I have never done or participated in an acquisition that large, but my intuition was also that 1-2% on an 8-figure deal is cheap. Because, I reasoned, that might be a 6-figure deal with a different group of people. I think the problem is that you state "$200,000 of value to a 10MM deal". But "10MM deal" isn't what an acquisition starts out as. It could be a $2M acquihire or $10M deal or $100M package by a competitor who is scared s$%#less of your disruption paying in stock that they fear will lose 60% of its value (along with the rest of their company, worth billions) if they don't turn the tides soon on this disruption, by buying an innovative upstart. They could fear they're facing a very binary scenario and don't see any other way forward.
These deals are not "$2M deals", "$10M deals", and "$100M deals" deals respectively, until they happen, and 5-10% either way probably matters a lot less than which of these scenarios you end up living in.
This is similar to why it's not expensive to pay a CTO 50% equity of your "$2M business". Because it's not really a "$2M business" it's a "$2M business" or "$0 business" or "$5M business" or "12M business" (or the sky is the limit) and the CTO will be quite crucial in determining which one happens.
This is counterintuitive. Put another way, Sergey Brin and Larry Page didn't each pay the other guy $30 billion to do what the other guy did in 1998. (Based on their respective net worth today, and the fact that they had to give up half their company to the other guy in 1998 instead of keeping it all.)
Because if they hadn't had the other guy, each of them who is now worth $30B wouldn't be worth $60B, but rather most probably $0.
So saying "2% of a 10MM deal" is like saying "50% of a $374B company."
It doesn't work that way. I certainly wouldn't mind giving 15% to someone who had closed a few $100M deals and wanted to help me close mine. And it would be a steal.
These deals are not "$2M deals", "$10M deals", and "$100M deals" deals respectively, until they happen, and 5-10% either way probably matters a lot less than which of these scenarios you end up living in.
This is similar to why it's not expensive to pay a CTO 50% equity of your "$2M business". Because it's not really a "$2M business" it's a "$2M business" or "$0 business" or "$5M business" or "12M business" (or the sky is the limit) and the CTO will be quite crucial in determining which one happens.
This is counterintuitive. Put another way, Sergey Brin and Larry Page didn't each pay the other guy $30 billion to do what the other guy did in 1998. (Based on their respective net worth today, and the fact that they had to give up half their company to the other guy in 1998 instead of keeping it all.)
Because if they hadn't had the other guy, each of them who is now worth $30B wouldn't be worth $60B, but rather most probably $0.
So saying "2% of a 10MM deal" is like saying "50% of a $374B company."
It doesn't work that way. I certainly wouldn't mind giving 15% to someone who had closed a few $100M deals and wanted to help me close mine. And it would be a steal.