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."

Comments

Could you be more vague?

[seanadams.com]

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.

Re:Could you be more vague?

[cayenne8]

"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."

I could not have put it any better.

It just matters at this point to how much the offer is, and how realistic your changes are looking forward to see if you can make that much more.

It is hard to think of it, with your first company, but, while it is ok to be enthusiastic about your work maybe even a little emotional about it, you can NOT be emotional about the business itself. Work it to make money...to free yourself more and more to do what you want along the way. Many super successful people started a company, worked it up, sold and made a mint....and went on to do more and more interesting things.

Life's a journey....not a destination.

For the most part, a job is nothing more than a means to make money. Making that money allows YOU to do what YOU want to do...and if that is living a life of luxury, sleeping with lots of women, travel....or, even more work, you can't do it or anything they way YOU want to do, without sufficient funding.

Re:Could you be more vague?

[martin-boundary]

For the most part, a job is nothing more than a means to make money. Making that money allows YOU to do what YOU want to do...and if that is living a life of luxury, sleeping with lots of women, travel....or, even more work, you can't do it or anything they way YOU want to do, without sufficient funding.

Yes and no. The problem here is that what you're trading for money is *time*, which is a non-renewable quantity. You only have a limited lifespan, and there are no extensions. Moreover, the value of time is a diminishing quantity once you're an adult.

If what you want to do is something simple like sleeping with girls a lot younger than yourself, enjoying luxuries as long as they can be bought etc., then trading in a chunk of your life in exchange is a good choice.

If it's something hard to get, like a skill or comprehensive education, then making money first is typically a disaster. There aren't many basketball stars who concentrated on becoming well off before they started practicing hoops. There aren't many top surgeons who learned medicine from scratch only in their 50s. If that's the kind of thing you want to do with your life, then you should ignore the money, as it's the best way to kill your dream.

The key is to figure out what you want early in life, before you waste a chunk of it collecting the means to achieve it.

Re:Could you be more vague?

[stonewallred]

Take the cash, invest it and go to work for big evil megacorp until whatever happens, happens. You will A)have a leg up on a retirement package which may allow you to retire a decade earlier than planned, B) you have a steady income for the period of time working for megacorp C)you get a helluva resume entry D) nothing is precluding you and your friends from developing a new idea/concept while working for megacorp. The earlier you can sock cash away for retirement, the better off you are. Plus, the experience of developing and being involved in the marketing end of the idea, without it being a live or die pressure cooker will be worthwhile too.

Re:Could you be more vague?

[dontmakemethink]

Typically the kind of money that frees you comes with strings that bind you. No business incorporates without the intent to exploit the protections provided by being a corporation.

If you don't know what those are, then you are in no position to negotiate what you describe. If you have to ask this question here, then you clearly need representation to ensure you're getting what you think they're offering. And I don't mean a SlashDot user with good karma.

And don't just look up a corporate lawyer, look up a real estate lawyer, a civil lawyer, hell even divorce lawyers, to find who acquaintances of corporate lawyers recommend. They hear all the goods and their reputations won't suffer from recommending someone outside their circle of peers.

Re:Could you be more vague?

[egcagrac0]

The key is to figure out what you want early in life, before you waste a chunk of it collecting the means to achieve it.

Sadly, this is significantly harder than it seems. Many people I know (myself included) have thought they knew what they wanted, started working toward it, and then found a decade later that their priorities have changed

To address OP, rather than wailing and gnashing teeth about how my life didn't turn out like I'd hoped: if you value your autonomy and will derive benefit from the opportunity to turn your microproject into something amazing (benefits like pride), then keep doing what you're doing.

If you want to work 40 hours a week, see your family and derive benefits from things like health insurance and paid vacations, sell out and start singing the megacorporate hymn.

If you're like me, you wouldn't feel right about seeing phrases like "Your Precious Baby: a division of MegaCorporate Ventures, Inc" in the marketplace, and the nice car just wouldn't make up for that pain. A lot of people I work with have no problem with that sort of thing, however, and have much nicer cars.

TLDR: Are you an artist or a businessman? Your answer lies within.

Re:Could you be more vague?

[wanderingknight]

For the most part, a job is nothing more than a means to make money.

You sad, sad person.

Labour is an end in itself. Producing is what differences us from animals. Read some Marx.

If you're living just for the money, you're doing it wrong. Or right, according to what this society wants to turn you into.

Re:Could you be more vague?

[TapeCutter]

yep, life's a journey not a destination. Personally I would try and do a bill gates, ie: licence it and sell the dev team's time to megacorp.

Re:Could you be more vague?

[Bitmanhome]

Yikes, what a terrible answer.

A) The reason to retire is so they can go off and do what ever they want. Original poster is already doing that.

B) The reason to make money is to survive, then engage in whatever hobbies you want. #1 doesn't seem to be a problem, and original poster is already engaged in #2.

C) Leading (or even participating) in a startup already makes a great resume.

D) They're already developing their new idea/concept.

This kid doesn't need to join a corp to support his dream, since he's already living it.

No advice to give

[cptnapalm]

From what you wrote, there does not seem to be any real question in (most) of your minds as to what to do, so not really sure what you are asking.

Please don't be one of those "I'm asking for advice, though I really just want affirmation" people.

Re:No advice to give

[Anonymous Coward]

Well, you know, someone (I think John Steinbeck) said that a man never asks for advice unless he's already made up his mind.

Re:No advice to give

[Dhalka226]

I tend to agree with your assessment; it certainly sounds like they don't want to sell.

What I would add, though, is that's actually a great position to be in. It means the worst potential outcome of this negotiation is the one they're sort of hoping for. So my advice is this: Treat it as exactly that: A negotiation. Worst case, they say "screw that we're not negotiating!" which it sounds like you almost want. No harm. Best case, you may be able to get any number of beneficial things, just a few of which might be more money and/or more autonomy.

you may think you're gonna change the world...

[Anonymous Coward]

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.

Re:you may think you're gonna change the world...

[shawb]

Not to mention, if the Mega-Corp likes the idea, they'll find a way to implement it whether or not you are helping them. You may be in the right, but if they want they can get the product cranked out faster and with more developed distribution channels and contacts. More importantly, they can throw more and better experienced lawyers at defending themselves than you can throw at them.

run!

[Anonymous Coward]

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.

Take the money.

[Spazmania]

If the money's good, take the money. You can always start another business but you can't always find someone willing to pay you for your current one.

Remember: you don't have to be the next Google. It only takes a few million to retire and to *anything you want to do.*

Re:Take the money.

[joocemann]

I think a lot of people with drive, education, and creativity are waiting for that big cash lump sum to fall into their laps.... so they can retreat to some mountain home, set up a work environment they can do on their own time and pace.... and relax...

I know that is one of my dreams.

Re:Take the money.

[Bertie]

Years back, I sat on a beach with a young Greek lady, talking of plans and careers and futures and whatnot. She told me the following yarn:

A rich American businessman is on holiday in Mexico and strikes up a conversation with a local fisherman. They come from very different worlds and both are interested in each other's lifestyle.

"So what do you do all day, buddy?", says the American.

"Well, I wake up, go out on my little boat and spend the day sitting in the sun fishing. When I'm done, I sail back in, sell most of my catch and make myself a few pesos, and keep enough of it to take home to feed my family. Then I'll have dinner with my wife and children, maybe go for a drink with my friends, come home, make love to the wife, sleep, get up the next day and do it all again."
"Hey, you can do better than that. You should take your son out fishing with you. That way you could catch more fish."
"And then what?"
"Well, with the money you make from that, you could invest in a bigger boat, and catch even more fish."
"And then what?"
"Well soon enough you could buy another boat, and another, and then eventually you wouldn't need to fish at all, you could manage your fleet's operations from the shore. One day you'd be a rich man."
"And what would I do with all this money?"
"Well you could retire and spend your days fishing in the sun..."

Point is, if you aspire to a quiet life of comfort somewhere beautiful, do it now while you're young enough to get a good run at it. Fuck the rat race and spending your days saving up enough money to be able to do what you could have been doing all along. Time and health are finite commodities and you never know when they'll be taken off you.

Of course, if you're the sort of person that thinks that hard work is an end in itself, by all means slog on. Whatever makes you happiest.

When a company wants to buy you...

[erroneus]

When a company wants to buy you, it means you are competitors otherwise and they want to stop you or otherwise control your future.

Make it clear what their expected terms are to be and whether or not you will be forced into a non-compete situation. They will bring you on as an employee as part of the agreement and at that point "all your IP are belong to us." You stand to lose plenty. And let's be clear on this -- they will hire you, but that is NO guarantee that they won't turn right around and fire you leaving you with no options for "starting up again" or working for another company doing anything similar -- remember that "non-compete" thing they required you to sign?

They have a PLAN. Make no mistake about it. They have thought this through. You should give this no less thought. Get them to disclose their ENTIRE plan to you at once including their intent to terminate you leaving you high and dry. (Of course they will never say that, but you can get them to state that they never had any such intention AND that in the event they feel they need to in the future that you have a golden parachute and get it in writing.)

Re:When a company wants to buy you...

[awol]

When a company wants to buy you, it means you are competitors otherwise and they want to stop you or otherwise control your future.

Not so. I have been involved in several cases where the acquisition was not to stifle a competitor but rather to;

• Move up the value chain
• Acquire complementary businesses
• Acquire skills and expertise

There are other reasons as well and of course we have also been invloved in acquisitions within the same primary business to increase market share, similar to your case above. In these cases, depending on the market in question, there are issues of price to be paid. Particularly if the market has only few competitors. This is very unlikely in the case at point.

My advice to the prospective recipient of a buyout is to price all the things they value about working for themselves and then discount them from the purchase and prepare to lose control of their business within 5 years (and price that as well). The thinking here is that with megacorp behind you you will be driven by the kind of medium size company management issues like revenue growth and cost control for which you are not currently prepared and which are frequently the cause of "ructions" between the current principles and new bosses. Many folk leave as a result of these ructions, by choice or by squeezed out. The five year time frame is used because it should include a decent "downturn" in the overall economy and hence a good old stresser of the management team.

On the other hand one or more of your group might enjoy the opportunities that Megacorp present, each of you should price these things independently and the talk about your differences.

You kind of need to be unanimous. A majority vote will likely be a disaster.

Depends on the conditions...

[fuzzyfuzzyfungus]

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.

Michael Scott Paper

[DirtyCanuck]

Somebody doesn't watch The Office.....

Take the money

[StuartHankins]

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.

"Buy 'em out, boys"

[xrayspx]

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.

Think long term

[Mad Merlin]

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:

1. What's the chance you'll come up with another idea of equal or better quality that you can turn into something worth $$$? Keep in mind that this is harder than you might think.
2. Just how much money are they throwing at you up front? Could you retire on it? (unlikely)

I'd certainly lean towards not taking the offer.

Be sure you understand how risky going it alone is

[cduffy]

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.

Hope for the best, prepare for the worst

[johnlcallaway]

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.

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 .. 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.

Sell, take the money.

[Anonymous Coward]

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.

First clue: you're asking this on Slashdot...

[Goody]

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.

Do you want an exit?

[mosch]

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.

Re:Be sure you understand how risky going it alone

[edwastaken]

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.

Take the money if its good

[Da_Big_G]

I was in the same situation about 10 years ago (yeah, pre-1.0-burst) so I think I have some insight for you...

First, this is a business question you are asking in a techie forum, bad idea. You are running a business, possibly selling a business, go get yourself some business advisers, at a minimum that means an accountant and a lawyer who know (or at least "get") your industry, and preferably some people who have sold companies in your industry, extra points if they sold to the same megacorp and aren't involved with megacorp any more (they can tell you how it all went, but if they're still there, there's a conflict).

Second, and read carefully: TAKE THE MONEY. There's an old expression: No one ever went broke making a profit.

Caveat: after taxes it should be more money than you'd make in 10 years of working the same "job" at average pay. (e.g. if you're an engineer who could easily pull in $125k/yr, make sure you're landing at least $1.25mm cash after taxes, don't take an all-stock deal - bubbles burst) You need enough money to be able to screw around for a few years if megacorp really does turn you lazy.

BUT don't get sucked into a long term contract working for megacorp. A year or two is ok, and if you're stuck with an earnout, make sure you really can see your company meeting those numbers. After a year you could be itching to leave the megacorp lifestyle (no company is perfect) and its best to know you can part on good terms, pick up and travel for a few months, then start your next awesome company.

Third, can I repeat #1? Find a better place than slashdot to get this sort of advice. If you're really strapped, try your college's career center network, or SCORE (.org)

Re:Take the money if its good

[owlstead]

Well, maybe it was his first instinct to put it up on Slashdot to get some general ideas. Seriously, Slashdot is a fine place for that. And here you are advising him to go to another place and even naming a few.

I would not be surprised if you get less if you randomly go to a advisor. Don't overvalue Slashdot, but don't underestimate it either.

Re:Take the money if its good

[Frightened_Turtle]

Most of the folks here on Slashdot are the Technician type of person. They like to tinker, create and invent. They are not the Business-type person. Just look at all the disparaging remarks people made above about marketing and sales people. But a business needs those people who like to schmooz and wheel and deal. The very things that most technically minded people don't like to do. And you need to be wiling to do that sort of thing in order to make your business succeed/survive! A megacorporation already has those resources. Such a resource could make your product succeed beyond what you had hoped.

I can only echo what Da Big G said above. Especially about the compensation from Megocorp for your company. If they are merely offering to "make you employees of their company," then they are playing you for fools. They need to cough up money for the purchase of your company for its value. Da Big nailed it about the 10*salary rule.

The biggest mistake made by young entrepreneurs who are right out of college is to miss opportunity. Whether through lack of recognition of said opportunity due to lack of experience, or clinging to idealism ("IT'S MY IDEA!!!) due to lack of maturity and experience. But missing this opportunity will put you far behind where you could be! Taking the opportunity will put you far ahead of where you are now.

NEGOTIATE!

Negotiate what they are going to pay your for your company. Negotiate what they are going to pay you for your services as an employee. And negotiate for your exit! Make sure that they will have to pay you a reasonable severance, no matter the circumstances. If they want your intellectual property or your skills that badly, they will gladly pay the price.

Find a lawyer to go over the details of the agreement before you sign anything. Just to ensure that the megacorp didn't write in an "escape clause" in any contracts you sign.

Last, as Da Big pointed out, go to your alma mater's career center to get the resources you need to work out an equitable agreement with Megacorp. It's an excellent resource, where you can actually gain access to people who are truly experienced with this sort of thing and who can give you clear advice.

Re:Don't Sell

[cayenne8]

"Independence isn't something the money can buy you."

Actually, sufficient money is exactly what can buy you independence.

If you aren't beholden to anyone or any company for making a living, you can do pretty much as you please as long as its legal.

(Not getting into how enough money will actually often buy you legal leeway too at times.)

Re:Fool

[eyepeepackets]

True: Slavery in all its guises comes to mind.

Take The Money IF...

[alain94040]

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.

You answered your own question

[CSMatt]

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.

Make Decision Executive-style

[soloport]

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!

Re:Make Decision Executive-style

[wall0159]

"If the OP hasn't even started getting sales, now might be an excellent time to accept the offer."

Interestingly, I've heard the exact opposite. Once you start generating sales, then your company becomes self-propelling, and its perceived value is much higher. Sales also put pressure on a potential buyer, because they know that the value of your company is increasing day-by-day. Therefore, you should also try to demonstrate that (even if you're not selling now), you will be selling soon. That will make you more valuable. Having said this, it of course all depends on specifics ;-)

Re:Make Decision Executive-style

[SgtChaireBourne]

If you decide against, let Magacorp know immediately. Then get back to work, pronto. Looking back, second thoughts and re-negotiations are distractions, too. Let Megacorp know that your decision is final.

And get working on market share fast. If megacorp is Microsoft , they have a history of taking what they don't buy.

There. Fixed that for you.

Other than those typos, you're spot on. The offer to buy is often more a threat for extortion. See Sendo and a long list of corpses. Over the years, MS has taken what was a diverse and thriving industry and killed it through secret APIs and undocumented formats and protocols, price dumping and giveaways, and predatory marketing.

Re:Make Decision Executive-style

[Eskarel]

Oh grow up, Microsoft buys out the competition the same way everyone else does, and the folks who sell to them, mostly sell for the same reason. Those reasons are simple and have been the same for time immemorial. Companies buy out small competitors sometimes to acquire new technologies, but mostly to avoid the risk that they'll become serious competitors later. Their owners sell them because there's a chance their company will fail and they'll go under, and if they sell they end up relatively rich.

Is it a company or a hobby?

[Lord Byron II]

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.

Are You Looking For Success?

[soloport]

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!

having been through this experience...

[blackcoot]

... let me tell you that going from a company of 30 to a company of 140,030 is still quite a shock, and the purchase went through nearly 18 months ago.

if you decide to go down this path, make sure that:
1) you have definite set dates for _EVERY_ part of the transition, _especially_ for 401(k)s, health insurance, etc. these dates must be part of the terms of the contract with seriously stiff penalties.
2) take a long, hard look at all your groups' bumps and warts. if you're like my group, you have several excellent tech leads and no project managers. make sure that your potential purchaser can either fix or drastically improve all of your failings.

there's a lot more, but for me the biggest items are those 2.

Geocities

[Spy der Mann]

Yahoo! buys Geocities and turns it into a piece of shit.

Any questions?

SELL!

[Proto23]

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/

Re:True, but...

[WillKemp]

There aren't many things better than being rich.

Yes there are! Being happy. Healthy. Fulfilled. Having an interesting life. Loving and being loved.

Being rich isn't a prerequisite for any of them - and it doesn't bring any of them on its own.

This is silly.

[Jane Q. Public]

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.

Re:This is silly.

[Sparohok]

I disagree.

There are obvious reasons not to put in too many specific details, in case the buyer reads Slashdot. (Unless of course this whole discussion is a negotiation tactic by the poster, in which case, bravo!)

You seem to want to provide accounting advice. Slashdot is not news for accountants, presumably the poster is better off hiring one of them for their accounting needs.

What Slashdot does have is older more experienced nerds who have been through this before and can give nerdly life advice. That's clearly what the poster is after, and we got exactly the right details to give a reasonable overview of their life outlook.

Re:Don't Sell

[Bob Gelumph]

You may be ambassador to England or France. You may like to gamble, you might like to dance. You might be the heavy weight champion of the world. You might be a socialite with a long string of pearls, but you're gonna have to serve somebody. Yes indeed, you're gonna have to serve somebody. Well it may be the devil, or it may be the lord, but you're gonna have to serve somebody.
-- Bob Dylan

The economy is disintegrating, take the money now

[Simonetta]

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.

Keep telling yourself that....

[nick_davison]

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.

the VC two step

[goombah99]

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.

It's complicated of course - but...

[IntentionalStance]

There's at least three things going on here:

• Where's the money coming from to fund your current exercise - could it run out one day?
• Do you actually need to take the risk of turning this current opportunity into significant wealth or are you content with something more modest
• Could you easily generate the next "great idea" or do you believe this a one-off

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.

Depends if there's a non-compete clause...

[cowbutt]

...if there isn't, or it's quite reasonable, take the money, fulfil the contract, then take the money and go and do the same thing again, but even better next time now you have the capital to avoid cutting (any/as many) corners. Rinse and repeat.

Worked for a former boss/colleague of my acquaintance! Thrice!

The implied threat in any buyout...

[Chris Snook]

...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.

Re:True, but...

[profplump]

That's what poor people like to tell themselves, but it's not really true -- rich people are, in the aggregate, happier than poor people. Being rich doesn't make you happy per se, but it can sure help you avoid a lot of the things that make you unhappy. And there's no reason to believe that being rich makes any of that happy-generating life events more difficult or less likely.

Re:True, but...

[somersault]

Not really - how much money you have is an important variable in the equation of how much time and resources you have to do the other things that you consider important. He didn't say that it was the most important, just that it's up there. Anyone who has to work 2 or 3 jobs just to keep their family surviving would probably agree that money is very important. It's only those who make enough that they don't have to worry about money that consider it unimportant.

Re:Depends on the Megacorp and on you

[Anonymous Coward]

This is good advice.

I had a startup 10 years ago with a similar situation and a head full of ideals. We passed over two such opportunities.

With experience, we now know that was a mistake.

Developing a product and making real money is 100 x harder than anyone realises, no matter how talented you are.

If you take a good chunk of money now, it will set you up and free you to explore bigger and better things. Plus, the big corporate may teach you a valuable business lesson or two.

Consider that to make $100k clear cash, your company would have to sell c. $1M of product taking into account staff costs, taxes, cost of sale, legal fees, etc.

Work out how long it would take you right now to generate $1M revenue and that is how much time $100k cash would save you.

Believe me, if you can save 2-5 year's of grind, do it. Anything can happen to your product including total failure in the Market. So if someone's willing to put a value on it now, cash in.

As a startup you have no idea how hard it is to turn great code into hard cash. Take the cash now and get where you want to be quicker.

P.S. just because you work with suits doesn't mean you have to become one. But it's surprising how some business methodology can bring order to creative chaos.

I disagree

[Anonymous Coward]

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.

Re:True, but...

[Anonymous Coward]

That's what poor people like to tell themselves, but it's not really true -- rich people are, in the aggregate, happier than poor people.

Having worked as a guidance counsellor, social worker, and community organizer, I can state with absolute 100% certainty and authority that this statement is entirely bullshit.

Re:Depends on the Megacorp and on you

[Rastl]

Your responsibility, assuming you did get the big cash, is to put a portion of that money toward starting someone else's startup

Bzzt. Capitalism failure. Their only responsibility is to use the money in whatever way they want. They earned it by putting themselves on the line so they should reap the rewards.

Would it be nice to put out a little venture capital? Maybe. Do they want to be venture capitalists or to pay people to handle that process? Probably not. From the question posed they want to develop and do stuff. Not sort through a bunch of half-developed business ideas.

I have no experience with this sort of thing but the suggestion of take the money, get stock options, work out a transition, and get out sounds perfect for you. Then you can do what you love, which will probably mean starting another company.

Lather, rinse, repeat. You'll be doing what you love and getting paid money for the end result.

The hardest thing is going to be letting go of your baby. Realize that as soon as you sign those papers you've turned it loose so you can't worry about what the new 'parents' do with it.

Re:Don't Sell

[mikael]

If you have paid off the mortgage on a house in a suburb with a good school or have retired to somewhere rural with more space and lower property taxes, have enough savings where the interest can be used to pay off the loan on a new or slightly used car, the food and utility bills, and you have still have enough left to do whatever you have always wanted to do (timelapse photography, video editing), then money does buy you independence.

I've seen many people do this, from engineers who had a steady career with large corporations, and took the option of early retirement when the companies downsized, to company directors who sold the company off to a mega-corp, and then formed their own startup.

But if you are wanting to continue running your company your way, the investment from megacorp is going to come with a catch; maybe the product manager responsible for that area will start making demands such as wanting the most qualified staff working on a particular aspect of the project, or using particular development tools or methodologies (to showcase their technology).

Re:Everyone has a price

[pbhj]

The price that you can sell at is the price someone is willing to pay. If you price it too high, especially for a big corp, then it's cheaper for them to start over and wipe you out leaving you with nothing (not even the business you had, possibly with some big debts and the stigma of a failed corp to drive off the investors).

You should of course start at the position above what you would most like to get from the deal but not so high that the other party thinks you're trying to gouge them.

Having said that I hate costing things.

Bingo!

[davebarnes]

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.

Exactly.

[Weaselmancer]

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.

Re:Everyone has a price

[RogueWarrior65]

Sounds to me like it's only a fishing expedition. If they haven't made you an offer, you've got nothing to consider except a hypothetical thought exercise and the existence of Megacorp is irrelevant. If you think they're going to buy you out and you'll get to keep working on what you're doing now or what you WANT to work on, forget it. Most corporations don't have a 3M mentality that encourages researchers to just invent stuff. if their real goal is to acquire your product once it's finished, you are no longer of much use. If they want your brain, then chances are they don't care about your product and want you to work on B.S. that their marketing flakes have come up with from some stupid focus group. If they want to buy you out to eliminate competition, the product is dead and you are of no further use to them. So, get enough money to retire on if you can. Typically, 3-4 times gross revenue for a company with existing products is what you can expect.

Re:True, but...

[Anonymous Coward]

I started a startup a couple years ago and sold it for several million. I am 25 and damn near the richest person I know. Money has not made me happier than before. It has made me more carefree, but not happier. My safety net is huge, but my lifestyle hasn't change much, and I wouldn't want it to. Happiness for me comes from having good friends, and having interesting problems to solve. Money is not a pre-requisite for either of those. Having basic money management skills is generally enough to avoid things like debt, which is where a great deal of stress and unhappiness comes from. Money is not needed to have good money management skills.

I have considered giving all of my money away, simply because it is a burden. I don't want to have to manage tons of money. I don't want to deal with all the tax issues. I don't want to feel richer than my friends.

Someone once said that the best way to make someone unhappy is to give them a million dollars. It isn't quite true, but it certainly means that person has more to lose. Either they've got an extra burden (like me), or will waste it and likely end up even worse off (like most who win the lottery). Money makes a balanced life more difficult in some cases, and not one everyone is ready for that challenge.