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What To Do When a Megacorp Wants To Buy You?
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."
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.
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.
with your ideals but you're going to have to be realistic, either you're going to take the money or you're not. If you're worth your salt you'll take the money and work on an even better idea.
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 more control over the end result that way.
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.*
Moderating "-1, Disagree" is simple censorship. Have the guts to post your opinion.
Independence isn't something the money can buy you.
Your save the world, fuck the rules, and money means nothing attitude makes me cringe. You may really burn yourself here. Life isn't some television show. Providing for yourself or being broke is not a joke.
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.)
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 being said, I'd say if you have a *good* offer on the table you should consider it. Most likely they'll ask you to stay on for at least a year, after that if you feel like number 49327405-4 in the org you should leave and use the money they bought your small company with to start a new one.
Life is short...
If your primary interest is autonomy/creativity, then it really comes down to what they are actually trying to buy. If they are buying your company to get your product(s); then sell, sell, sell. The more money you have, the easier it will be for you to pursue whatever projects/new startups/etc. you feel like doing in the future.
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.
Somebody doesn't watch The Office.....
take the money and run.
make sure it megacorp sized money tho. a million for each of you should do it.
Take the money if it's anything reasonable. You then have some resources to enable you to work on things that make you feel more free.
But seriously, take the money while the offer is there.
is to never accept the first offer.
I see you work for Compuglobalhypermeganet, huh? That was a pretty vague writeup. I'd say advice would be "Decide if you want money or jobs", "Hire a lawyer to try and get you want you want". If you don't feel like you or your technology would reach its potential at MegaCorp, refuse to sell out to them and make your own billions/change the world/improve lives.
I like music
Ok, money isn't important, but money let you do what ever you want. Like, starting another NEW enterprise, with NEW ideas based on NEW experieces after working with a megacorp...
Or maybe, that kind of money would let you buy a small paradice, a condo or house at of Mexico beach... Buy some stocks, make good savings desitions, put a trust fund to your self...
I've been working for 10 years with my own enterprise. I love it, it works "ok"... but what I really want to do NOW, is to have time MY time... Always is the enterprise first, like if you where married... and there will be a time, when you would like to have more time to do other pleasent things...
Take the money, work less, take A LOT of vacations, doesn't matter if they are exotic or not...
But for god sake, SELL...
I envy you with the most inner deep of my heart.
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.
Game! - Where the stick is mightier than the sword!
Take the money. Make sure you have no legal obligations to the new company to stay long, or to disallow you to keep working on whatever projects you're working on. Then leave when you don't like it anymore and back to doing what you want. You'll have the money, the only downside is they'll have the rights to whatever you've been working on so you'd need to come up with something new.
--Anonymous Coward
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.
we haven't started having regular sales
So you must have some nice IP that you've developed... or maybe even a prototype of some kind of widget. Shop around, if someone is already interested, there should be more offers waiting for you. Your best option is probably to wait for those competing offers, or to seek them out when your company is ready.
Make sure the cash is enough you won't need a job for a year or two at least, above and beyond what you just want to blow right now. You should be prepared that in less than six months, you won't want to work there and arrange your finances accordingly.
.. and now the investor owns all rights to the product so other than the originator having a high-paying job for a couple of years he got ... zip.
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
I rarely read replies, it's my opinion and if you thought about your opinion a little more, I'm OK with that.
TPS reports. Dilbert. Office Space. Need I say more? There is nothing wrong with being a small company. But it depends, do you want the perceived "safety" and "stability" of being a part of a large company (which in actuality probably isn't as stable or safe as you think it is) or do you want to be in control of things?
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.
We founded our company because we didn't want to follow rules. We wanted to be the ones who make the rules instead.
It looks like you answered your own question. If you're not in it for the money then don't be in it for the money. But given that later down in the same paragraph you mention being able to make more than you're being offered if you continue along your path...maybe you are in it for the money and you've just filled your thoughts with a virtue instead of a sin (greed is still that if I remember...).
Look, you should take out your emotions from this. Will making a deal give you funding to be the ones to make the rules on another project or idea you may have? It sounds like they are more interested in hiring you than buying you out. Companies look for talent in many different ways. They know the best way to get the real money makers is to get them before they make any money.
Being approached like this is amazing if you haven't been advertizing or selling your idea to anyone. How did they even find out about you or your idea. If you take anything out of this experience that you are soon to have remember...the IT world is like a pack of wolfs. You are either with them or you are food...ok bad analogy but it was given as advice to me once. If you don't agree to their terms you can either expect to be black balled by that company or expect to find yourself in court. If they have approached you this early in the game chances are good they already have a competing product in the works and rather than risking you filing a patent they'd rather just buy you now.
At least tell us a general topic that your product covers?
I was in that situation and did not sell. So advice to you is sell. You can always have another idea and start another company. With money you can do anything you want. Do not wait for the future which may not be there. This company may turn around tomorrow and withdraw their offer and you will be left with nothing.
Sell and decide what to do later.
this may sound awful but if it sounds remotely good, it may be the best option. Sell them all the progress so far and let them finish the whole project and take a big lump sum for it. Then immediately start a new project with your people and finish that one so basically you're developing one product and getting paid for two. But if you love the project too much and don't trust them or they want you to finish it yourself under their control, I've got a better options. Trust me, letting them buy you out and basically hire you then tell you what to do will NEVER end well. It always sucks no matter what. They'll insist on some stupid feature or make a dumb decision and then you're stuck with it. Tell them you refuse to ever do that and when you're done with the whole thing, you can license the entire thing solely to them and they can act as your marketing and control and support side and just pay you royalties based on sales.
Google's Super Secret Search Algorithm: SELECT @search_results FROM internet WHERE @search_results = 'good'
Vito will make an offer you can't refuse. Either your signature, or your brains will be on the contract. Sell, retire on the beach, take up knitting...
You're asking this on Slashdot rather than seeking professional help, so that tells us something immediately. Sell out to the big company now, ride it as long as you can and leave when it's no longer fun. You don't have the business know-how to run this company on your own and have it survive.
Tired of being "punished" by the Slashdot $rtbl since 2002. I'm now over at http://soylentnews.org/ .
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.
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.
Having been in precisely this situation, I'll make the following suggestions: 1. Explain that you'll be far more efficient if left alone during the development period. Secure a clear assurance of independence. 2. Accept the financing. Get most of the money up front. Get an experienced lawyer to do the pricing/negotiations if you haven't done this several times. 3. Read the contract, yourself, carefully. You will want to make changes. Insist upon them. 4. Make sure to specify obligations on both sides. If they're not happy they can walk away, but there needs to be a clear path to taking back your work and going forward on your own. This means dollar amounts and dates. And that should do it. Remember, big companies are good at initial commitments, and terrible at follow-through. If you're structuring your work around timely milestone payments, you've accepted a big chunk of uncertainty you can do without. Good luck!
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?
I see even classic Slashdot is now pretty much unusable on dial up anymore.
Agree with cduffy. If they are offering you "car" or "downpayment on a small house" amounts, then you may wish to consider going it alone. But if they are offering you F U money, then think very hard about it. Many best technologies don't succeed, and almost as often, the founders donot get much of it because of dilution or getting forced out by the board or any other number of reasons. If you are looking at over $1M or so going to you, then think very hard about passing it up. Even if the money is less, having experience making and selling a company is a huge gold star to any VC or angel investor for your next company. By the way, if you are really serious, get better advice than /. Talk to VCs, your clients and your advisors or mentors.
Whatever you do, do not accept stock options. Take the cold hard cash - it has real value. I've seen too many small startups get screwed when their genius product was bought out and then the company that bought it went under. Suddenly, they sold the rights to their product for... nothing. Take cash. Upfront.
As Steve Miller says: "Some people call me Maurice."
No, wait, wrong quote.
As Steve Miller says: "Take the money and run."
Quidquid latine dictum sit, altum sonatur.
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)
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.
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.
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.
In the land of the blind, the one-eyed man is kinky.
I think they are not offering you enough money.
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...
When someone offers cash in the current economic scenario, do not think twice. Accept it if it is X times the money and effort you put in it, where X is something you (as a team) are comfortable with.
The next 3 years are going to be really bad from an economic point of view and there is a distinct possibility (Probability > 0.91) that such an opportunity may not come your way again, however good you and your product are. So dilute your expectations, negotiate hard and take cash. Do not take stock or anything equivalent. And execute a good exit strategy. A business is only as good as the cash it generates and the sooner the better.
The rest is polemic.
Good Luck
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.
---------
There is inferior bacteria on the interior of your posterior.
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.
Most important: Decide quickly. Also important: Try to put as little emotion into the process as possible. When you have made your decision, consider the following:
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!
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.
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.
Is it to sell out? Is it to build a bigger, better business than anyone else. Do you measure your worth by the number of zeroes in your bank account? The kind of car you drive? Or is your personal worth measured by how many people want to work for you? To help you build your dream by buying in? It's the cusp of a new generation. I call it right-brained capitalism. You have to decide.
Golden Parachute.
and to keep Slashcode happy on length, a quote from the Python. You bastard. You lucky luck bastard.
- Tjp
I am in wallow with my inner money grubbing capitalistic pig. ... Oink!
There aren't many things better than being rich.
Weaselmancer
rediculous.
You are going to have to first deeply understand what each of you wants to get out of life and how this businesses helps each of you do those things. If you can survive and want to stay under your own control, then do so, but manage your cash (and by extension, your growth) carefully. "Cash is king" for a reason. It's because profits don't pay the bills; cash literally does. Read "The E-Myth Revisited," "Small Giants," and "No Man's Land." They will give you great insight into how you need to view the management of your business, where you want it to go, and the sort of challenges you'll face based on the course of action you choose. Good luck, and I hope that your choice is the right one.
all it comes down to is what the realistic chances are that not selling now will net you way more in the near future. If the answer is almost a definite "yes", then you should wait and get what its really worth as a more complete product. If the answer is no, then sell it. Its not difficult. However, if you, like me, hate the idea of working under others when you have the capability to work on your own and still make money (unlike me), then you should stick to just making these ideas and selling them, because you don't want to end up maintaining things when you could instead be creating things (again, where i currently am in a megacorp). Your creative freedoms will be ultimately stripped, just a matter of when. Plus once your product goes into maintenance mode they will most likely outsource it then can you.
Obviously everything I just said is in no way 100% guaranteed to be the case, and is certainly quite a bit on the pessimistic side, but honestly what it comes down to is safety. Which end result is the safest for you and your chums, financially, in the long run.
Good luck!
"We can categorically state we have not released man-eating badgers into the area." - UK military spokesman, July 2007
Not fully satisfied with the offer? Ask for more! Chances are, if it's their first bid, they're actually willing to pay more. Spend some time putting together a pitch to show the company to convince them you're worth more than what they offered.
I was say sell the company, get some financial stability under you, quit and start another one. Is it really the only good idea you are ever going to have?
Often the people are more valuable than the idea. There are lots of good ideas out there, but very few people can execute.
Living in Chile
if it's less than you'd make on your own eventually maybe, and more than you'd make if today, then it's a good offer.
The only question you have is what you want to do with life. Which you've answered -- you want to be the boss.
Two perspectives to offer you:
- think about the offer as though you were simply being offered a normal job, but with a signing bonus and a non-compete. The fact that the money is for your start-up is irrelevant -- it's just another form of signing bonus / expertiese.
- if you've only just started, and you're working with a few other friends, keep in mind that it's really hard to actually finish a project. I've been there. Most projects don't succeed. Sometimes teams disband. Sometimes actual problems arise. And sometimes it just isn't worth finishing. But in the end, the projects that do reach their end-game cost money. So consider that you may never reach your end alone, and that if you do, you'll be spending money, not making money, until you get there. The offer to buy you is simply someone who thinks that you'll succeed, given the funding. But it's a known gamble to them, and it's only money to them. To you it's work.
So in the end, your decision is this:
- if you want the risk to be someone else's, and you don't want to spend your own money, and you want to get ahead, even if only a smallish amount, and you really want this to have a good chance, then take the offer.
- if you want to enjoy life, be your own boss, spend your own money, and fight for your right to party (it's really very rewarding), then turn down the offer. At the same time, figure out what price will change your mind, because there may be another offer presented.
I personally chose the latter. I refused to work for anyone else every again. I had my own money. So I pushed hard, and started a successful small business. Now, 10-15 years later, I've found myself starting up a second company with my remaining no time, and we've spent a crazy unheard of sum of money to get this thing going faster, because neither myself nor my partner has enough time to make this venture take the slow road.
So there you have it. I chose the "go it on my own" the first time, and now this second time I'm buying myself out in order to speed things up.
You can quit, you can fail, or you can finish.
what was your initial exit strategy when you started your company? take the money and run. move on to something else.
Sell Sell Sell
http://www.toomanyproblems.com
then do it. Try to negotiate that you may run certain aspects (e.g. selecting the team etc.) in the way you want it. I work at a research center of a large company (as a normal employee), and yes, the rules there can de a pain in the ass. On the other hand it gives you access to ressources, connections and people you can not imagine. If you want to give a talk at some institute to get people interested it will be substentially easier to get invited with a name of a big company. At some occasaions, your company may hold own conferences and ask you for recommendations whom to invite - a great occasion to figure out who is good. In my fields (physics) access to many journals is provided and a big library is present.
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.
We know where leadership by an anti-intellectual "strongman" who scapegoats minorities and likes boisterous rallies goes
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
Stop-Prism.org: Opt Out of Surveillance
Twitter?
That's what I'd sell out for. A million bucks (take home money, after taxes yadda yadda) plus stock options and some sort of executive position for $180,000 a year plus bonuses and health benefits (WITH dental). You can sell out now for that, or you can build the company to that state in 10 years. If you can't sell the company for what I outlined above, it's not worth your trouble.
moox. for a new generation.
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
There are certain core ingredients typically required for success:
* 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!
Let them make an offer, then give them a reasonable counter offer with NDA and covenants to not compete fully understood before you sign on the dotted line. So what if they want to buy you out? Make them pay for the privilege, enjoy the reward for your hard work for a little bit, then move on to your next big thing. It is obvious that you can't start a new business to do the same kind of thing a week after you sell out, but there's got to be something else out there that you can do without blatantly competing against Megacorp.
Alternative approach: you don't sell because after all, the company is your baby and you want to see it grow for a little longer. And you are more than pleased to license to Megacorp whatever it is they are really after. By this you prove that you are in for the business, that you are not just trying to pick a fight with them. What you don't want do to is be petty and tell them something stupid like "stick your offer up your ass, I will never sell out to youse bastards!"
I would propose a partnership, but that makes you rely too much on Megacorp and they can use this reliance to control you, so it is not really feasible. Either sell out, or offer them a reasonable license that gets them what they want, within very strict limits, and you open up one more revenue stream.
Pedro
----
The Insomniac Coder
And then I woke up.
It doesn't sound like they've made you an enormous offer, otherwise you'd be writing this article from your new yacht, right?
Instead, they've made you a sensible offer. Are you at a sensible stage of your life? Do you have commitments and obligations that would suffer if you didn't act sensibly?
If not, don't be afraid to go yourself. Instead, take their interest as a vote for encouragement that your product has serious potential.
Try to raise capital instead of selling out. Offer them a cut as silent partners. Don't be scared if they don't agree initially. Practise your negotiation skills and see if you can't come to a mutually beneficial arrangement.
Perhaps they could take a cut of your business in exchange for funding, office space, access to HR, legal & Financial resources, etc...
The big change in these types of arrangements is that you will have to formalise your processes (read: boring, repetitive, bloated) and start sacrificing some of your product to suit the market. This is not such a bad thing in business and is necessary to allow growth, quality control and delegation.
good luck.
-fodi
Sell out, agree to stay with the purchased company for a short transition period only (six months or so), and don't agree to any noncompete longer than two years. Make sure that the buyout payment is independent of any employment arrangement. Get legal advice on tis.
Then, now that you have some money, do something else.
Why? Because you haven't faced the marketing problem yet. If you do it on your own, there's a good chance you'll have trouble selling the product. Especially during a recession. And getting money for marketing may be tough.
If you don't take the money, this is what will happen: you're clearly doing something they want. If you turn down your offer, they'll just have to reinvent it. They'll probably even be ethical and clean about it so you won't be able to sue for IP theft. But you'll end up as a few geeks with principles trying to compete with someone who has real resources. At that point, you're toast.
If the offer is reasonable, take it. If you do not, they will probably bury you.
"Computers are useless. They can only give you answers."
-- Pablo Picasso
So you're in a position to make some money by selling your currently operating business.
You want to hire an attorney who has experience in mergers, acquisitions and sales, and you want to hire one or more business consultants to assist with the mechanics of the trade. You will probably want to enlist the help of one or more people with domain-specific experience in your field, if you want to ensure the success of the endeavor.
Slashdot is a good place to start if you want to get to the "First they laugh at you" stage of World Domination.
-fb Everything not expressly forbidden is now mandatory.
... 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.
Not just for the legal issues involved in IP, sales, business asset ownership, and tax consequences, but because many transaction attorneys are trained in M&A and can help you understand a proper valuation of your business, as well as what an appropriate employment agreement involves. Seriously, get an attorney. You know code, what you want, and your specific business model (maybe?), they will help inform you about the legal, tax, and regulatory consequences of your preferences and get a wider perspective on the situation.
Yahoo! buys Geocities and turns it into a piece of shit.
Any questions?
wooot! Island FTW!!!11! Sell out and live a dream life.
Don't listen to any of these armchair socialists. In the real world when someone wants to buy your company you sell. For any amount I might add. Reading your post I guess you are under 30. Sell, sell, sell. Or you will regret it later. You have to look at it this way: your first company is just to proof that you can build a company and sell it. It's like a good grade on your business building CV. Forget about the money. The money is nothing. I hope the big company puts some shares in the deal, or at least options. Shares are good at the moment in this market. The best thing about selling now is that you get an excellent CV. The next time you want to start a company with your track record you can go to any venture capital firm and get enough funding to start a real company with offices, employees etc. Then you sell your second company for the big bucks. After the big bucks you start your third company. This is the company that you keep as it is a combination of a great business idea and work that you really like. So your first company you sell. I am currently doing my third company which you can see here: http://usa.tiouw.com/
Speaking as the (ex)owner of 3 failed dot-coms, take the fucken money!!!!
Table-ized A.I.
You don't tell us what the product is, whether it is software or hardware, or something completely different. You don't tell us what kind of money is being offered, or what you think you might be able to make from it, in how many years, if you don't take the deal.
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.
Here's the point - if they're offering to buy you, they may well be doing you a favour. They could almost certainly do this on their own, and out-compete you.
You can tell by this move that they're interested in what you're doing, and if they have the kind of money you're implying to set up a team working on this, that money is there whether you guys come on board or not. So, much as you like being independent, can your little startup compete against a well funded competitor with a big name behind it?
Have a long hard think about that question, and try not to get emotionally attached to your company as you answer it.
As much as you like being independent, it may be better to take this opportunity, and move onto other things if you find it doesn't work out.
What I would suggest is to make a list of the things you really enjoy about being independent, and speak to this company about them. See if they are amenable to you guys having autonomy and control over this project. Find out what their long term goals are for it, and whether they align with your own. Get them to put in writing their commitment to the project and their goals, and to having you guys in charge - that way you should at least have a few years whereby you know where you stand, and can be confident of running the project the way you want, in the direction you want.
If that can work out, see this as a huge opportunity. Firstly you get the money and a bigger team to drive your project forward faster than you could have done before. You'll also get to make some good contacts, and probably learn a lot about how to run things like this, oh, and you get the cash too (depending on how big you think this will be, it might be worth insisting that your deal is partly profit related)
Then, if it does go titsup in a few years, and you don't like the way things are going, you're all in a good position to leave the company and startup on your own with a new project.
back in mid 80's I was also emotionally attached to my work and didnt take their money. After 20years I realized that it was the greatest mistake of my professional life. Yeah, I didnt like the rules and be my own boss. Now I am my own boss and still dont have the money that they actually made with someone else. You are not gonna be getting offers for ever. Maybe not even a second time. Take the money. now! You can always make another company of your own in a few years.
I worked for a medium-sized business that was recently purchased by a company ten times larger. The mega-conglomerate had a subsidiary in our industry that was roughly the same size. They paid a substantial premium for us.
One of the first moves megacorp made was to compare our operating platforms. Megacorp had a platform which they had stopped all improvements on and outsourced maintenance to India. They put it up against our system. The customers were calling the company up telling megacorp to go with our system. Our platform was demoed to the business leaders who then unanimously agreed to use our system. Our system had features that megacorp had twice tried and failed to implement! Our US operations have consistently maintained a 30-40% profit margin. In short, our platform put megacorp's platform to shame.
Megacorp understood this and decided to switch the company over to our system. That was the last intelligent decision megacorp has made.
Our platform developed because the company had a culture that brought the right people together and encouraged improvements to the system. Instead of learning from this, every move megacorp has made since the acquisition brings us one step closer to the operating model that developed megacorp's inferior platform.
In short, if you want your soul crushed while being assimilated into a bureaucracy where you spend 30% of your time following useless rules, then by all means, sell.
If it is a business, it is about money. Otherwise it would be a hobby.
Also if they buy you and employ you, you would be an employee and can be fired. The moment you sell it, it isn't your baby anymore. If there is a potential of big money, perhaps selling is not the way forward, but rather selling part of it. Think Dragons Den.
The advantage for you is that you get the power of the big company. The advantage of the big company is that you still be financialy comited to the product so you will work harder and won't quit if something else comes along.
You also say it is a group of friends. Realize that in the long run working with more then 3 people will be very unlikely and even 2 won't be always easy.
What also could be possible is that the company wants to buy you to put it on a shelf and let you rot there.
Depending how many people are involved, I would look at selling shares and if there are more then 3 friends, sell the whole thing, take the money and then see if the offer to work there is good as an employee. I would realize that I should be making a LOT of money, as I would be one of the experts on the product.
And also look at how the shares are now devided compared to the workload and what ig corp has to offer. Are you all geeks and no sales people? Is everybody developing and nobody reasearching? Is everybody pulling their weight? If the latter is also not true, sell, because it won't change and it will be much more frustrating along the line then now.
And one last word. If you sold it, it isn't yours anymore. It will be Big Corp who owns the next Google or Playboy, although I am sure they will never let it grow that big. What makes things grow big most often is one individual behind it. (Microsoft is an exeption, but that is a marketing company)
Don't fight for your country, if your country does not fight for you.
Think about this: Why would Megacorp want to buy whatever it is you're making unless they thought they could use it to make tons of money? It may take longer, but if you believe that the work you're doing will result in a successful product then there is FAR more potential for wealth in that than there could possibly be in selling at this early stage. People do not gain real wealth by working for others. Real wealth is created by working to make yourself rich, not some megacorp. Believe me, if you have something truly extraordinary, the money they will pay you is much much less than the money they will make selling it to others.
Keep in mind the history of the industry. For example, Microsoft is built on the process of buying work from small-time operations and using those products to make billions in revenues. In fact, the company essentially got started by doing that.
There is some reason the company wants to buy you out. It could be competition, or it could be you are onto something they think they can profit from or market themselves. There may be some aspects of the thing you are working on that they would like to own the IP on as well. Give this very careful consideration.
I would highly suggest you get a lawyer to look over any of the documentation/agreements before signing anything away. Make sure that they explain things in detail so you can make an informed decision.
If someone wants to buy it now, it is possible someone else may want to buy it later on as well.
It is very possible you may not get any other offers or another business may figure out a way around your IP.
Its possible if you don't accept it, some animosity can build in your group.
Regardless, negotiate don't take the first thing they offer you and whatever you do make sure you enjoy yourself - no regrets no matter what way you go. Good luck.
Whatever it is you do,
If you say No, can they throw gobs of money into replicating what it is you do? Can they do it better? It's a sad thing but sometimes, it really is that easy. Even great ideas can be brought to market quickly if you throw tons of money at them.. Can they hire 100 people to crank it out? Even if it's only half as good as yours, can they market the crap out of it and get the customers first?
If so, make sure you and you alone own the ability to do what it is you. Get a (barf) patent if you don't have one.
If your idea is something anyone can do better or quicker with gobs of cash, unfortunately, you may want to sell, even if it means sacrificing your idea. I wish it weren't that way, but worst case, you could end up in the end with nothing.
God, that sounded like a Conservative.
Fuck the man, working 9-5 is a prison sentence.
Take the money and leave. Do not stay in any position where you're dependent on them. If there is any non-compete clause have it reviewed by an attorney. Start something new that you want to do.
I'd go on a Vegan diet but the delivery time from Vega is too long. --brownkitty
First, let me tell you that I have been involved in such deals and searches for such deals. I am posting anonymously because my name would be recognizable to folk who might take exception to my telling you these truths.
Being acquired by a company many times your size is perilous and seldom works out. They can play statistics. You can't.
As others suggested, you need an experienced attorney, a financial advisor, and you also need an experienced M&A person.
To find a Mergers and Acquisitions person you want to find someone who did it for the big companies because they provide the insight into what Megacorps think. Fortunately, the recent collapses in finance, in automotive, and manufacturing mean that some interesting folk are at loose ends right now.
You need to call big companies that have grown by acquisition, track down the M&A people, and ask them for referrals to good folk who may be available to help with your situation. That will work if you make enough calls and the list may converge pretty quickly. You only need one, probably part-time, and probably temporarily.
You will be outnumbered in negotiating strength. Megacorp can put together a pickup team bigger than your company over a weekend. Thus you must focus like a laser on your critical items.
Here's the trick: There are 3 categories of things to deal over.
Achieve--What do I want to win?
Avoid--What do I want not to happen?
Preserve--What do I want not to lose?
And there's an important fallback position--what is Plan B?
These preceding items may sound simplistic, but you are little--simplicity is your friend.
Deals don't fall apart on one issue, they fail to create or maintain an acceptable package. Yours will not be an exception. And that's when plan B makes the difference between survival and extinction.
During negotiations, your key people will suddenly stop making any progress on your project while they negotiate and prepare for negotiation with Megacorp. You will work harder and make less progress than ever before. Remember, the people on the other team do this for a living; you get to do it as an add-on.
If I have made this process sound onerous and draining, I have gotten through to you.
Many people have ignored all such advice. Among them there were still winners and losers. But they did not get to choose which they would be.
Good luck.
Not just asking slashdot :) Which megacorp? they had other acquisitions? how well or bad went for them? And what happened to their "child projects"?
The 1st megacorp that comes to my mind is google, that bought a lot of companies, and some of their products got dumped, others got integrated into bigger projects, and other got their own life and meaning after that. And, of course, the tale of Oracle->Sun->Mysql
...renegotiate so that you maintain some creative control anyway. If the deal falls through....well the money wasn't that important.
If you could sacrifice what you're doing right now in order to get money that will let you do a whole hell of a lot of other things, well take the money.
It's not that difficult a choice really. The difficulty is I don't think you do actually know what's more important to you.
These posts express my own personal views, not those of my employer
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.
8 of 13 people found this answer helpful. Did you?
Offer them an exclusive non-compete contract for your services for a fixed term, but you remain a third party to the megacorp. As a contractor to their company you retain your IP, freedom and control of your company.
If they don't take this offer or at least seriously consider this as a plan B, then their plan is evil.
After logging in slashdot still does not take you back to the page you were on. It's been that way for 20 years.
You probably have something valuable to have a mega corp approach you. Don't sell more than 90% of the company -- keep at least 10% for you and your buddies. Negotiate a certain percent of revenue or profit from sales of your product for you and your friends.
Remember what happened to the guy who sold MS-DOS to Bill Gates for $10,000. Don't be a sucker -- businessmen are very smart at making deals.
I work for a huge company now. The small specialized company I was working for was sold to this big large company.
The two guys who sold it are both thinking of leaving and starting something else and while I and another developer get paid more now, the work environment before it was sold was definitely better.
I don't think the guys who sold it necessarily regret it as they made great money, but it wasn't what they thought it would be either. Every big corporation has tons of politics and as a acquisition, you are going to be low on the totem pole.
It really depends on the amount of money being offered. I was once offered $500,000 for a business that was barely turning over that much. My business partner was reluctant, and the deal fell apart. With the benefit of hindsight, I should have jumped at the offer. Offers of money don't come easily. If the money is big enough to pay a big chunk of a home, jump at it, and then start planning your next venture.
Up your selling price and then buy your yaht.
1. sell the company
2. work for some time
3. if that doesn't work, get fired (don't quit!)
4. start another company with the money you earned
5. develop the product you want, the way you want
6. ???
7. profit!
I've lived at Big Fortune-10-types, small mom-and-pop-places, and the medium companies in between. I've worked for myself, I've started companies, and I've closed companies down. Here is what you should consider.
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.
A megacorp wants to buy a start-up with virtually zero sales? Exactly what are they buying?
Well, you don't give much away so its hard to tell if "going gold" on your own is as viable as you think it is. In any case, I would be asking myself the following:
Does the offer pay out all our current business and private debts and leave each of us with enough to be debt-free home/land/condo-owners?
Assuming you take the offer, do all of you have guaranteed paying work lined up (or investors for your next venture), such that each of you makes a decent living (at least as good as you've had so far), for the next 24 months?
Me, I'm financially somewhat conservative, so if I was in your shoes and answered YES to the above questions, then I would unhesitatingly take the money and run. I would probably insist though that some (minority) of the payout be in the form of shares in the buying firm (to retain a small stake in the resulting financial rewards the new product will potentially bring)
take the money and run!
I dunno, seemed like the right song idea at the time... lol.
...even though all of us agree that if we finished our thing, we'd earn more than what the corporation has offered us.
If you know there's a good chance to finish your thing on your own - do it. If there's a great risk to fail - maybe you should think about accepting the offer. That's how I'd think.
It seems you answered your own question here, or am I confused?
Look at 'stock options' with the settlement, but mostly hire an attorney! And listen to him/her!
Sorry, this just seems too 'stupid/simple' to be more than basement-dweller ego/dick stroking...or I am missing something obvious here?
Down With Slashdot BETA!!! I've been around the corner and seen the oliphant; you can only abuse me from your perspecti
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, people thought that their stock price was going to continue to grow so big that it would eclipse the entire Time magazine: Warner Bros. studio conglomerate. Now they're just the lingering bad smell of a fart. Can you imagine how bad Steve Case would feel now if he didn't sell out for billions back then when he was more popular than Elvis? AOL is nothing now, but he still has...ALL...THOSE...BILLIONS...OF...DOLLARS.
Sell out now, fool. Why are you even asking us such a silly question? If you sell out and the business is good, you'll still be a company god and get even more money through your stock options and bonuses. If the start-up tanks, you'll still have all the money and you can walk away with none of the problems. Think of your kids. No kids yet? Well then sell out, find a beautiful wife or two and go make a dozen. and don't forget the pre-nup.
The basic premise is easy money now or a chance for more money later. What do you want? The thought of money gives rise to greed, and it clouds your judgement. Recognize that, and ask yourself what'll happen if any of a dozen things go wrong.
Ask yourself things like: Would you rather go down with your own ship than quit and see your promising product wither and die on the vine because of mismanagement? Neither has to happen, but if you have to choose between them, which will it be?
The megacorp is likely looking for a high-risk low-cost bargain, ie buying you now times the chance it'll be nothing is probably cheaper than waiting until your company'll cost them eight or more figures later times the chance that'll happen, figured against their desire to have something like your product. At least in their reckoning. But what do you reckon?
Ask yourself, what can they contribute to your thing? And, can your crew work in a bigcorp red tape environment? They'll be big in marketeering and selling their stuff, but will they be able to sell yours?
Megacorps are usually outfitted with lots of career mediocrists held down in tight wads of red tape (the good people either get promoted to executive management or quit), which is why they like to buy other, smaller, companies with new ideas. But would getting bought actually help your idea grow?
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.
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.
Some drink at the fountain of knowledge. Others just gargle.
This sounds like one of those Penthouse letters that start, "You're not going to believe this, but when my sister came home from college she brought this girl called Chastity with her."
I've calculated my velocity with such exquisite precision that I have no idea where I am.
and more than a hundred opinions on what you should do with your <insert whatever good OR bad situation>.
Ultimately the person furnishing the opinion does not reap the consequences, so it is very easy for them to state their opinion on what you should or should not do. Despite the individuals attempting to be helpful, I found this rather annoying at times when buying my house a couple years ago, and currently looking for work.
My suggestion: there are definitely some good bits of advice for you embedded in the overwhelming heap of less useful information. Dig out the tidbits of gold from the suggestions here, from your partners, friends, family, lawyer, accountant, etc.
Then make your own decision.
Ok, here it goes: 1) This one is more for your future business: Dual-license your code (GPL/Proprietary), just like Troll-tech does with QT, this way even if a hostile competitor acquires your company just to shelf your product, the code will live on in the hands of volunteers. 2) Don't chase after IPO, seriously Google got pretty far while staying a private company, and while it is not as common anymore, some of the multibillion dollar companies are private, for instance Mars,INC - $20 billion in sales, entirely private. This way you can say a big FUCK YOU to anyone who approaches you with unwanted intentions, and what's more important you are not responsible to any stupid SHAREHOLDERS just yourself and your customers (every time a subject of company ethics comes up here on Slashdot there is is always this excuse - they HAD to the evil thing because by law they must maximize shareholder income).
US-UK-Israel: The real Axis of Evil
The big question is "should you bank or gamble?" - only you can judge this but trust me - banking is always harder than you think so if you have a real offer then consider it seriously - gambling always feels attractive to people who place bets
And yes - hire an attorney - if you can't afford one then you aren't really playing yet.
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.
Your enthusiasm for your current gig puts you in a very nice position. Since you are not especially motivated to sell, you can drive a hard bargain and safely explore the limits of what the buyer will pay. If they get annoyed and walk away you go back to doing what you love. Win-win.
So, I would say, put your heads together and come up with the lowest price at which this decision would become a no-brainer, where you could all move on without regret. Make a counter offer at that price. Then go from there. The very least you will get is additional information about your negotiating position.
Just remember, you have the upper hand in the negotiation because you are happy to walk away.
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?
As a rule of thumb, the earlier in your development/marketing cycle you sell out, the less you get or the greater the amount you have to give away for a given amount of money.
Choosing the best time to make this move is one of the key factors in realizing the full potential of your business.
of what you're hoping for then accept. Unless you have signed contracts with customers and you have the funds to take it legal if they go back on these. Trust me - been there more than once. Take the money - invent something new again but this time have it properly capitalized
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.
Don't let them get 51%, if you can help it. If, as you say, you really care more about the project than about the money, you might very well prefer to see it die than to see it killed by a large corporation.
Of course, this depends very much on the company, and on your level of trust.
But that's my gut reaction -- hold onto control. If they want to fund your sales and keep a cut of the profits, that's fine, but don't put them in a position to dictate what you're doing.
Don't thank God, thank a doctor!
For the quantitative aspect of the situation, you should examine their offer and try to figure out how they came to this figure. What is it in your company that can make them money? What synergies would you provide them? Do they have a solid marketing team to sell your product? What can they do that you can't, and what can you do that they can't? That way you'll have an idea if their offer is reasonable.
Now, let's reverse the question. How do you value your own company? Do you have the resources and know-how to make it into a $5M company? $100M? You've worked hard up to this point, but this is in the past now. Are you confident enough that you'll be able to get to a point where you actually make good profit?
Now the important point is that if they value your company higher than you do, you should sell. Period. The fact that they are offering something for your company is no guarantee that you'll be able to make nearly as much on your own. They might be willing to give you a lot because you're worth a lot to them. You might not be worth so much without outside help.
As you mentionned, money is but one factor in your decision. Still I hope this helps a little...
You are young. Sell the company. It will be painful but useful and for several reasons. It establishes a track record, it gives you (I would assume since I don't expect you to sell it for peanuts) some well deserved cash that gives you some level of independence and in the process you will learn a lot about how NOT to do things.
Just do it.
I've had a wonderful time, but this wasn't it -- Groucho Marx
Look, If a megacorp sees something in your company, there must be value in your company. Unless this company has extra money to just toss around, they definitely must think that they can at least double their money on buying you out. The question is, what are they actually buying? Are they buying a concept/dream? What differentiates you from every other biz in your market? They are going to play off your greed. They expect you to want instant gratification by accepting a huge buyout along with an agreement to work for them. Look, You said you were young, and your colleagues are young. If this deal is coming up now - Imaging what will pop up in another 90 days. Also, did you sign an NDA? (Well, if you did, your post to /. is probably not a good thing). If you didnt, take their deal to another megacorp and offer them the same thing for 50% more. If they see the value in it, they might do it.
You are the one at the advantage here because you are the ones making the decision.
Talk to an attorney; Get a business counsellor to find out why they want to buy you. What's attractive to them should be what is attractive to you.. . .
Remember - 51% is all that counts.
...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!
What's fair money?
How will a sell affect you? Do they want you bad enough because they genuinely like what you produce and want to offer the product to their customers. Or, because they want to kill off competition beforehand. Or, because they are planning ahead scenarios of what will happen after the crisis. What if you don't sell? Will they attempt to crush you?
You're probably doing something the way it should be done. Or you're the troll of the month. Anyway, all the best.
I hadn't the slightest objection to his spending his time planning massacres for the bourgeoisie... (P.G. Wodehouse)
When are you going to get another chance to scoop an investment out from under Megacorp?
They obviously think that the company has something worth more than the money they are offering or they wouldn't offer.
If they are stupid you don't want to work for them. If they are smart you should probably invest in your self anyway.
If they bought you they own you and they would insist on a non-compete so you couldn't even go back out on your own.
You sound emotionally driven, you want to be happy. Megacorps must grow profits. It is literally illegal for the officers of the company to make any choice favoring your happiness over the profits of the shareholders. I don't think these are compatible philosophies.
The sole exception I can think of is if you wanted to bail to do something else with the money.
...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.
There's no failure quite as dissatisfying as a complete and total solution to the wrong problem.
...and made the biggest mistake of my life.
4 of us came up with an online image hosting and sharing system that connected online photo albums with big photo printing houses. We were too early to market (zero digital camera penetration and no camera phones) but a German ISP wanted our browser-based image editing stuff. We'd only taken $1.3M in seed funding so we still owned almost all of the company. My personal share of the deal would have netted me $8.3M.
We turned them down.
Somehow we convinced ourselves that if we were worth $40M after 2 months we'd be worth $200M at the end of the first year. The offer gave us an inflated view of what we were doing - we really thought that we were breaking new ground and that success was inevitable.
We weren't and it wasn't.
I walked away 18 months later with less than $60K.
Once in a while I still lose sleep over it. If I had the chance to go back I'd take the cash and use it to build something new without the need to go looking for funding. Good luck!
I'm no expert, but I am studying acquisitions in B-school right now. Some of the other folks here have already posted some good advice, like figuring out what's really important to you and your team and finding good professional advisors. It might also help to try to understand why exactly the big company wants to buy you. There are many potential reasons: access to your tech, access to potential new markets, access to your team, rounding out their product portfolio, keeping your tech out of competitors' reach, eliminating competition for something they've already planned, etc. Some of those are more likely than others, given your story. Figuring out what they're after might shed some light on whether their plan is compatible with what you want or not.
You should know that a lot of acquisitions do fail, in the sense that the buyer and/or seller don't get what they want or expect from the deal. This can happen for many reasons, not necessarily due to deception. For example, things can go sour because of a poor cultural fit between the two entities, or because the people responsible for making the deal aren't the ones who will actually have to implement it. On the other hand, things can also work out great for both parties: you each bring something different and valuable to the table, so you make something better than either of you could do alone. Big companies have resources for things like hiring, marketing, etc.
I don't know what you should do, but I will say that either choice will be a learning experience! Also, for what it's worth: I would put a lot of thought into the non-monetary aspects of whatever deal is on the table. Not that the cash isn't important--it is--but keep it in perspective. Big paychecks and cash in the bank are wonderful things, but I've always found them cold comfort if I didn't like going into work every day.
Good luck!
3. Profit.
-David
If you do you will become Anonymous Better Off Corporate Drone rather than Anonymous Entrepreneur. If Better Off beats Entrepreneur then go for it; otherwise hold back.
Either way, best of luck.
In Megacorp, you'll learn that:
1) (first day) That's not your job. We want you to do this instead. But, thanks for all your hard work. We just need someone new who can take it to the next level.
2) (first month) Do do this well. Why don't you keep doing that. You know, over and over and year after year.
3) (years later with your days crowded with minutiae of the company's improved process for the thing you do every day) We really don't need that skill anymore. What else can you do?
When you're supported by the mighty resources of Megacorp, the skills you don't get to exercise atrophy.
Unless its a boatload of money and you can quit after you train the new guy and start a new company, you might want to keep doing what you're doing.
Though, you'll have probably signed a "no compete" agreement so you'll have to think of a different product for your new company.
If you wish to serve Megacorp, get a lawyer to read the contract before you sign anything.
You should get a lawyer with many years of experience to negotiate the price too since they probably low balled you.
A few million isn't enough.
You need at least $5M and $10M is better for "do whatever you want" retirement money.
Don't forget that life gets in the way and things happen. You get married, have ungrateful kids, spoil everyone, give to charity. Some would say that it is a sin not to work hard all your life. I'm a retired atheist at 40, so travel is my life now.
And alimony.
Been there done that.
Got bought out in my early 30s (later than you). Got $15m pre tax for my share of a company that took 5 years to build. (5 *hard* years, might I add). Have spent last four years spending time with wife and kids. In no hurry to start another company, but feel it will happen sooner or later.
Recommendations:
1) Make sure they are serious, and negotiate assuming they will pull out at the last second (either due to them, or circumstances beyond their control).
2) Take the money. Even if there is a non-compete, you will still have lots of time in your life to do something else. Just compare the money you will get to your current asset situation. If the money they are offering is more than 100x your assets, then take the money (it sounds like you are not so long out of college, so that might be a safe bet).
Moral of the story: Better a bird in the hand than one in the bush.
The funny thing about money is that the curve of happiness against fortune flats out pretty early - i.e. having more money does not bring the desired effect of being even happier. In other words, not having money is surely a motivation to start having it and live a richer life, but early on from there, having more money does not mean anything anymore with regards to happiness and satisfaction. And I am sure you have enough to live a decent life now already. All that will change is that you will be able to dine at restaurants perhaps twice as often, go to cinema twice as often, travel twice as often. In return you submit your company to buyers will, and just sold your dreams to someone most likely not so idealistic about them as you were.
Point is, if you make money with your company and are happy, continue so and show the finger to those monopolists. Don't let yourself by fooled, they are not offering to buy you because they wish for a better future for you and your friends. It is about fear and control, basic emotions prevalent in humans who think too much life is about survival.
I am a lawyer with a fairly good amount of experience with M&A.
In the sell side things are usually simpler, since you donÂt have to worry that much about a due dilligence process.
You say the money is fair enough? How did you reach this conclusion? Have you asked someone to valuate your company? Even if you have been only doing R&D, you should get someone to valuate that for you and give you some number to work with and help you the negotiation process.
I would also recommend legal advice of some sort. Maybe you donÂt need or canÂt afford a magic circle firm or 1000 USD/h lawyers, but you should definetely have one with some experience to help you with the negotiation process and agreements.
If money for lawyers is short, factor that in the purchase price.
Even being on the sell side you should also consider what is the company buying you out. If you say itÂs a megacorp there shouldnt be major issues regarding their financial condition... but who knows nowadays.
Good luck and congrats.
On the face of things, I think you shouldn't accept the offer. You clearly value your independence and self-determination, and if you're confident of your statement that your project will be worth more money in future, stick with it! But whatever you decide to do, come back in a year or so's time and tell us whether you think it was the right decision. That would be interesting.
Did this exact thing in 1998. My wife sold her one person internet company running out of her home office to a big corporation. I'll tell you the same thing I told her, which turned out to be *way* too true. Once you sell the company, it's no longer yours. Seems obvious, but the repercussions are many and varied.
The big thing to know is that corporations have no motivations to honor their contracts. So, they don't. Which means you have to take them to court over everything. So *always* insist on a clause in any contract with a corp. that they pay for any and all court costs no matter who does what. This doesn't incent them to honor their contracts, but it does make it much easier for you to sue them as it becomes necessary. And it will become necessary. It will.
The other big thing to know is that corporations lie their asses off. All the time. Often for no reason other than an exercise in power. You'll never *really* know what's going on or where you fit into their scheme simply because they won't let you know. Since you'll *never* be "one of them" because you were bought, they'll never let you into the inner circle. They just won't. So expect to be lied to, especially about plans for the future.
Finally, you'll be expendable. Corporations buy companies all the time. I'm still just amazed that they'll spend the money to buy a small company then fire everyone and liquidate it. Just to get rid of competition. They could easily do that to you guys. Because once they buy your company it's theirs to do with what they will. They are perfectly happy to kill your baby if it suits some purpose of theirs, no matter how trivial.
So the take away message here is that once you sell your company it's no longer yours. Remember that.
If you value independence more than money... then you already made your decision.
Why would you give up something you value (independence) for something that doesn't mean much to you (money)?
If you had super powers, would you use them for good, or for awesome?
...your new corporate overlords!
There is some excellent advice here. I have built and sold several startups to mega-companies. The advice on Slashdot is varied, but there are some great kernels here.
On lawyers:
First: You should have counsel, but use it very sparingly.
Second: You should not look to them for advice, they rarely know anything about business, they will focus on all the bad parts of the deal and what can go wrong. You will spend a lot of money as they talk forever and you think they are your friend.
You have to do what is right for you (and your team). I.E. this is a life question- somethings to consider:
1) Are you so passionate about the technology/project that you will spend your life doing it? If so, maybe you do not want to get bought out. Be aware, many entrepeneurs are just that, regardless of the technology - meaning you might find something else to be just as passionate about in 12 months.
2) Is the money enough? Only you can answer this question, but I will suggest that individually the first 10m can be life changing (good or bad is a different question), the second 10m will not have as much impact. So, getting over the first hump as early in life as possible can lead to some interesting results.
3) Stay focused and passionate on your business through the up/down of the negotiations. This means you have two jobs- the company + the negotiations.
------------
Is it just me or is there something about the story that doesn't ring true?
Mega corporation, mega bucks but no sales?
Technology -- do you mean software that does something so groovy that Google/Microsoft/Apple/IBM/Oracle can't imagine how it's done?
Or is this some new website that will sell ads?
For now I'm holding on to my venture capital stash
I have friends that have gone through this...
This doesn't sound like a winning situation for either party, here's why:
1) You don't have an IP and you don't have customers, so what the megacorp is buying is your services. Basically, they are hiring you and giving you a job. If this is the case, The purchase price relects future potential (as a competitor). Considering the money for future potential, you are most probably going to be on the losing end of the deal.
2) Once you are absorbed by the borg, I mean megacorp, you are done. You lose all ability to make choices for yourselves. You have lost control to choose your own destiny and there is a 99% chance you will end up leaving and just starting another company all over again. - This may not be a bad thing, just a pain and you will get tired of doing this after the 1st couple of times.
3) Be very careful of any thing that you sign - especially if it limits your ability to quit, any non-compete agreements, any thing that limits your ability to work for another company (or a new company). Trade secrets - if you do leave, you may not be able to pursue new ideas, if the megacorp is already doing that. - This you probably won't find out until you have joined them - by then it will be too late.
4) In the unlikely event that the amount of money would "set you up for life", then GO FOR IT. Live off of the interest and enjoy yourselves. Life is too short to be spent entirely in front of a computer screen and keyboard - seriously dude, enjoy life - it's wayyyyyyyy tooooo short.....
What protection do you have that they won't buy you up, string you along for a bit, and then quietly dispose of you taking all your work?
I worked for a games company for 2 years that wasn't even 'bought' but invested in and they still managed to do that to us by pushing us to hard targets for reinvestment, that required the expenditure of a lot of money (including advertising) and then though all targets were EXCEEDED by a large margin (very large beta userbase etc), they then promptly declared a month before the review was due, that they were not in fact going to reinvest whatever happened.
This left my employer with a substantial debt, that after a month of letting him stew trying to find new investors, they 'kindly' offered to write off for the sum of everything. All hardware, all IP, the lot.
Later we discovered our investors had cut a deal with Sony to produce similar games, so we believe they took it all internally, though to the best of my knowledge they ended up not finishing or releasing anything based on our work.
Sell, take the money. It's a fantastic opportunity financially and career-wise, since it must look good having your own company bought out by Megacorp.
Leave Megacorp at the earliest opportunity and start another company, or retire if the money you made from the sale to Megacorp was enough :-)
Idealism is a great thing to have, but remember that it's part of you, not your company. You can take it with you wherever you go. You can't guarantee that your company will be here next year let alone in 20 the way business works.
Sell!
Stick Men
If this money can help you to create a new and real (money) independant company why not!
Just think about your employees (or futur ones), they are the hearth of any business.
First: You are young and stupid. That will improve with time and experience, but right now, you don't know what you don't know. You are simply over matched by the pros at the big company.
Second: The money they are offering, no matter who they are, is a low ball offer. You haven't a clue what your company is worth. What ever they've offered you is probably not less that 10 times less than your company is worth. You need to find out what your company is worth, but not from a potential buyer. -- Another poster hit the nail on the head: Money lets you do whatever you want to do. It gives you choices. Whatever your company is worth, if your ideas are good, it will be worth more the more mature your product is. If you can afford not to sell out now, wait and get a better price later.
Third: Whatever terms and conditions are attached to the offer are certainly designed to keep you attached to the company, and your buyer, for a long time; are intended to keep you from working on anything similar for a long time; intended on keeping you from working for any potential competitor; intended to keep you quiet about it forever. If you are having fun now, know that the fun stops as soon as you sign off on the sale. You lose control of your invention and become a wage slave immediately. You don't get to make requirements, architectural, design, or process decisions about it any more; those decisions now belong to the buyer. Can you live with that?
What to do? Stop talking to the potential buyer about your product. Whatever you do, don't let 'em see the source code, especially if the big company is Microsoft. Get a lawyer that specializes in acquisitions of small startups to watch out for your interests.
This is the business school version of a Penthouse Forum story.
You are welcome on my lawn.
There's been some good advice here (rather shocking for /.) but I thought I would throw that in. Also, what are the repercussions if you don't take their offer? Will they squash you like a bug?
BTW, do you have a good attorney well versed in these matter?
putting the 'B' in LGBTQ+
Robert X. Cringely has a tale about Neokast which turned down a nice offer many moons ago. Just something to ponder over:
Cringely.com
Think very dispassionately about the 10 year revenue generation from A. an independent company, B. a product inside MegaCorp. Get outside help on this question. It is very hard for a small company to generate a long term growing stream of revenue. It is also common for large companies to completely mess up sales incentives and marketing for a small product in the total scheme of their big business. Forget about profit in this analysis - that will come if the revenue grows a lot. Then trade that picture off with your team's preferences about small/independent/"risky big bang or nothing" versus large/bureaucratic/"take some money now". People's personalities can fit one or the other of these risk scenarios, but the financial stakes can push the team one way or the other - despite personalities.
Is the money enough to continue making your own rules? Take it. You're little company could be the next Google or the next Boo.com. You'll never know. But you do know how much money they are offering right now. If it's enough (some mean two-digit million sum of euros or so) to basically retire for the rest of your life and you have a family and/or other non-related interests that wouldn't be affected by a non-compete: Take the money. You owe it to the people who depend on you. Statistics say that you'll more likely to fail on your own than succeed. If you're doing software and/or services, do some good and do a Mark Shuttleworth. Take money, do FOSS for the rest of your life. That's somewhere along the line of what I would do anyway.
If you're doing hardware: Take the money even more so! Hardware is way more difficult, and much easyer to botch.
I know the problem: You've finally gained critical mass and just have become independant on your own terms for the first time in your life and along comes a huge corp with deep pockets and tempts you. That's a big stab at ones pride - I can feel the conflict you have. Never the less: Game the situation at the best of your abilities. Take the huge wad of cash they're offering, negotiate a bigger one if possible and avoid all NDAs and non-competes that enable them to come after you in 3 months and take away what they paid you for it.
Once you have the money use it to do good and fun stuff and live your private life like you would if you hadn't gotten the deal - then you'll live happyly ever after.
My 2 Eurocents.
We suffer more in our imagination than in reality. - Seneca
Get the cash while you can, then go start something else. Rinse and repeat.
---- Booth was a patriot ----
I've been in a similar situation before but in my case, we decided to opt out of the purchase. It was the right decision for us at the time but I wished it had worked out better. Make certain, if you proceed, that you have negotiated residual rights to income gained from your intellectual property over the course of the next 5 - 7 years. Make certain that, if MegaCorp should default on any of its payments, that you get to walk away with your IP. If they're defaulting, there's a lot going wrong. Talking about a loose integration roadmap with the MegaCorp's principals might be a good idea too. Good luck!
...the strings will probably come in the form of some non-compete. You might not be able to get the money without agreeing to a non-compete, but make sure it is clearly limited in scope and duration.
For negotiating the exact terms, parent's advice of hiring a lawyer is probably a good idea.
C - the footgun of programming languages
Face it, the better your product is the more likely it is that someone is going to sue you for patent infringement. If it's not about the money, then the company can help you bring your dream/product to fruition.
You're young. Follow your dreams. Build what you want, how you want, when you want. Screw the money. When you're older with real responsibilities, you will not be able to afford to follow you dreams in an unfettered way. Youth == idealism. Pragmatism comes in time.
I've worked for 30 years at tech companies ranging from 5 people to 5000. I prefer small companies. I've participated in two startups, been at a company that was bought twice.
The two companies that were bought both had the same thing done, which I haven't seen anyone (here or elsewhere) talk about. Say they buy you for $10M. This charge shows up on your part of the mega-corp's books. The purchase price is charged back against you. This is a big lump to swallow. Be forewarned. A year later, they ask you why you aren't profitable (as a group) yet....
Other details--you didn't give much detail, but I'm guessing you don't have a skilled business person on board. Mainly I'm talking about a professional negotiator--not one of you who thinks they are 'pretty good' at negotiating. I guarantee that if you don't have a pro, the money you're being offered is *far* below what they would consider. If you're having doubts, counter with an offer so high you'll be very happy if they accept.
Take the money regardless. Jack up the offer, live through the bit where they make you pay it back, put up with the large corporation. Then leave, do another start up. They're lots of fun, you'll have a chunk of money... Don't get tied down by a contract for more than 6 months to a year.
Steve
I own a small company myself which is just getting up on its feet - publishing rather than software, though (it's about to release its fourth book). You're reading a lot of information here that can probably guide you quite well, so I won't repeat it.
But, I will ask this: does it feel right?
That's the thing - you have instincts for a reason. If it doesn't feel right, then there is probably some subtle clue that your subconscious has picked up on that things aren't as advertised, and you should be listening to it. So, look at yourself in a mirror and ask "Does this feel right?" If the answer is "yes," go ahead with it, but if the answer is "no," I'd suggest turning the money down, or at least digging a lot deeper before you make a decision.
Also, do your research on this megacorp. Find out who they are, and how they've treated their acquisitions in the past. In all honesty, I have to wonder why they're contacting you at this point in time. From your summary, you haven't released a product yet, so essentially you have no track record - they have no idea of if you're going to be profitable or not. To me, interest like theirs this early would be a warning sign...your mileage may vary.
But, at any rate, find out if it feels right, and trust your instincts. As I said, you have them for a reason.
Robert B. Marks
Author, Demonsbane in Diablo Archive
...in the same direction, or in some other direction. Money in the bank is freedom, in some respects, and will allow you to be creative in this endeavor, or in some other endeavor. I find security in many places - my wife, my kids, my philosophy, but just as important, it's nice to have that 50 grand in the bank and my 401 all ready to tap. Not having to sweat the mortgage, food, health insurance, car payment, etc frees the mind to wander to other places.
Venture capital won't buy you out they will instead 'buy in' - that is they will put money into your company in return for equity. That means you have capital to invest in getting the product to market, and the downside is loss of some amount of control and equity. If you need this capital and can work with your new co-owners this can work very well. However, if it doesn't go smoothly there will be a lot more pain. You only get a small fraction of the investment amount to keep personally.
The other sort of deal which is to buy you out by purchasing all or most of your shares is actually much rarer. In this case you have a contract to stick around and you get to keep the money even if things don't pan out so well (maybe you lose some bonuses but not the main purchase amount). You lose control of future developments and if things go really well you won't get much of the upside.
I've personal experience of these. My comment is that unless you need the investment or buyout money, you will be happier not doing a deal.
In theory, there's no difference between theory and practice; in practice there is.
stay lean. Stay lean in your personal lives and keep your development lean. By staying lean you can change directions quickly and respond to problems by altering tactics and even potentially abandoning entire lines of development.
Once you pickup weight in the form of staff (who will be dependent on your consistent revenue) you will have additional pressures on yourselves and your product. Large customers will also put demands on your product that may not be beneficial to its overall health. Pressure of legacy support can also derail development plans.
The more gradually you grow in your initial phases the higher probability you will have of laying a firm foundation to grow rapidly on. You hope to eventually get big. Putting it off initially should help you control how you grow when you finally do take off.
[signature]
The question didn't really give any serious info. Things like what the product is, how big each company is, the amount of money on the table, who gets to make the final choice (does it come to a vote or can one person pull the plug).
The only important piece of info I can see here is that you have a company that isn't making any sales yet and someone wants to buy it out. Seems odd. But I would sell, sell and sell. You've got a product no one is buying and someone wants to buy you out, take the sure thing.
If this is a know big corp you could look into their past history before deciding. If its for eg. Microsoft then just sell it, quit the company and start over. If its on the other hand is a benign company like Google you have nothing to fear from telling them no thanks.
Its really hard these days being independant with all the software patents flying around in the US. Any big company in software has broad invalid patents that they can use as an excuse to bury any small company they like just for the fun of it and with pocketchange.
HTTP/1.1 400
I feel like I tell my kids that all the time... anyway;
Counter with an offer of sale of 49% of the company; a non-controlling share, to the mega-corp for half what they're offering. They still get a "seat on the board" and get to work with you, not to mention get to profit from your profits.
Yeah, it means that in the event your idea goes under you've only got 49% of the money you could've walked away with... but that's the point... 49% of the money is better than 0% of it (which is what you're potentially going to get if you walk away), or having 100% of the money and 0% of the business.
Learn from my mistakes. I did the same thing... I lost my business to another smoother operator, then lost my job within a year due to (cutbacks) (this was ~2002... last time the economy was tough). As it turned out he made a great living off my idea and concept, and I got the shaft.
My new business... well, I'm building that one on my own and I won't make that mistake again.
Just because I'm different let me say things the other way. :-|
If you get the money and do not know what to do next with it, it will gather dust on a shelf corner. It's ok when you're old, you need the safety of looking to the money and seeing it's still there.
But if you're young (even if only at heart), money is some kind of latent state like yeast without water.
OTOH, if you have an idea sell everything and get the money -- not for the money itself, but to invest in your new idea.
Keep in mind this real world statistics, which is given to you freely (as I received it): 98% of all things go wrong.
2% will succeed.
So, say, to save Earth you have to try some 50 different approaches... Sucks, eh?
Can you imagine how bad [GATES] would feel now if he didn't sell out for billions back then when he was more popular than Elvis? [MICROSOFT] is nothing now, but he still has...ALL...THOSE...BILLIONS...OF...DOLLARS.
Everything went according to Gates' plan; Microsoft has now served its purpose. The pilot used the escape capsule, the ship is on a trajectory to crash and burn.
you had me at #!
Why ask, when it does look like you already answered your own question:
"Money really doesn't mean much to us as long as we can do whatever we want while excelling at our passions."
Too boot you stated that when your project goes gold you're estimating to make even more money than what is being offered. Keep the project. Do what you enjoy while excelling your abilities and knowledge on your time and your rules.
NeXT
..you have a club. A few buddy's who get together and play on whatever project you play with. Emotionalism doesn't have any place in a company, nor does "wanting to do what we want." Get a hobby and do what you want. As with the company, do what's best for the company. First - you need to clear your thoughts and straighten your priorities. You contradict yourself by saying that money doesn't matter then later saying that ya'll agree that you could make more money if your product goes gold. Clear that contradiction - either money matters or it does not. And remember, that's a big IF as far as the gold is concerned. Especially if that corporation is interested in the technology you're working on - if you turn them down they'll find someone else and they'll go gold because they have the resources, while you play with your friends in your playroom. Get real for a moment and think about it from a business perspective. If you have concerns, put them on paper and make that part of the negotiations. Or, turn them down and enjoy your hobby.
1) Get a lawyer, one who specializes in buyouts. You need advice from an expert who is not emotionally attached to the deal or company.
2)Megacorp's offer to buy means they are interested in what you do; and right now buying you is cheaper / faster than doing it themselves or buying someone else. However, if you decide not to sell they have the resources to continue to develop the idea. You need to ask yourself - can they beat us in the marketplace? The answer is probably yes; especially since you can't afford to dedicate the money needed for a prolonged market battle.
3)Sell. Having money gives you options if the idea fails. It, in essence, buys the freedom to chose what to do if you get enough.
4)Always leave open the possibility of buying back the idea. Just because Megacorp thinks it fits in with their strategy today doesn't mean they will tomorrow; in the mean time you've used their money to get the idea off the ground.
In short, selling cuts your risk and gives you a lot of upside. While you may not get the really big bucks that you would if you DIY and it take off; the experience of doing such a thing in a Megacorp will make you very marketable since you've now proven yourself.
I'm a consultant - I convert gibberish into cash-flow.
On the definition of "what you want."
I'm pretty sure $2m when I was 25 would have meant easy retirement, but I'm not that expensive to run.
Also, retirement means different things to different people. I wouldn't have stopped working, but I would have been more selective and the pressure would have been off to make rent, mortgage, etc. By continuing to work I would also have had plenty of liquidity to enjoy some of the things I like - good food, travel...
you had me at #!
He asked on irc as well...
you had me at #!
No words. Should have sent a poet.
"all of us agree that if we finished our thing, we'd earn more than what the corporation has offered us"
This statement alone tells me you lack critical business skills.
"If" we finished our thing? That should be "when" - because "if" is a hobby, "when" is a business. "We'd earn more"? Wishful thinking at best, a dangerous delusion at worst. The deserts are littered with the bones of startups that thought they'd be the next $Megacorp.
Your number just got drawn in the lottery. Get a good lawyer and tax adviser, and take the deal. Lightning doesn't strike twice.
This is an important question. If they think you bring new, important knowledge and skills to a market they have, great. Protect yourselves in what you sign, make sure they can't just bleed your intellectual property assets dry, fire you, and bar you from the field, find out who your managers will be and whether you can work well with them, but enjoy a stable income and the chances to actually test your product before selling it, and having an HR person to manage salaries and insurance for you.
But way, way too many startups are robbed blind of their core product and their work then discarded to protect some other corporate asset with which it competes, or forged into a new direction that it should not go. We're seeing both right now with Oracle buying Sleepy Cat Software and the core development team for Berkeley DataBase (whose development over the last few years alternates between necrotic and cancerous, as people dealing with its new Java components can testify). The result is the continuing abandonment of Berkeley DB in favor of SQLite (which is plenty for light applications, and more robust) and MySQL (which works well at larger scales, supports replication far better, and is also more reliable).
I do hope that Oracle is using the Berkeley DB knowledge for their own core product line. But now, with MySQL's core development team at Sun in the mix, they have even less incentive to burn resources on it. Be careful that if your role at the megacorp winds up outmoded by some other development, you've gotten enough money to continue your careers elsewhere.
Whatever they promise you, get it in writing. Talk to a good lawyer and make sure it's rock solid. Don't trust the word of an individual, because you can't be sure that person will be around. You are about to be dealing with an institution, so you need to operate by institutional rules. Having a rock-solid contract will make all your corporate interactions more pleasant!
If you believe you have the capacity to finish your project, and it's a substantial amount of money above and beyond what this company is offering, you might want to consider declining their offer. The distinct possibility exists they might offer more. But don't forget most - something like more than 75% - of large software projects do not get completed.
Do not accept stock; insist on an all-cash deal. Too many people have been burned by stock deals; also it would almost certainly be restricted stock that you have to hold for a long time (12 to 18 months, and there will be restrictions on selling it). This will also determine if the company is serious or they're just bottom fishing for a cheap opportunity.
Do not accept a non-compete clause in any employment contract unless it provides for payment of 100% of your salary during the non-compete period. Programmers are way too valuable to accept handcuff conditions like this.
The lessons of history teach us - if they teach us anything - that nobody learns the lessons that history teaches us.
There's a third option, between losing your soul and forgoing the money.
The option is: get the money, run, and start a new business.
Of course, whether or not it is a viable option, depends on a number of factors, including:
1. Are you able to negotiate with Megacorp a deal that does not tie you to them until 2025?
2. Are you developing the next PageRank? (PageRanks ideas come once in a decade, and if that is your thing, you don't want to sell. In that case, though, you will be able to raise money without losing control. In 1998, Bechtolsheim wrote a check to "Google Inc", for $100.000, prior to the company even being founded.)
3. How much time/ effort you've used so far to develop your idea.
4. How good you are with Powepoint. If you speak binary but can't sell yourself properly, then being under the wings of a Megacorp may be the only option to survive and keep doing what you are best at.
"Whenever people agree with me I always feel I must be wrong." (Oscar Wilde)
Speaking from the experience of an idealist -- Be Practical.
Think of the long term. If you are a person or group who has good ideas, you will have more (many more). If you can be organized and motivated enough to produce good working products, you can do that again.
What *IS* hard to obtain is capital to start whatever biz or project you want.
If this sellout will leave you with sufficient capital to start whatever you want in the future, then TAKE IT, do a great job, and stay as long as it is good for everyone.
After that, you will have the freedom to decide what to do next. That is truly valuable. I'm taking advantage of it now -- built and sold one good company, and now really enjoying starting a completely different business, which is acually more fun!
OTOH, if it is just a buyout into a cushy corporate job, then either turn it down, or raise the price until it is high enough to buy your freedom.
If you do decide to do it, get the best terms and get a really GOOD lawyer on your side, and make the contract solid. Decide what you REALLY need (not just what you want), and stick to that, and try to get some wants too. Be creative, and flexible, and if they meet it, great. If not, move on.
Either way you decide, move forward without second-guessing yourselves.
Enjoy it, and Good Luck!
Megacorp has a name, it will give you company exposure, the kind of exposure that would take years of advertising, you'd be able to get that for your company instantly
I don't know what would be your best business strategy, but i would buy a lot of champagne.
Really.
Because all the things you like are going to be gone; some quickly, some later... But it will really suck seeing them go.
And as soon as they have absorbed whatever they want, you will be escorted out, and some pinhead will have your old job.
I'm currently wearing that t-shirt...
Truth isn't Truth - Guliani
To me, the signal:noise ratio of /. is much higher than Digg.
SELL
The fact that you are running your business out of your home, really means you don't have a business. It's time to take the plunge to the dark side and learn how it's done, then move on to your next business plan.
If your alternative argument is that you don't care about making money, you should sell this distracting project and start writing FOSS code.
Go ahead and sell the company, but don't work for the people who purchased it. Do not sign a non-compete contract. Take the money that you get from the company and start another one doing the exact same thing.
You will have competition in your market, but you will also have a sizeable nest egg to invest.
IMAGE VERIFICATION IS EVIL!
Perfect answer.
Just make sure you get paid in cash. Not stock or deferred earnings.
Be sure to buy something from http://www.zerohalliburton.com/business/aluminum.jsp and bring it to the closing to hold all the cash.
Dave Barnes 9 breweries within walking distance of my house
You fellows might want to read up on Jack Smith and Sabeer Bhatia's experience when Microsoft bought Hotmail. I think there was something in Wired about it after it happened.
Home of The Suki Series
It sounds to me that you answered your own question. You don't want to follow the rules, money isn't important and you're emotionally attached to the company.
It sounds to me as if you just needed a warm-fuzzy. I hereby give to you one warm-fuzzy.
I don't see anyone mentioning the fact that these guys will have to sign a non-compete agreement as part of selling their almost-business to McMega Corp.
This means that they won't be able to pursue the same functionality and methods privately if their association with McMega doesn't work out optimally.
So there needs to be enough money to compensate for not being able to work on your favorite stuff, for years into the future.
RJ
You're in luck! I'm available for hire right now!
Peter
Downsize DC Today!
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, got a job. Most of my crew I grew up with didn't. I am relatively wealthy compared to those guys. I have a new car, my house is paid off.
Most of my friends though aren't nearly where I'm at. They're in their 40's too, but they bag groceries and work gas stations. And can't afford simple things I take for granted, like healthcare.
I watched one friend float a check for some food at a grocery story for $1.26.
Now, I'm no expert on happiness - but being able to buy food when I need it, cover my family's healthcare, and enjoy a new car makes me far happier than those guys.
In short, money doesn't buy happiness, but not having enough can definitely keep you from being happy.
So I stand by my original statement. I'm not rich, but being rich definitely would not suck. 99% of the trouble you'll get into in this world stems from a lack of money, IMO. Speeding tickets, bills, debt, food, healthcare...
Being rich eliminates an entire class of problems from your life. And most of the people I know are so preoccupied with this class of problems that most of the joy you can get from living is unavailable to them. They're too busy trying to make rent. I'm doing well, and I am much happier than most of those guys. I have hobbies, my family is healthy and well fed, I don't have to worry about eviction or what the hell I'm going to do when the next rent comes due.
I'm sure there's a point of diminishing returns, too. It is probably possible to be so wealthy you're perpetually bored. But I wouldn't be, that's for sure. I have a dozen projects I'd spend my time on if I didn't have to have a job. So again, my happiness would be increased with more money. If you play it right, money == freedom, and you can never have enough of that.
Weaselmancer
rediculous.
I think running the company yourselves will teach you a lot more then you could jumping in bed with someone else.
say no. There will be others. They are just wasting your time to stall your efforts.
I hate to say it, but the fact that you are venting on slashdot implies you will fail.
You need a killer attitude to succeed.
suck it up!
1) Make sure the deal is truly worth it. For a big corporation the math is something like this - we can buy this startup for 10x and be guaranteed to have working product or we can throw x dollars at it and maybe get something that works - if we find the right people with the right vision etc. They would rather pay the 10x for the sure thing! So lets say 4 guys, 1 man year probably worth a few million easy - with the right sales guy (The CEO of a startup company IS the sales guy) closer to $10 million (assuming you have a product and some IP around it and maybe a few existing customers that will vouch for you).
2) Negotiate your future with the company. They will demand that you stay on-board for at least a year or two, probably 2 if you are technically significant. You salary and position should reflect that (get a contract with very clear termination clauses). You aren't Sr. Software Engineer (for example) you will be "Fellow" etc. Pretty much unfirable - not sure what salary you had in mind, but I suspect 2x is more appropriate. When the company I was with go purchased the CTO got a position for $250K/yr.
3) Bonus structure - You are there for a product/product line. Bonus structure to reflect hitting milestones.
So...
Pros - funding to do more of what you like. Yes the company will have some control (they probably want things that can help generate revenue - but that just means they want you to create things other people will want - they will find a way to make money off of it).
If you tell them you want to run your group like a startup (work 70hr weeks with no overtime pay) they will agree - just remind them of the bonus structure.
Pros - got make that big meeting up in NY with the President/board of directors? Ask them to send the company jet for you....
Cons- control. You will have an idea and you will effectively have to beg for funding. If the company thinks you are too far off in left field, you may not even have enough funding to buy new laptops - let alone money to buy R&D equipment. New CEO and company priorities can change.
Cons - IT department. Big mega companies want all their computers under control. Long boot-up times, pesky anti-virus, firewalls that don't let you go to certain web sites (be it hacking, porn, politics, guns etc.) Stick with Linux if you can, most IT departments can't even spell it.
Cons - Meetings. There will be 3 layers of management above you. They will all want to know what you are doing and you have to couch it in terms they understand. Each layer will be progressively less technically savvy.
Other things - big companies have big reach (global). A plus or a minus you may be asked to physically go around to different places in the world. Training sessions, product demos etc. Interesting for a while, but can get old.
Resources - big companies have all kinds of resources. From tech writers that will write user manuals for you, to testers that will verify everything is correct. The bad news for production is that they will not lift one finger until you specify, exactly, to ISO9000x standards, how high that finger is to be lifted and what calibrated tools should be used to verify the lift height. Its not that they are too stupid to figure out what needs to be done, they just believe all the people on the shop floor and warehouse are too stupid.
TODO: create/find/steal funny sig.
um, AOL bought time warner, not the other way around.
You will have rules soon enough. They will be dictated by business and customer needs.
Ask for more money and take the job.
Or tell the company that you really want the experience of growing a business. Ask the company if they would be interested in a partnership. Possibly with partial ownership and an advisory role. Make them your first and biggest customer.
If you haven't already seen them, some of Paul Graham's essays on startups are worthwhile:
http://www.paulgraham.com/articles.html
He made his fortune selling his little program to Yahoo..
I read many responses, but have a slightly different perspective...
Right now your startup seems like your future. However the majority fail ultimately. Even if it succeeds, you probably are the personality type who will get bored and want to start the next big project instead of nurturing the old.
There are people who focus on startups. Spending a few years growing a startup into something "real" then moving on to the next interesting project.
The intent of the Megacorp is probably different than your intentions, even if they SAY they want to grow it and make it successful (as others have pointed out).
The smartest business decision is to take whichever route provides the greatest guaranteed profits. Therefore, sell, agree to aid the transition, then escape to invest your talents/enthusiasm/drive into your next big idea. While at megacorp, LEARN.
Nothing in your life teaches you more than starting your own company. Second to that is seeing how other companies do business (or fail to do business).
Whatever you do, don't accept an unrealistically long non-compete.
If you look back on this twenty years and five companies later (four failures and one success) you will laugh that you thought it was a difficult decision.
My reference for this is having a father who worked at Dunn & Bradstreet decades ago, my own experience observing a small company's failure, learning from their mistakes and starting my own company, working for other companies, and now effectively "retired" with property investments (akin to having my own moderately successful company I suppose, but a lot less work).
imo, if you were so driven with your own company--you wouldn't be asking this question or seriously be considering it. If you wanted the megacorp job, you'd also already have jumped.
Instead, realize that starting companies is a transitory occupation, handle selling this one, put that on your resume as a success and move on to start the next cool project!
PS: If you are Twitter.com, ignore everything I just said.
it sounds like you have already decided not to sell, but here is my advice:
sell, you moron. pretty much all new businesses fail. most existing business consider being bought out by a larger company a huge success.
if you are worried that the money you are getting is not enough, sell 51% of the company to them and retain 49% for yourselves, so you basically split the money down the middle, but they have the control that they want.
if you are worried about the autonomy, then sell, make sure there is an employment contract with satisfactory conditions attached, and try that for a while. then quit at the end of your tenure if you are unhappy. ride the gravy train to the top if you still enjoy it.
a big business with "excellent" employment conditions is probably too good to be true, but anything close to that makes this a no-brainer.
make sure the offer is cash, not stock!!!! if it's stock, make sure you can sell it right away. the last thing you want is to be holding all of your wealth in the stock of one company. once you have $50 bn, it's ok if $49 bn is in MSFT shares, b/c you still have $1bn left even if it completely evaporates. (and believe me, gates has lots of other investments). but for the type of money we are talking about, you want cash.
get a good lawyer to straighten this out for you. the $750/hr now will be a pittance compared to the millions it can save you down the road.
If you abandon your principles and take the money don't complain when Megacorp Inc/Ltd changes the rules on you.
I have been through something similar, when my small company was acquired by a larger, established one. It wasn't always easy, but if your team sticks together, you can definitely make a success of it.
Beware the politics, petty bureaucracy, process monkeys and wannabe loudmouths who think they understand the industry though! Sure, people who have worked in big business know how the gears of industry turn, but they often don't understand how to develop good software and keep the quality high. Having said that, you'll probably be able to learn a lot through the experience.
I strongly urge you not to "play up" the notion of "staying for the transition" as another poster suggested. If you give an aloof impression from the outset, you are likely to impact the deal and cause the buyer to reorganize how they schedule your payouts so that you'll have to stay longer to get all the benefits. I've seen this happen.
To be frank, unless you really plan on building a full business yourself with all the right component parts, you'd be idiotic to turn this opportunity down. Good luck!
but if I were you I'd seek the advice of Justin Frankel or Shawn Fanning. :)
It seems you'll probably sell, and most people are telling you why or how you should sell, I'd just like to say why you may want to not sell.
Well that's more about why I wouldn't want to sell. I couldn't find a job, so I worked hard for 5 months on a commercial program, I didn't count my hours, I wasn't getting a cent for it for the first few months, it was awfully hard to sell at first. But then, through updates, new features, better communication after having learnt to promote it better, but mostly after building a momentum and getting a beginning of popularity. Then, it started to pay the bills, then all of them, then more.
It still makes up for a modest salary, but for various reasons I know it will soon double, and continue to increase. I work from home and now that things are rolling the workload is very reasonable, I do what I want with my product, I do what I like and while there are lots of people telling me what to do I can afford to dismiss most of what I'm told, cause I'm my own boss.
The cashflow's increasing, I have plans for various improvements and spin-off products, and I'm going back to college, which thankfully means I'll still get that "salary" while studying, which is great. Unsurprisingly I've never been proposed to be bought by a big company, but I wouldn't have sold anyways, nothing beats making a living out of doing freely what you like, mostly if you have big plans for it.
You just got troll'd!
Sell out, move on, take a long vacation, go do something else!
6.8SPC TR of 550, l xwind at 6, drift rt at 26" drops 77". AT has 503 ft-lbs at 1403 fps. FT 0.86
Without knowing any details beyond what you described, I would say stay away from Megacorp. It sounds like you weren't actively looking for a buyer and if Megacorp never came along you'd be perfectly happy doing what you're doing. When Megacorp gets involved, it will be very time consuming and when the deal is done things will change for you very significantly. When you say "The money is fair enough" I suspect you're not aware of the potential if you create a solid product and succeed in having regular sales on your own. Unless we're talking about money that you all could retire on, in which case forget everything I said above and go for it, then based on the limited information I would say thanks but no thanks, check back in a few years.
If you are all happier working independently as you currently are, and you're as certain as possible that you'll make far more money finishing your product than "selling out", then you should definitely remain independent, or make a counter-offer to the Megacorp that would make "selling out" worth it.
It seems unlikely to me that a Megacorp will out of the blue come up with a valuation and a decision to buy out a start up at the stage described here. Not in these times, at least. I am an entrepreneur and we had a Megacorp, that we were working with closely, discuss ways in which we can collaborate. One of the person in the Megacorp suggested the possibility of an acquisition and even threw in a number(18 months back) but I didnot consider it credible and it wasnt. These buyouts are a crap shoot and can fail for more reasons than one can count and often for no apparent reason. Only suggestion I have is to get outside opinion from someone who has a few years (10) of experience, someone you can trust and has played this game in the past(an entrepreneur or VC). Get his view and decide quickly. If you determine that you have a good shot at converting this (after advice from someone more experienced), go ahead and put a date say 60 days for closure. Always push for the MegaCorp to get committed as remember these are big Companies which have no souls and emotions you can appeal to ...... wait get help!!
1. Do not trust the acquirer. Decide on what you want and do not accept their first offer terms. They will offer more.
2. DO NOT TRUST THE ACQUIRER. Do not sign a sales agreement prior to buyout, do not sign an exclusive distribution agreement prior to buyout, do not sign a marketing agreement before buyout.
I have seen several companies firsthand which went for a buyout by the megacorp in their field; the founders were eager to get a return and the big company knew it, diluted the offer into a 'try and buy' arrangement. In the meantime, the bought company worked on an integration product with the buyer, and the buyer got excplusive marketing rights.
Next thing you know, the one-year acquisition period got delayed, the acquirer dropped their option to buy. The bought company is now scrambling with their R&D tied to the acquirer's product and no way to save the sales of their existing product (can't market it). Another year later the deal went through, but on much worse terms for the bought company's founders.
I've seen this more than once.
3. DO NOT TRUST THE ACQUIRER. Assume good faith for negotiations but require your terms. If they don't give terms that cover both your asses (not just theirs), walk away. They will come back if they really care.
Stay fucking indie.
Sell. You’ll have plenty of dough to start something else if the conditions become unbearable and have to leave.
and i can't stress this enough, HIRE A LAWYER! NOW!
I was in this exact situation. A competitor had been repeatedly attempting to enter our market space but was rebuffed by our customer loyalty. We spurred them off a few times until their price tag became too attractive. We sold out for 10x annual revenue, and stayed on for two years as consultants for transition purposes. Guess what, 18 months in our primary supplier was bought out by its competitor, change in management resulted in hostility towards us (we had a first name basis relationship with the previous owners and had excellent wholesale pricing access) and renegotiation of our pricing resulted in a dramatic shift from wild profit to narrowly eking by. But: it wasn't our problem, our cheque cleared and we went on to do even more wildly interesting, and sometimes profitable, things.
Moral: Sell when the going gets good. The fact that you and your group have come together and built something wonderful means you can do it again in another field or another product.
What you gain is money. So that's the trade-off you're considering. But you've already told us you don't care much about money, but do care about your independence and having control of the technology. So why on earth would you give up things you care about to get something you don't care about?
And don't let anyone tell you it's silly or naive to value other things more than money. Throughout my career, I have never once chosen the best paying job or career path over the one I thought I would enjoy more. And I don't regret a single one of those choices.
Remember this: you can't buy happiness, but you can sell it. Don't sell yours. Throughout your career, people will again and again ask you to give up your happiness in exchange for money. It's almost always a bad idea.
"I'm too busy to research this and form an educated opinion, but I do have time to tell everyone my uninformed opinion."
There are certain core ingredients typically required for success:
* 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? ...
As the owner of small business (my second), I can verify the importance of the things you list and I think companies that fail are always missing two or three of these.
Also, I think companies that succeed are missing two or three of these, at the beginning.
I intend to keep a copy of your list, thanks. :)
Let me repeat that
TAKE THE FRACKING MONEY!
There's a million great ideas out there but only one that's going to give you a payout. Unless you're 90 years old and think you only have one more chance to make a difference... TAKE THE MONEY. Wait, did I say
TAKE THE FRACKING MONEY!
yet?
...what would a young Google do?
There is a war going on for your mind.
This is the best point of all. Upon selling a company, you MUST enlist the experience of an attorney and/or business broker to guide you through this process.
If you can read this... 01110101 01110010 00100000 01100001 00100000 01100111 01100101 01100101 01101011
Ugly Lesson #1: If a product or service is truly your baby and you're that emotionally attached to it, do NOT sell. Business is all about consumption and, just like food that gets consumed, it will never maintain the same state even minutes after it begins to get processed. Megacorp isn't interested in acquiring your company because you're a great bunch of guys. They want your product or some component of your product and they will do a great job with the foreplay to convince you to sell. More often than not they don't care about your vision or company mission; they want to incorporate your product into THEIR vision and they are only bringing your team along solely for the brain trust to further develop and act as the kernel of the future support structure for the product. Megacorps are also not into allowing the little guy to get leverage on them so, rest assured, they will do their best to make sure every inch of your product is documented to insure that you or anyone on your team can be replaced or "downsized" at will.
Ugly Lesson #2: If the offer is enough to satisfy you and your partners, consider selling the product and not the entire company. Use the infusion of capital to grow the business or, if it's that much money, take up a new career sport fishing off the coast of the Caribbean island of your choice.
Ugly Lesson #3: If you decide to sell, you are going to need to adjust your expectations. Any kind of merger or acquisition is a lot like a marriage. The early foreplay and sex is phenomenal but once the honeymoon is over, Megacorp will stop with the romance and start acting real because they now have what they wanted. Throw any idealistic impressions of how things âoewill beâ out the window because now you are working for them. You will abide by all their policies (not just the ones you like). You will go along with whatever they say, regardless of how much it might bother you, and if you protest too much they won't think twice about throwing you out like a javelin. Even Steve Jobs got fired from Apple once upon a time. Unless they have somehow breached the contract, you can't take your company or your product back once the deal is done.
If you want to love and nurture a baby, do yourself a favor and go ahead and have a baby. Don't make the mistake of loving a business like a baby because, quite candidly, you never know if that child is going to die young (which happens most often) or it will grow up to find a cure for Cancer or become Frankenstein's Monster. A business is a business, a vehicle to make money by providing a product or service (and hopefully its something you love to do). My advice -- if you are going to sell your company, sell it, walk away and don't look back. A quote comes to mind: "Remember Lot's Wife".
Max Nomad . Bohemian Griot Publishing, LLC . http://www.bgpublishing.com
but this reminds me of all the women i could have potentially slept with but turned them down because the one had too big of a butt, another one i valued her friendship too much, another one i was worried she had VD, another one i was already seeing someone else, etc. so now i'm old, alone and abstinent. All of my life is a regret. Please, please don't be me. If you personally stand to make 7 figures off this transaction I would do it and hope you like megalomart. if you don't then you can quit and start another company and relive the dream. or not. If they're buying you cheap then it might not be worth it. you need to contact their competitor and get a competing bid. if that's not feasible, turn them down and become a commercial success and they'll still be interested in buying you.
Answer: If you want to remain in control, don't sell.
Don't blame me, I didn't vote for either of them!
then VAGUE is his game...
"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 Ben Loebin is his name, then, he can just download into another body. If he's not, then he needs to take the money, run, and sequester himself to figure out how to build a "Resurrection Ship", hehehehe...
Previously: "Linux... Toward the Sunrise..." Now: "Linux... Toward the-- No, now, part of Every Sunrise"
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.
Duh, anything you can read probably can't talk. Except maybe a guy with a novel tattoo'd on his back.
If you take the money you are guaranteed to lose control of your "baby". If you are ok with that, then go ahead. The adage "a bird in the hand is worth more than two in the bush" might apply here. You can take the money and run. Just realize any corporation is going to take your creation in a direction you won't like. If you are willing to let it go, then go for it.
Just remember, money does not buy happiness, but it does pays the bills.
"No matter where you go, there you are." -- Buckaroo Banzai
This is certainly what I have heard, and angels can yank money at the drop of a hat, too.
Growing your own company, with sales and market and support and etc, is HARD. It's probably not fun, it's probably not what you're good at. Knowing what I know now (worked at Sun, then worked at 4 startups, now back at Sun), I recommend assuming that you will do the deal with MegaCorp, but also be sure you are prepared for the negotiation (you might want professional help). And don't be afraid to say "no"; they're going to make the smallest offer they think you are likely to accept.
And be prepared for life without your great little company. It will help you make better decisions.
Years ago (mid 1996), when Java was young, some of us (compiler hackers) looked at this interpreted browser language, and said "this is a fine language for general-purpose computing, people are going to program great big servers in it, multiprocessors, even" -- and we decided to use write a compiler for it, instead of, say, debugging tools. And we didn't know squat about marketing and sales, we talked to the wrong people, etc, etc. (We did fun stuff -- we could scale the Volano benchmark out to 800 rooms on 2-processor x86 box -- that's 32000 threads. We kicked ass on Trade2. But we never made any money. And since then, working at Sun, I've learned about cool new stuff you can do with scalable synchronization, that if I had known back then, would have allowed us to REALLY kick ass and not make money. So don't think that there's nothing for you to learn at MegaCorp, either.)
So if you are lucky enough to have MegaCorp waving money in your face, I would negotiate the best possible deal, and take the money. You will want to do more than one thing in your life, anyway. My father worked on guidance systems for years (everything from torpedo gyros run by a spring, to B52 gyros run in a vacuum suspended by electrostatic force, so even that is not the single boring job that it seems), did solar hot water for a hobby, then worked on medical devices in "retirement", and right now he's politically active in a major grass-roots sort of way.
So, heck, if you don't need the money for retirement, you could get into politics.
Exactly. You need to be OPPORTUNISTIC and (not AMBITIOUS) in Globalized World.
I'd like to buy homeland for our 10 million people. http://twitter.com/mahadiga
Yeah, just makes sure you can get out cleanly when things go to hell. Not if, but when. They always do. Make sure that you are well protected from non-compete agreements - after all, your marketable expertise is in this very field. The laws regarding non-competes vary a lot from state to state, so see what state law will be governing the contract. I'd also be very careful about accepting any deal that was complicated and involved your ownership of company stock - too often these can be extremely restricted, based upon rules against insider trading. Also, make sure that what you sell to the megacorp isn't open-ended, but rather, it restricted to the things disclosed. They may try to tempt you with larger money in exchange for concessions that put you at risk, but remember that there are some companies which will lure you into such an agreement to stay for a certain number of years in order to gain your full payment, but then go about making it impossible for you to do, hence you default and the leave you with nothing. It's better to set a very loose and amenable to you contract, and then bargain from a point of power towards other work. What I mean is, get the sale agreement very simple leaving you carefree, and consulting agreements worked out separately - so if you tell them to go screw on a consulting job you don't lose anything regarding the sale. Also, I am prejudiced towards cash, and not stock, when selling out. Just because lots of companies can crash the value of your holdings in the conglomerate at will.
I have some friends who were prepared to sell their very new startup to a high-tech megacorp that approached them. They decided to accept the offer rather than to raise a VC round, but the megacorp dragged out the negotiations, the founders ran out of money, and the VCs decided not to invest. End of company.
You should also beware of accepting stock with sales restrictions. I have a colleague who sold his company at the end of the dot-com boom for stock that was worth $19M to him personally, but he was restricted from selling it for a year. By the time he was free to sell, the value of the stock had dropped to $200K.
You can take steps to partially protect you and your teammates. One of these steps is employment contracts for you and your team, assuring salary and benefits for a couple of years no matter what. You can also ask for a "change of control" clause that gives you additional options should Megacorp itself be acquired or change its CEO.
That said, if you have a dream and Megacorp isn't going to set you up for life, then you should find a couple of hardened veterans who've been down this road and ask them to serve as advisors. They'll tell you that lightning doesn't strike very often and that there is a good chance that things won't work out. However, if you are at a stage of your life where you don't have a lot of commitments in the form of mortgages, debts, and children, this is as good a time as any to take a chance on seeing your dream through to fruition.
Good luck!
...and run.
If you are liquid right now in this economy, you are king. There are so many investment opportunities out there right now it's crazy - everything is discounted.
Remembering your name in the morning is already a good start...
MS has been such a problem by making unrefusable offers, that it's part of common culture. Making fun of it was probably a factor in a former political cartoon itself getting an offer it couldn't refuse and ending up under the control of MS' own competitor to Salon. A Gates-style "buy out" is a concept of its own.
... Their owners sell them because there's a chance their company will fail and they'll go under...
That's exactly the point repeated throughout this topic by many people. But you left off the reason: the small company will likely go under because it has been targeted by Megacorp, for a small business Microsoft is the kiss of death. Besides, advocating use of MS products at this late date is to knowingly advocate bleeding money from US workers. How many have to be fired to pay for the "upgrades", which in turn pay for the "buyouts"?
Beta is broken and the link to classic doesn't work. Stop wasting our time or there won't be anybody left here.
money is everything. then you can drive the lil company into the ground, and start a new one, that you can sell, and drive into the ground. if you drive it into the ground fast enuff, u might make it into politics. :)
Life's about deciding what's important (to you), and doing it. If what you want to do is also important to mankind, then you should want to persuade lots of other people to go in the same direction. It seems to me that Megacorp is offering you a great way to do that. They might also help you avoid the common mistakes in the process.
You should check the small print carefully, though. If their direction turns out to be different to yours, you need some way to escape.
Don't worry too much about losing your freedom - if you want lots of people to help you, you inevitably have to put some time and effort into convincing them. You will still achieve much more than by working in isolation. And you can delegate the boring bits if you have money.
Phil McKerracher
Why are you doing this? For the money? If so, grab it now. Is it for the love of what you do? Walk away from the offer and stay true to your dream.
Big money now is bigger than even bigger money later from a financial perspective, especially if it is a 99% probability now and a 90% probability later. But you are young and have plenty of time to make good and bad decisions about money.
What do you want to look back on in ten years? "Oh, I should have taken the money" or "Oh, I should have maintained control and developed this the way it should have been developed"?
If you do go for the corporate offer, get some sound legal and negotiating advice before you sign anything and always maintain a personal exit strategy.
I work for a large corporation doing something I really enjoy, so throwing in with a big company is not a death sentence. But if you have the passion and desire to do something different there will be plenty of time in your life to join a big company and you will be a better asset from your experience than if you were always wondering what might have been.
insert pithy comment here
It is to me very simple. Why did you start your business? If there is no component of making money (I doubt that this is the case), then do not sell. My brother never finished his doctorate, but makes a great deal of money in a job he loves. He is happy without the degree, which was desired simply to get a good job. He has the latter, no longer needs the former. If you would like success, take the money (you mentioned it seemed good), if things go south, you can start again - this is the mark of the true professional - you can do it again. If you can't do it again, then be very glad you took the money, because you may have failed had you continued to go it on your own (not even to mention that the the potentially hostile non-buyer would be potentially your worst competitor). Finally, you may be very good at what you do. Are you very good at everything needed to bring your "product" to success? Marketing, Sales, licensing, customer service, etc. Best of luck, and whatever decision you make, never regret it! - Jason Chen, M.D.
I was young and stupid (I'm 35 now, so I'm older and still stupid).
I had no idea what I was doing, no business background, no accounting, no law. My degree was in computer engineering.
A company approached us and wanted to buy us. All I did as a negotiating tactic was say, "We're not interested in your offer. We probably won't be interested, we're going to keep working, but we're open to listening to additional offers if you can find a way to address our concerns."
I kept saying essentially "no" for 9 months. They kept piling on additional offers and contractual independence and upping the price. They finally created a "wholly owned but independently operated subsidiary" that I could keep running. They offered rights to buy back out if I didn't like it, let me pull all the AR out of the company prior to sale, etc, etc. None of these things I would have thought of myself.
So my advice is to not tell them to go away, but to tell them your objections and that they have to overcome those (on their dime, with their creativity). If they don't, great; you got what you wanted. If they do, you can consider that option with all your co-workers.
I lucked into this approach (I meant it when I said I wasn't interested in selling), but in retrospect it was brilliant. I think I would have "lost" the moment I ever counter-offered.
Anyway, I hope that's helpful.
Money is nice, but in the end, you will get alot more satisfaction out of running your own business and creating a quality product that you created from your own mind and two hands, Megacorp has other motives, like squashing any competition. I think we can thank corporate America for destroying the nation and the world for that matter, by dictating the products that the consumer needs and doesn't need, not to mention having zero ethics.
If you really want to do your customers a favor, produce and deliver a quality product, that they want(ask for) and you will never go hungry again. My 2 cents.
You've got a pie. It's not in the oven yet. Someone else wants to bake it and sell slices. They want the recipe too. If they are really good at their job and you've got a good pie, they will make a lot of money. CA$H tells you how serious they really are. A position in the company, stock, options, royalties, none of this costs mega corp very much. This means some middle manager can bury your project until you all get fed up and leave. You're young and impatient. It won't take long.
Run the numbers. What is your exit strategy without mega corp? What is the time value of money to you? When you know this number, keep it under your hat. This is what you want in cash from mega-corp....PLUS a tiny piece of every slice sold.
If you're good at coming up with pie recipes...selling them may be your best business plan..
Just say NO.
There. Done it for you. ^^
Seriously. Being independent of some retarded else, telling me what to do, and not stealing my ideas, IS THE VERY POINT OF HAVING YOUR OWN COMPANY!
I'd rather die than work in a company of someone else again. And I would literally defend the ideas that are the core value of this company with my own life.
It's the point of my existence. Take it away, and you die. Seriously.
Any sufficiently advanced intelligence is indistinguishable from stupidity.
How much money can your friend cough up?
If the company defunct, he may be able to buy the assets for pittance.
The same thing happened to my last employer. After efforts to find a buyer failed, the founder made a personal bid for the assets. The offer was accepted and he is now free to try again.
Now the founder of my old company is reasonably well off, but he's not rich. He still needs to find an investor to get going again, which may a while in this economy. But at least he has the option, and he can exercise that one soon. I need a job. :-)
I will append my opinion here, because parent is probably the only comment that mentions licensing.
Can't believe the licensing option wasn't mentioned more in this discussion - if you've got a killer IP, then approach the MegaCorp's competitors, and offer non-exclusive licensing deals to the MegaCorp *and* their competitors, at the same time.
That will make them think twice about developing the product themselves from scratch and losing the edge during that time.
Put the first money you make towards a patent application, assuming you are a prior (first) art.
Don't sell out in these times, if you've got a place to live and something to eat, the money is just a piece of paper. Money can dramatically devalue from one day to another, MegaCorps can fall or downsize to the bone.
It all depends on whether you really believe in your idea.
Don't Sell Out!
Meridian 59. EPIC WIN. http://openmeridian.org
Follow your heart!!!
You'll be happier you did.
Weigh the positives and negatives. List all the positive aspects of your current situation, and give each a percentage totalling 100% (i.e. "working with friends: 10%, creative control: 50%, looking forward to work every day: 40%"). Divide the buy-out money into those percentages ("working with friends: $100K..."). See if you're getting a fair prices for selling those assets. It's important to know yourself. If the joy you feel working every day is derived from your executive and creative control over your own work, you will likely be less happy when someone else is calling the shots. Cashing out is great if it gets you what you want, but what will you do then? If you are already making enough money to support yourself and you enjoy your work everyday then you may not want to cash out. Only you can decide.
If you do decide to sell, assume your buy-out goes as poorly as it possibly could. Your new bosses change everything, use fine-print clauses in your contract to screw you over, etc. What will you do? Things change when money comes into play. People change. Do not naively assume that the buyer cares for you in any way personally; this is business. Consult a lawyer and ensure that the buyout contract allows you an unobstructed and agreeable way out should things take a turn for the worse. Many buy-outs lead to the ousting of the leadership of the absorbed company at some point, and there's a reason. Make sure you have a backup plan (i.e. money, resources, contractual guarentees) if things go badly. "An ounce of prevention..."
to encourage the OP, irregardless of the decision, to write down all the associated feelings, passions, hesitations etc. Because, you know, he could be in megacorp's position 30 years from now buying out some other startup run by a bunch of 20-somethings.
"UNIX is very simple, it just needs a genius to understand its simplicity." -Dennis Ritchie
I had a very personal experience with just this kind of situation, and it ended with my company folding. Here are some tips to make sure the same thing doesn't happen to you: 1) Fail fast. This is ALWAYS rule #1 in a startup. If there are any terms and conditions required for the offer to go through, make sure you understand them and make sure the conditions can be met. Will any of you need to relo? How many of you must be retained and for how long? Are there any "proof points" required for the purchase to go through? It may seem strange, but your goal is to get them to reject you by pushing on any weak parts of the deal. 2) You haven't finished until the check CLEARS. Never, under any circumstances, assume that things will go well. In my experience, we were assured several times by high-ranking members of the acquiring company that everything was great and we had nothing to worry about. Don't believe them. It's business, and if business conditions change before the check clears, you can be sure there's some kind of escape clause in the contract. So, until you've taken the money out of the bank in large denomination bills, the deal isn't over. 3) Forget about your feelings and do what's best for your young business. This can be REALLY hard. It sounds like you're in a similar situation to the one I was in: the large company offers scale and ability to execute that you will spend years building. Your company seems to be so young that there is a lot of risk and uncertainty. But, is your young company experiencing traction? What would the impact be to your business if you are distracted for 2-3 months working through terms and have nothing to show for that time? Have you made it to the point where people understand the value you will bring? In other words, would they miss you if you disappeared? If so, your company may be better served by building those relationships with your current or future customers and generating some "raving fans". HTH
Social media and technology thoughts: http://jasonkinner.wordpress.com
ASSESS whether your business is worth lots or little,
DECIDE whether you value owning your own lives, or whether you prefer being wage-slaves.
http://www.amazon.com/Definitive-Guide-Business-Finance-Financial/dp/0273710958/
Women, who're in some significant ways smarter than we are, tend to become self-employed to own their own lives ( instead of to "make a killing" ), and tend to study HOW to successfully do so, instead of booming & bombing, as we guys do.
If you prefer the results of one path, make it happen.