they own your idea.
all that they care about is profit margin, and the very second that it looks like it won't be profitable, they'll kick your ass to the curb and bury your project in the basement.
finish your product, then decide if you want to sell. you will have much mor
Take the money. (Score:5, Insightful)
If the money's good, take the money. You can always start another business but you can't always find someone willing to pay you for your current one.
Remember: you don't have to be the next Google. It only takes a few million to retire and to *anything you want to do.*
Re: (Score:3, Insightful)
I think a lot of people with drive, education, and creativity are waiting for that big cash lump sum to fall into their laps.... so they can retreat to some mountain home, set up a work environment they can do on their own time and pace.... and relax...
I know that is one of my dreams.
Re:Take the money. (Score:5, Insightful)
Years back, I sat on a beach with a young Greek lady, talking of plans and careers and futures and whatnot. She told me the following yarn:
A rich American businessman is on holiday in Mexico and strikes up a conversation with a local fisherman. They come from very different worlds and both are interested in each other's lifestyle.
"So what do you do all day, buddy?", says the American.
"Well, I wake up, go out on my little boat and spend the day sitting in the sun fishing. When I'm done, I sail back in, sell most of my catch and make myself a few pesos, and keep enough of it to take home to feed my family. Then I'll have dinner with my wife and children, maybe go for a drink with my friends, come home, make love to the wife, sleep, get up the next day and do it all again."
"Hey, you can do better than that. You should take your son out fishing with you. That way you could catch more fish."
"And then what?"
"Well, with the money you make from that, you could invest in a bigger boat, and catch even more fish."
"And then what?"
"Well soon enough you could buy another boat, and another, and then eventually you wouldn't need to fish at all, you could manage your fleet's operations from the shore. One day you'd be a rich man."
"And what would I do with all this money?"
"Well you could retire and spend your days fishing in the sun..."
Point is, if you aspire to a quiet life of comfort somewhere beautiful, do it now while you're young enough to get a good run at it. Fuck the rat race and spending your days saving up enough money to be able to do what you could have been doing all along. Time and health are finite commodities and you never know when they'll be taken off you.
Of course, if you're the sort of person that thinks that hard work is an end in itself, by all means slog on. Whatever makes you happiest.
Re: (Score:3, Informative)
Well you can negotiate.
Usually corporations think that way:
So in this case they think it would be more reasonable to buy an existing company/team.
"But" you are entrepreneurs, your motivation is essentially "big money". If you loose that appeal and if you receive just a salary ins
binge for 5 years straight.... (Score:5, Informative)
You think a few million will cover that? I think not.
Of course it will. Get the money, transfer it out of the USA to the Caymans or Luxembourg, and move to a nice beautiful discrete villa on the outskirts of some major city in or near a cocaine-producing country where the blow is cheap. Like say, Lima Peru.
Marry a beautiful young proper landed old-family upper-class girl who likes to have sex and who's family is experiencing a cash flow problem. Learn Spanish, meet your neighbors, learn the local customs, go to local cultural events, have your wife's family and friends teach you all that you need to say and do to be treated respectfully in your newly-adopted country. Go to Mass once or twice a year. Make some noticeable donations to local respected charities. Make a few unnoticeable donations to local police department's widows and orphans fund. Keep up appearances and indulge your appetites discretely. Know your limits but keep expanding them.
Do this and your millions will last a long, long time. Party Hardy, dude.
Re:binge for 5 years straight.... (Score:4, Funny)
Don't Sell (Score:2)
Independence isn't something the money can buy you.
Re:Don't Sell (Score:5, Insightful)
Actually, sufficient money is exactly what can buy you independence.
If you aren't beholden to anyone or any company for making a living, you can do pretty much as you please as long as its legal.
(Not getting into how enough money will actually often buy you legal leeway too at times.)
Re:Don't Sell (Score:4, Insightful)
-- Bob Dylan
Re: (Score:3, Insightful)
If you have paid off the mortgage on a house in a suburb with a good school or have retired to somewhere rural with more space and lower property taxes, have enough savings where the interest can be used to pay off the loan on a new or slightly used car, the food and utility bills, and you have still have enough left to do whatever you have always wanted to do (timelapse photography, video editing), then money does buy you independence.
I've seen many people do this, from engineers who had a steady career wi
When a company wants to buy you... (Score:5, Insightful)
When a company wants to buy you, it means you are competitors otherwise and they want to stop you or otherwise control your future.
Make it clear what their expected terms are to be and whether or not you will be forced into a non-compete situation. They will bring you on as an employee as part of the agreement and at that point "all your IP are belong to us." You stand to lose plenty. And let's be clear on this -- they will hire you, but that is NO guarantee that they won't turn right around and fire you leaving you with no options for "starting up again" or working for another company doing anything similar -- remember that "non-compete" thing they required you to sign?
They have a PLAN. Make no mistake about it. They have thought this through. You should give this no less thought. Get them to disclose their ENTIRE plan to you at once including their intent to terminate you leaving you high and dry. (Of course they will never say that, but you can get them to state that they never had any such intention AND that in the event they feel they need to in the future that you have a golden parachute and get it in writing.)
Re: (Score:2)
By the way, this sounds terribly like one of those "microsoft partner" deals and if this megacorp happens to be Microsoft, just keep in mind that Microsoft sees partnership as "victory for microsoft" and they own whoever they partner with.
In any case, GET A LAWYER and get them to agree to pay your lawyer. They have lawyers too...lots of them.
Re:When a company wants to buy you... (Score:5, Insightful)
When a company wants to buy you, it means you are competitors otherwise and they want to stop you or otherwise control your future.
Not so. I have been involved in several cases where the acquisition was not to stifle a competitor but rather to;
There are other reasons as well and of course we have also been invloved in acquisitions within the same primary business to increase market share, similar to your case above. In these cases, depending on the market in question, there are issues of price to be paid. Particularly if the market has only few competitors. This is very unlikely in the case at point.
My advice to the prospective recipient of a buyout is to price all the things they value about working for themselves and then discount them from the purchase and prepare to lose control of their business within 5 years (and price that as well). The thinking here is that with megacorp behind you you will be driven by the kind of medium size company management issues like revenue growth and cost control for which you are not currently prepared and which are frequently the cause of "ructions" between the current principles and new bosses. Many folk leave as a result of these ructions, by choice or by squeezed out. The five year time frame is used because it should include a decent "downturn" in the overall economy and hence a good old stresser of the management team.
On the other hand one or more of your group might enjoy the opportunities that Megacorp present, each of you should price these things independently and the talk about your differences.
You kind of need to be unanimous. A majority vote will likely be a disaster.
Re:When a company wants to buy you... (Score:4, Informative)
I'm curious. Do you have any experience in this matter? I do, and I can assure you that the absolutes you've defined are not absolutes by any means. It really depends on the deal. Some companies buy to simply increase market share. Some think they can move a new product through their channel cheaply. Some think they can incorporate unique features into their existing product easily. Others want sales relationships (not in this case, from the sound of it).
There's no hard and fast rules to this. In deals I worked on, typically we wanted to use an acquisition as a seed to enter a new business and leverage our brand to grow it. You better believe we were interested in keeping the entrepreneurs happy. The problem is, once you dump a stack of money in an entrepreneur's lap, it's hard to keep them from moving on or retiring, even with an ironclad non-compete.
As you say, though, the only thing that matters is getting a good lawyer who has experience in acquisitions. They won't let you do anything stupid, but it's gonna be expensive. Probably something along the lines of 5% of the value of the deal. If the deal falls through, then you eat that cost.
In my experience, most entrepreneurs are WAY out of whack with regards to the value of their company. Most are convinced that BUYER X is interested in their company because their product/service/whatever is the wave of the future and has no possible substitutes. Usually, BUYER X has the means to develop whatever you're doing, but simply wants to get there faster.
Hard Call (Score:2)
I've worked for MegaCorp before I did not enjoy being a number, since then, I've worked for small to medium companies.. Currently I work for a medium sized company ~200 (MX Logic). I joined the company when it was >100.
I may work more hours for less pay than I would at MegaCorp, but at least I feel that the things that I do directly contribute to the company. That I am not just on a hampster wheel is a good thing to feel. Also I know the CEO, CFO and all other execs on a first name basis.
All that be
Sell dude (Score:2)
Life is short...
Depends on the conditions... (Score:5, Insightful)
If they are buying your company to get you, then the situation is less clear. If a condition of the buy is you working for the man for a fair while, then you might not want to do that.
Take the money (Score:5, Insightful)
But seriously, take the money while the offer is there.
"Buy 'em out, boys" (Score:3, Insightful)
Think long term (Score:4, Insightful)
Given that you've started this in the first place, you're almost certainly going to become unhappy with the new corporate environment sooner or later, which means that you're going to come back to this again. The real questions are:
I'd certainly lean towards not taking the offer.
Be sure you understand how risky going it alone is (Score:5, Insightful)
I've done a lot of startups, and every one of them failed -- and four out of five times, it wasn't for lack of technical excellence.
Getting sales, marketing, and operational execution right is both critical and very difficult. If the buyout offers you enough money you'll be in a better position next time you want to go start your own company -- think very, very hard about accepting the deal.
Re:Be sure you understand how risky going it alone (Score:4, Insightful)
Re: (Score:3, Informative)
Getting sales, marketing, and operational execution right is both critical and very difficult.
I'm a business owner and what amazes me, is the amount of time I have to spend selling in order to make some money.
Every time I read about a great idea or a startup, my question is thus:"Sounds great. Who's going to do the sales?" Often followed by silence.
Someone has to go out and tell people how wonderful the product/service is. You're not going to cut it with some Google Adwords because everyone does that.
Hope for the best, prepare for the worst (Score:4, Insightful)
Personally, I would work out some kind of ongoing royalty situation in addition to the buy out just in case it takes off. Stock options are useless unless it is already a public company and you can exercise them within 6 months.
A friend of mine had a great idea. Got some investors, created a company to develop the hardware and software, started getting customers. Then the economy went south, the investor got scared, and no more money. So no more company.
Oh
TPS reports (Score:2)
#1: Things Change After the Sale (Score:2)
Get a good experienced attorney advisor to make sure that you take into account all the subtleties. You can't learn or appreciate them all from the outside and as young as you are.
Get a good financial advisor (who works on an hourly basis) and make sure he works with the attorney.
First clue: you're asking this on Slashdot... (Score:5, Insightful)
Whichever (Score:3, Interesting)
I understand I'm not answering the question, and what I'm about to say isn't exactly "the truth", but more like one way to think about it: there's no way of knowing.
If your forego the Megacorp money, you might complete your product and end up making 100 times as much money. Or your whole project could fall apart in 3 months for reasons that you have no way of anticipating right now. Maybe one of your team will get hit by a car, or fall in love and move to Tokyo.
On the other hand, if you sell to Megacorp, you might end up being able to make your project into everything you envisioned and find fame and fortune through Megacorp's extensive resources. On the other hand, the corporate culture may strangle your soul to the point where you need to quit and check yourself into a mental institution.
There's no right answer here. Without knowing the particulars of what your project is and which Megacorp wants to buy it, the only real advice I can think to give is to think it over and then try to act from hope rather than fear. And keep in mind that if you're fresh out of college, you can probably afford to make a few mistakes, and still have time to start over. Instead of spending all your time afraid of making mistakes, remember that you want to make the best use of your successes and mistakes by learning as much as you can from them.
Do you want an exit? (Score:5, Insightful)
If you want to do *exactly this* for the rest of your life, say no.
But if you're like most entrepreneurs I know, that's not the case. It's likely that you could take the money, and pursue a new idea, developing another company, new employees, etc... and having some extra money in the bank will make all that a LOT easier.
As somebody who has done a few startups now, I can assure you that money matters. Because more money means you can chase bigger ideas with less pressure.
They don't want to buy you... (Score:2)
They don't want to buy you, they want to buy your idea (assuming you aren't BSing us).
Once they have it, it (and anything remotely resembling any part of it) is theirs, not yours.
You'll just be an employee, at least for a while.
You need a damn fine lawyer or 12 to go over anything and everything this company wants you to sign or says that they will sign.
Are you guys even incorporated yet, or do you love living dangerously?
Comment removed (Score:5, Funny)
Take the money if its good (Score:5, Insightful)
I was in the same situation about 10 years ago (yeah, pre-1.0-burst) so I think I have some insight for you...
First, this is a business question you are asking in a techie forum, bad idea. You are running a business, possibly selling a business, go get yourself some business advisers, at a minimum that means an accountant and a lawyer who know (or at least "get") your industry, and preferably some people who have sold companies in your industry, extra points if they sold to the same megacorp and aren't involved with megacorp any more (they can tell you how it all went, but if they're still there, there's a conflict).
Second, and read carefully: TAKE THE MONEY. There's an old expression: No one ever went broke making a profit.
Caveat: after taxes it should be more money than you'd make in 10 years of working the same "job" at average pay. (e.g. if you're an engineer who could easily pull in $125k/yr, make sure you're landing at least $1.25mm cash after taxes, don't take an all-stock deal - bubbles burst) You need enough money to be able to screw around for a few years if megacorp really does turn you lazy.
BUT don't get sucked into a long term contract working for megacorp. A year or two is ok, and if you're stuck with an earnout, make sure you really can see your company meeting those numbers. After a year you could be itching to leave the megacorp lifestyle (no company is perfect) and its best to know you can part on good terms, pick up and travel for a few months, then start your next awesome company.
Third, can I repeat #1? Find a better place than slashdot to get this sort of advice. If you're really strapped, try your college's career center network, or SCORE (.org)
Re:Take the money if its good (Score:4, Insightful)
Well, maybe it was his first instinct to put it up on Slashdot to get some general ideas. Seriously, Slashdot is a fine place for that. And here you are advising him to go to another place and even naming a few.
I would not be surprised if you get less if you randomly go to a advisor. Don't overvalue Slashdot, but don't underestimate it either.
Re:Take the money if its good (Score:4, Insightful)
Most of the folks here on Slashdot are the Technician type of person. They like to tinker, create and invent. They are not the Business-type person. Just look at all the disparaging remarks people made above about marketing and sales people. But a business needs those people who like to schmooz and wheel and deal. The very things that most technically minded people don't like to do. And you need to be wiling to do that sort of thing in order to make your business succeed/survive! A megacorporation already has those resources. Such a resource could make your product succeed beyond what you had hoped.
I can only echo what Da Big G said above. Especially about the compensation from Megocorp for your company. If they are merely offering to "make you employees of their company," then they are playing you for fools. They need to cough up money for the purchase of your company for its value. Da Big nailed it about the 10*salary rule.
The biggest mistake made by young entrepreneurs who are right out of college is to miss opportunity. Whether through lack of recognition of said opportunity due to lack of experience, or clinging to idealism ("IT'S MY IDEA!!!) due to lack of maturity and experience. But missing this opportunity will put you far behind where you could be! Taking the opportunity will put you far ahead of where you are now.
NEGOTIATE!
Negotiate what they are going to pay your for your company. Negotiate what they are going to pay you for your services as an employee. And negotiate for your exit! Make sure that they will have to pay you a reasonable severance, no matter the circumstances. If they want your intellectual property or your skills that badly, they will gladly pay the price.
Find a lawyer to go over the details of the agreement before you sign anything. Just to ensure that the megacorp didn't write in an "escape clause" in any contracts you sign.
Last, as Da Big pointed out, go to your alma mater's career center to get the resources you need to work out an equitable agreement with Megacorp. It's an excellent resource, where you can actually gain access to people who are truly experienced with this sort of thing and who can give you clear advice.
I am SHOCKED and APPALLED (Score:3, Funny)
This is not the slashdot I know and love. Where are all the calls to open source the project for all the eleventy billion reasons that F/OSS is superior in every way imaginable?!!?!?!?
everyone here just telling him to sell.
not flamebait, actually +1 surprised.
Take The Money IF... (Score:3, Insightful)
The rule is quite simple really. Either they are offering you independence (also known as "f***-you-money"), or they just offer you a glorified salary.
If the offer will truly give you independence (say $1M each?), then take it. You'll be able to start something else just as fun soon enough.
If the offer is $500K to share among 4 people, then I agree with your attitude: it's basically the same as working for a big company and you don't want to do that.
DO IT! (Score:2)
Oh for gods sake! TAKE THE MONEY AND RUN. Milk it for all you can! To quote Homer Simpson when Bill Gates offers to buy him out, "I put my heart and soul into this business and now it's finally paying off!"
Seriously, get enough money to be comfortable. If you guys end up not liking working for the megacorp, QUIT AND START ANOTHER COMPANY doing something else. Maybe you'll get bought again!
Just make sure you don't sign anything stupid.
Everyone has a price (Score:5, Interesting)
Think about it. If they were offering you one billion dollars, would you still be asking this question?
If your answer is "yes, I may still be in two minds about selling", then don't sell.
If your answer is "no, I would sell in a heartbeat", then lower that limit, i.e. would you sell for a hundred million? 10 million? 5 million?
Put a price on what you would be willing to sell for without hesitation. Then evaluate the difference between that amount and the offer. If it is less than 25%, sell. If it is over 50%, don't. In between 25% and 50%, I don't know - but may you don't even fall in that window.
And, lastly, do not sell unless you personally stand to make at least $2 million after taxes. Anything less is hardly worth it. Given the fact you have received a buyout offer with no real sales, you obviously have something of value and hence will easily make at least that much on your own.
My 2 cents...
Re: (Score:3, Insightful)
The price that you can sell at is the price someone is willing to pay. If you price it too high, especially for a big corp, then it's cheaper for them to start over and wipe you out leaving you with nothing (not even the business you had, possibly with some big debts and the stigma of a failed corp to drive off the investors).
You should of course start at the position above what you would most like to get from the deal but not so high that the other party thinks you're trying to gouge them.
Having said that
Re: (Score:3, Insightful)
Sounds to me like it's only a fishing expedition. If they haven't made you an offer, you've got nothing to consider except a hypothetical thought exercise and the existence of Megacorp is irrelevant. If you think they're going to buy you out and you'll get to keep working on what you're doing now or what you WANT to work on, forget it. Most corporations don't have a 3M mentality that encourages researchers to just invent stuff. if their real goal is to acquire your product once it's finished, you are no
Be careful of spies and pretenders (Score:5, Interesting)
Sometimes a big business or somebody posing as one comes along offering to buy up a small startup company, when in reality they only want to get inside information so they can copy the ideas and technology.
So you really need to find out if these people are actually capable of buying your company for millions (anything less, and by the time you split it up between all of you and take out taxes it won't be worth it), and that they are genuinely interested in buying the company, before you even think about selling it to them. Then if you think they're real, get a lawyer ASAP with experience in these type of deals, and be very careful of how much information you reveal to the buyer.
You answered your own question (Score:5, Insightful)
Here are the arguments you made in favor of selling:
The money is fair enough, and the employment conditions would seem excellent, since they would enable us to manage good-sized motivated teams,
Here are the ones you made against selling:
but we are very emotionally attached to our development and we place great importance to being independent. We founded our company because we didn't want to follow rules. We wanted to be the ones who make the rules instead. Money really doesn't mean much to us as long as we can do whatever we want while excelling at our passions. We feel that by accepting the offer, we couldn't achieve the maximum of our potential, and one of us joked that if we get in contact with the corporate environment and accept their money, we risk becoming lazy.
Judging by both the quality and quantity of the arguments in both scenarios, it is pretty clear that you really don't want to sell, and are just pondering the benefits of selling rather than seriously considering it. I can understand this kind of dilemma, but it sounds like you really just want someone to convince you that selling is good or bad rather than actually asking about it. You either want someone to go into a detailed rational response in favor of selling, or a simple emotional one against it.
I say do what you think is right for you and your company, rather than listening to a bunch of random Internet users.
Is it a company or a hobby? (Score:4, Insightful)
The purpose of a company is to make money. The purpose of a hobby is to have fun and experience personal fulfillment. You need to decide which your organization is.
If it is a company, then you need to decide which path will make the company make more money. But, without knowing the numbers, it sounds to me like a big lump sum now plus jobs from Megacorp, Inc., will probably pay better than hoping that whatever it is that you're developing will someday be a viable product.
And if it is a hobby, then generally, I'd say don't sell. But there may a be reason to. Megacorp, Inc. might be able and willing to supply the development teams that you as an individual and a couple of friends cannot. In this case, by selling out, you could enable your product to be on the market that much sooner.
Here's some suggestions (Score:4, Interesting)
The first thing to note is that the company has put some effort into making the decision. If they don't get the purchase, that effort will be wasted. ...which means you can make a counteroffer for 10% more and they will probably take it.
(The same thing is true with job offers. The company doesn't want to go back to the interview process, so once they've made an offer to hire you, ask to "think about it" for a day. On the next day, come in and ask for 10% more.)
Next, you should decide what your goals are, and whether it's more important to "feel good" or "be successful".
If your goals are to make tons of money, and you think your project has a good shot at that, then don't take the offer (politely) and keep working.
Otherwise, decide whether it's more important to "feel good" or "be successful".
As an example, people who show up at traffic court wearing jeans and a T-shirt with long unkempt hair usually get short shrift. If asked, they would complain something like "it shouldn't matter how I dress - they should see me for who I really am".
Those people have unclear goals.
If it's important to not get the ticket, then you should do everything you can to make it more likely that the ticket goes away, even if it means getting dressed up in a costume and acting as if you are someone you aren't (read: suit and tie). Dressing to your personal philosophy makes you feel good, but it doesn't accomplish your goals.
So for your situation, you must ask the question: "what are our goals"?
If you are well and truly into "not following rules" and other things, then that's your answer right there.
But remember it's easy, even trivial to start another project and get excited about it, and you can even have your existing dev group together to do it.
If your goals are to have fun and go your own way, selling out now could be a stepping stone to that end.
When the situation is framed clearly, as the traffic court example, most people realize that the fleeting "feel goodness" really isn't all that important to them, compared to the value of achieving their goals.
Have a group meeting, decide what your goals are as a group, and write that down. Your decision will flow naturally from there.
More info (Score:3, Interesting)
Good luck!
If You Sell, Plan To Leave (Score:5, Interesting)
I've worked at two small technology companies (video games, actually) that got bought out by larger corporations.
The wise owner/managers in both cases did this: Work up until required by their contract (1 year in both cases), and leave the next day. The not-so-wise programmers (including me) tried to stick around, make it work, become frustrated, etc.
I now see there's a standard protocol for company buyouts. Step #1 is where big company sends spokesperson on site to give a boilerplate spiel, "We're not changing your working practices; your culture is great, we don't want to change that; etc. etc.". All bullshit. They say that to forestall mass departures, and proceed to make whatever changes they wish, at whatever pace is desirable for them. Now I know: When your small company is bought out, leave ASAP. It's over.
I actually do recommend that you sell and leave ASAP.
JM2C (Score:3, Interesting)
Hi,
Thanks for the interesting question. Hope this helps.
The money is fair enough, and the employment conditions would seem excellent, since they would enable us to manage good-sized motivated teams, but we are very emotionally attached to our development and we place great importance to being independent. We founded our company because we didn't want to follow rules. We wanted to be the ones who make the rules instead. Money really doesn't mean much to us as long as we can do whatever we want while excelling at our passions.
I feel you, my friend. I have not been exactly there, but have been in very similar situations. While I don't know your exact situation, I can tell you how I would think about it. What follows is stream-of-consciousness, late on a Friday evening - take it for what it's worth. :)
If my main goal is to do independent development, I would look for paths that get me to that goal while satisfying my other important needs.
Supposing I were a young hot-shot with a belly full of fire, I would feel confident that I could succeed running my own company, working as a unit of a larger company, or trying something else. That last bit is important -- technology, and technology skills, are highly fluid. If you got to where you are, you can probably get there again, given the opportunity.
Mixing those two ideas together, I would start thinking about how to structure the deal with the big company. What would I want to get out of it? Well, if I want to be independent again, preferably while I still have a belly full of fire, I'd want to think about my exit strategy from the parent company. Do they want me to commit to them for some period of time? Are there golden handcuffs that are going to tempt me to stay after I'm ready to leave? A golden parachute if they take the technology and cut me out?
That would lead me to think about how the payout is structured. There will probably be some mix of cash, immediately vesting stock, and stock that vests over time. Suppose you want to leave in one year -- how much of the total payout would you have to sacrifice? Is the parent company willing to shift to more front-loading? How much back end do you have to give up to get more now?
But why go through all that thinking if your intent were to stay with the parent company and see the product through to maturity? It is entirely reasonable to want to see your product grow, and to guide its development. That is a very healthy way to view system engineering.
The reason to think that way anyway is this: If you can work out an exit strategy that you and your friends can agree on, you don't have to worry as much about whether the relationship with the parent company will remain healthy. That future is an unknown, and there are many examples of your sort of situation going well, and just as many of them going poorly. If it works out, that's great! If not, you and your friends can head off on a new adventure together. As long as you have some front-loading and/or short horizon payout, you have a safe way out. That safe path in case things go awry can give you the confidence to join the company.
Also consider it from the big company's perspective: If they are confident that they will be a healthy environment for you and your friends, they should not be too afraid of giving you some front loading to guarantee that you will come out reasonably whole.
At the same time, don't be rude. You don't have to tell them that you're looking for a reasonable exit strategy -- they will understand that. Just discuss the options of front versus back loading, and then talk with your friends in private to discuss whether the range of options includes something you are comfortable with.
And, honestly, I'd lean toward doing the knowledge transfer to the new company and moving on as soon as it was working for them. Make sure you have the right to work together on non-competing projects in the future. Make sure you have the right to develop independent ideas with
U can't predict the Future (Score:3, Interesting)
Swallow your principles
Principles aren't worth the paper they're written
Principles are external to the self.
Follow your convictions.
Convictions are internalized values
Convictions define you
Money just keeps score
Take it to win another day
having been through this experience... (Score:4, Insightful)
... let me tell you that going from a company of 30 to a company of 140,030 is still quite a shock, and the purchase went through nearly 18 months ago.
if you decide to go down this path, make sure that:
1) you have definite set dates for _EVERY_ part of the transition, _especially_ for 401(k)s, health insurance, etc. these dates must be part of the terms of the contract with seriously stiff penalties.
2) take a long, hard look at all your groups' bumps and warts. if you're like my group, you have several excellent tech leads and no project managers. make sure that your potential purchaser can either fix or drastically improve all of your failings.
there's a lot more, but for me the biggest items are those 2.
Geocities (Score:3, Insightful)
Yahoo! buys Geocities and turns it into a piece of shit.
Any questions?
This is silly. (Score:3, Insightful)
You have pretty much said "I have a business. Somebody wants to buy it. What should I do?"
And there is no answer, given that much information.
Re: (Score:3, Insightful)
I disagree.
There are obvious reasons not to put in too many specific details, in case the buyer reads Slashdot. (Unless of course this whole discussion is a negotiation tactic by the poster, in which case, bravo!)
You seem to want to provide accounting advice. Slashdot is not news for accountants, presumably the poster is better off hiring one of them for their accounting needs.
What Slashdot does have is older more experienced nerds who have been through this before and can give nerdly life advice. That's cl
Comment removed (Score:3, Informative)
Become a contractor (Score:3, Interesting)
If they don't take this offer or at least seriously consider this as a plan B, then their plan is evil.
Keep telling yourself that.... (Score:3, Insightful)
We are very emotionally attached to our development and we place great importance to being independent. We founded our company because we didn't want to follow rules. We wanted to be the ones who make the rules instead. Money really doesn't mean much to us as long as we can do whatever we want while excelling at our passions. We feel that by accepting the offer, we couldn't achieve the maximum of our potential, and one of us joked that if we get in contact with the corporate environment and accept their money, we risk becoming lazy.
If you truly felt that, you wouldn't be asking the question on Slashdot. You'd already have your answer and there'd be no discussion needed.
Your challenge is, like most of us, you've all invested heavily in the underdog culture, come up with a million justifications for why... while no one was offering it... it was much better to do without money, how it was idealistic, etc.
Except now you have been offered money and the very fact you're having to ask puts lie to the concept of absolute belief in those values that were so easy to claim you had when, in truth, they were your only option.
You have both options open to you: You can take the money or you can decline it can keep being the same company. What you need to do is honestly weigh up your feelings and pick whichever is more important to you. But part of honesty is getting over having told yourself you believe something when your actions (in this case having to ask) scream that you haven't bought in to it quite as hard as you want the world, and most likely yourself, to believe.
At the end of the day, it's your call. Slashdot can give you more insight in to the pros and cons of different paths but it's your individual values that have to make the call and, as everyone's values are slightly different, no one on Slashdot can tell you what that ultimate answer is. Just be honest with yourself and accept that, whatever you choose, there'll be bad days when you wish you'd chosen the other but that that is reality and it's OK when it happens.
if your business is any good, don't do it (Score:3, Informative)
Happens to me every year - I own a 3-doctor medical practice in a "monopoly" location, Every so often a large corporate practice chain wants to buy us out.
Consider this: large corporates, as a rule, know how to handle money. If they offer you something, they expect to be able to make a lot more than they will spend. Unless you depend on their resources in order to realize your business plan, that's the money you will miss out on.
But that is only the money part. More important - far more important - is job satisfaction. I have seen many of my colleagues who sold out turn into miserable frustrated sourpots, when prior to the sellout they were happy and satisfied professionals.
My advice - if you seriously believe your business is any good, you like doing what you do, and you don't depend on corporate backing to finish what you started - DO NOT SELL OUT!
I sold my IT business in order to get through studying medicine, and I have seen what happened to those who remained in corporate employ thereafter - not worth it, never worth it.
However, if you realized that your business plans are unrealistic, you are not likely to finalize the project or match your own deadlines, competition is pulling ahead - then of course get rid of it to the highest bidder before they notice these problems too.
Thing to remember (Score:3, Informative)
You can sell and have a big pay off, however you don't get to walk away. Oh no, no no. You become an employee of Megacorp, and depending on the size of Megacorp, an employee with no power. Megacorp will most likely have a bunch of managers who will call the shots, and you'll have to follow them even if they are 100% wrong. You'll have to put up with that for the next three years while they have the golden handcuffs on you.
Plus everything they promise you will change. A change of direction, and suddenly everything they told you to get you sell is out the window. Megacorp will have all sorts of wonderful policies and procedures for you, like time tracking, horrid ticketing system, an IT department that will force locked down, Window desktops/laptop that belong to a domain (say goodbye to any Mac or Linux desktops), monitored internet, and tons of HR crap like employee ranking, personal development plans, blah, blah, blah. Also they might install badge security and cameras on all your door, so they can track you, if they don't make the entire company move. And if they don't move you, they will entice a few employees to move and grow a local branch and kill your branch via nutrition. Again, you're not sitting on a beach enjoying yourself .. you're writing a daily status report to your new boss that has no idea what you product or company does.
Been through two buy outs, and watched both companies torn to shreds. And watched two boss struggle watching it happen. It's pretty painful to watch people destroy what you spent time to create.
Simply, when you sell, you become their bitch for a few long years. Could you have made it without them?
Depends if there's a non-compete clause... (Score:4, Insightful)
...if there isn't, or it's quite reasonable, take the money, fulfil the contract, then take the money and go and do the same thing again, but even better next time now you have the capital to avoid cutting (any/as many) corners. Rinse and repeat.
Worked for a former boss/colleague of my acquaintance! Thrice!
The implied threat in any buyout... (Score:3, Insightful)
...is that if you don't sell, they'll just make it themselves. They have vastly more resources than you do, so they could swamp you unless you get some serious venture capital immediately. But it's cheaper for them to buy you, so they'd rather do that.
The money you could make going it alone is by no means certain, but the money you make by selling is. As long as the terms are such that you're allowed to leave, with the money, and start another company doing something similar (they'll probably have a non-compete for something identical), you get to keep the freedom and start over with more resources.
Many entrepreneurs go through this cycle several times, building their experience and their resources until they reach the point where they can raise the kind of venture capital that allows them to become the megacorp themselves. Sometimes they enjoy being on top, and sometimes they avail themselves of the freedom to do whatever they want, and go on to start more successful companies.
Personally, I'd sell out, as long as the terms gave me plenty of freedom. You might even enjoy working at the megacorp. Some of them have very healthy cultures.
Hot Buyout (Score:5, Funny)
This is the business school version of a Penthouse Forum story.
Re:you may think you're gonna change the world... (Score:5, Insightful)
Re: (Score:3, Interesting)
If there was a +6 Insightful I'd be happy to mod this one up. Just to add a bit, there can always be one paranoid crazy at MegaCorp who will think that your continued existence is a mortal threat to MegaCorp and that you should be eradicated at any cost (lets face it, Capitalism isn't immune to irrational nut jobs).
On the other side of a aisle is there any way you can protect your self in the event that a raider takes over MegaCorp if their stock plummets? By protect yourself I mean other than taking what c
Re: (Score:3, Insightful)
True: Slavery in all its guises comes to mind.
Re:True, but... (Score:5, Insightful)
Yes there are! Being happy. Healthy. Fulfilled. Having an interesting life. Loving and being loved.
Being rich isn't a prerequisite for any of them - and it doesn't bring any of them on its own.
Re:True, but... (Score:5, Insightful)
Re: (Score:3, Insightful)
Having worked as a guidance counsellor, social worker, and community organizer, I can state with absolute 100% certainty and authority that this statement is entirely bullshit.
Re:True, but... (Score:5, Insightful)
Not really - how much money you have is an important variable in the equation of how much time and resources you have to do the other things that you consider important. He didn't say that it was the most important, just that it's up there. Anyone who has to work 2 or 3 jobs just to keep their family surviving would probably agree that money is very important. It's only those who make enough that they don't have to worry about money that consider it unimportant.
Exactly. (Score:3, Insightful)
I didn't say it was the MOST important, although a lot of people seem to be reading that.
"What a sad, sad outlook on life."
You know what else is sad? Not being able to afford healthcare. I guarantee that you won't be happy if you don't have enough money. Is money the solution to all the world's problems? Hell no. But it sure solves a lot of the ones that get in the way of happiness, that's for sure.
I'm a gamer geek. Have been all my life, and I'm in my 40's. I went to college, got a degree, go
Re: (Score:3, Interesting)
Right. There's poverty and there's poverty.
I've just got back from Ethiopia. I don't need to tell you what a poor country that is. Millions and millions of people there have fuck all, and in their eyes I'm rich beyond their wildest dreams. It pulled me up sharp when I realised that I could make in a day's freelancing what somebody in a reasonably good job - a junior teacher, say - could make in a year. I don't mean that to sound boastful - I can make a more than reasonable amount of money doing what I