First, sorry for the anonymous account. NDA etc..
We're a small, boot-strapped (though fairly established) company. The major company that rules our industry is looking at acquiring or investing. We're really naive at these business aspects, we're engineers..
How much do you disclose on the early talks? We have a document prepared with vague but accurate graphs showing our growth, various comments about how awesome we are and our plans for product development.
I'm afraid of looking too keen for a sale, where I know we'd give up control but it would allow us other benefits of major growth. I feel completely lost here, I've read everything I can on HN but it's hard not knowing what to expect. Is it always this terrifying?
I'd love to hear any stories and advice, thanks for any input.
1. Know that 99% of deals fall through. This one will also, except when it won't. More importantly, the deal is only done when the cash hits the bank. Deals are known to fall through even at very late stage. Falling through is the norm, going through is the exception.
2. Be open about numbers, growth etc. Be closed(vague) about strategy, execution plan etc. You need to be open about the numbers to give them confidence. You need to be closed about strategy, execution plan because a huge number of deals fall through because the acquirer decides to build the same stuff inhouse (typically prodded on by internal engineering teams)
3. Build confidence. Talk about how this marriage will be best for both the teams. Reserve the negotiations around cash towards the end of the deal. When you start negotiating about cash, the deal is already done.(Except when it isn't - see point 1). Negotiating the deal is though topic for another post.
4. Decision making in big companies is slow and hard. The decision to acquire your startup will need to be driven by someone internally in that company. Find out who your 'champion' is in that company. Maintain regular contact with him, though dont push him too much. If some time elapses without any communication, ping him and check with him.
5. Most deals that go through will go through quickly. The decision in most of the deals which go through is already made. You just need to nod your way along in such cases. In other cases there will be just one big issue that you need to build confidence upon. If the talks get extended, it is likely that the deal will not go through.
6. The Zen Rule for Deals: Assume that the deal will NOT go through and plan your startup accordingly. The person who is willing to walk away is the stronger person in any deal. Detachment will allow you to negotiate from a position of strength.