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?

[jonbryce]

Justin Frankel, formerly of Winamp, which was taken over by AOL, might not agree with you.

Re:Could you be more vague?

[SlashWombat]

The thing about money is that it gives you time ... in the future. Most buyout deals tend to indenture the key staff for 1..2 years while the business either spools up, or down. So the worst case is that you spend 2 years figuring out how to structure your next attempt.

I also find it hard to believe your not really interested in the money, otherwise, why would you have started your own business in the first place?

Re:Could you be more vague?

[Anonymous Coward]

like sleeping with girls a lot younger than yourself

Both of you, bad example. This does not require money. (Yes, even for the ones that are younger and more attractive than yourself.)

If you think it does, you're doing it wrong.

Re:Could you be more vague?

[Hymer]

For the most part, a job is nothing more than a means to make money.
Some of us have made our hobby our work... so we are doing exactly what we like and we have fun working.

When you sell yourself to a megacorp you end with a contract saying that you are not allowed to do whatever you are doing if you quit the magacorp for some 3, 5 or even 10 years after you quit, that is std. procedure.

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?

[Anonymous Coward]

like sleeping with girls a lot younger than yourself

Both of you, bad example. This does not require money. (Yes, even for the ones that are younger and more attractive than yourself.)

If you think it does, you're doing it wrong.

vote++.

Here's a little secret that a lot of men don't ever seem to catch on to: Many women are turned on by older men. Lots of them. Maybe even most of them.

When I turned 40, fresh off a divorce, I figured the old sex life was just about over. Seldom have I ever been so happy to be proven wrong. :)

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?

[mysidia]

That's why you make sure you live in a right-to-work state that doesn't allow companies to make workers sign non-competes.

So you can go work for a different company doing the same thing later, if megacorp screws the pooch...

Re:Could you be more vague?

[speeDDemon (nw)]

Money is like air, its only important if you don't have any.

Re:Could you be more vague?

[BeanThere]

The first you will learn about money is that it lets you do exactly that.

Precisely. The obvious contradiction in his statement reveals naivety in this regard - he's perhaps just used to mom paying for everything, so hasn't quite learned this yet. Speaking as someone now in his 7th year of working his ass off at growing a small business, and still at least a few years of hard slog away from being able to "retire - precisely so that I will be able to do whatever I want" - I would strongly recommend taking this deal, especially if you can negotiate a bit of a higher price (if they offered X, they will probably accept a price of, say, X+15%). Getting a business going is really *tough* ... you might think right now that opportunities like this are going to come along a lot - but more likely than otherwise, this is just a fluke, you might *very* well struggle your ass off for another ten years before you ever get another opportunity like this. Unless the offer isn't that great (he's vague - e.g. is it "enough money to live for three years" or "enough money to live for 30 years", crucial difference) - take it, take it, take - even if you then just start a new venture, at least you will be starting that from a position of having some cash in the bank, which will really, really help in any new venture (as a.o. e.g. you can't invest in R&D when you need to do projects just to keep the cash flow going). If the money is good (as in "I could theoretically retire with this, if I manage it carefully"), then I would definitely take the money.

He says it's not about the money - but it always is, because living is expensive, nobody can get away from that. And so you never do quite "what you want" anyway, even if it's your own business; you gotta keep customers happy so you can pay the rent.

Unless you are super confident that your business is so amazing is going to hit the bigtime soon. It's 'tough out there', it really is.

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?

[Courageous]

You've gotten a lot of different pieces of advice in the thread below. I think many of them are quite wise, in particular the remarks that turning your development effort into a real business operation may be a longer tougher haul than you think. The only thing I might add is that there is a certain stage to consider selling your operation... based on a sort of best value of what your small team has been able to complete. It's not clear to me that you are there. Perhaps you should put your feelers out, connect with some friendly venture capitalists, and ask them to assess for you. The ones that have been doing it for a while should have a good feel for it.

C//

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?

[bwcbwc]

A couple of practical matters to consider, besides the self-analysis:
- Are there other ways to structure the deal rather than a complete buy-out? If Mega-corp is interested, maybe you'd be better off with a VC Angel type of deal, whether that's from Mega-corp or someone else. If mega-corp is just interested in your technology, maybe structure it as a partial buy-out with an unlimited license for them to use. If you want to live dangerously, give them majority ownership and you guys keep the smaller piece.
- If you turn them down, is Mega-corp going to start filing patent, copyright and other lawsuits at you? If they are _really_ interested, your days of independence are over regardless. I'm not saying just take mega-corps offer, but you'll need a source of funds to defend yourself from hostile action from them. Whether that comes from selling to a competitor, a VC funding round or you and your roommates each have a half-million stashed away is your decision.

Re:Could you be more vague?

[b4upoo]

I would take the money and the job that goes with it with a pre set separation date and terms. That way you can do what you like with a nice nest egg and that time certain arrangement will guard against you getting trapped in corporate culture.

Re:Could you be more vague?

[mr crypto]

"money is that it lets you do exactly that" is very well put.

I would like to add that in these types of deals the only rules are the ones you make. When eloan was bought, the sellers sold 1/2 the company as a compromise to mitigate their risk. You should also figure out what is important to you in terms of product development and marketing and propose them as terms of the contract.

Re:Could you be more vague?

[masmullin]

I'll buy you a diamond ring my friend if it makes you feel alright. I'll get you anything my friend if it makes you feel alright. Because I don't care too much for money, money can't buy me love.

Re:Could you be more vague?

[jwildstr]

Be careful with "D) nothing is precluding you and your friends from developing a new idea/concept while working for megacorp". A lot of companies will basically have you sign something saying that ideas you come up with/develop while working for the company are theirs. It's hard to prove the "come up with" part of things, but if you spend 2 years working there _AND_ on your pet project, you'll likely get a visit from megacorp's lawyers.

Of course, you can negotiate things when you're selling to them, but make sure to watch for things like that.

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.

Re:Could you be more vague?

[Seismologist]

You have given us nothing to go on here as far as your business case, so I'll be brief:

Can't you read into it... ???

They are in the hydroponics business growing "herbs" on a small scale. Now, they have been found by a larger "cartel" group, most likely from Mexico, whom are giving them an "incentive" to join forces...

Re:Could you be more vague?

[ruphus13]

Eugene Kleiner,the founder of Kleiner Perkins, the VC firm behind some of the biggest successes of our times (Amazon, Google, Intel, Genentech, etc. etc.) said it best - "When they pass the hors d'oeuvres around, take two". When there's money on the table, you take it.
Love your money, not your stock.
Let's face it - if you came up with this concept with a bunch of your buddies sitting around, you can always come up with another one. Getting a company off the ground is VERY hard, and it is much easier with success under your belt. This will classify as a success. It will make the next one, should you choose to do another, much easier. It will be easier to raise venture money if required, it will be easier to attract talent, and it will be easier to sell to customers. You will learn a lot about taking a product to market, seeing it deployment and learning how customers made purchasing decisions.
Unless, for some reason, you have some killer IP and a clear path to revenue (both of which are, more often than not, not worth the paper they are printed on - technologies have short half-lives and customers change strategies, get acquired, lose or make more than anticipated and contacts within firms get re-org'd, fired or they quit), you really should have a very strong reason for assuming you will do a better job than Megacorp. The only reason to pass would be if you feel the deal is not high enough. That can only be validated via a counter offer. Again, as Eugene Kleiner said, "Never sell unless there are at least two buyers". So, if you feel this offer is fair, you better have a strong reason for thinking you can do better than Megacorp.
Also, get some solid advisers (perhaps professors who serve on boards, or alumni or something) to help you think through this before engaging the professionals (lawyers).
IANAL, but know the following (you prob already do, but I didn't see it discussed here):

1. There is a big difference between a cash offer and a stock (if illiquid) offer.
2. Lockouts - how long before you can leave, should you want to
3. Earnouts - what milestones do you need to hit before you get all your monies disbursed
4. Non competes

Facebook and Google are well known for going through the halls of places like Stanford and doing 'manquisitions'. The developers get some cash up-front (similar to a signing bonus), get an exit under their belts, get a smaller piece of a hopefully bigger pie, and it gives FB/GOOG a few solid developers to work on projects that the devs are passionate about.
A wormhole has opened up. Don't saunter by!

Re:Could you be more vague?

[ta bu shi da yu]

I see you are posting anonymously on slashdot. Why do I suspect you are a 17 year old pimply faced teenager?

Re:Could you be more vague?

[Thinboy00]

I see you are posting anonymously on slashdot. Why do I suspect you are a 17 year old pimply faced youth?

There, fixed that for you.
*pause*
I'm a pimply faced youth, you insensitive clod!

Re:Could you be more vague?

[Thinboy00]

Adam Smith needs revision...

Re:Could you be more vague?

[ta bu shi da yu]

As I saw on a bumper sticker the other day "We have a fountain of youth, why can't we have a fountain of SMART?".

Re:Could you be more vague?

[cayenne8]

"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."

I don't think of it that way. I love life, there are things I love to do....hang with friends, work out, travel, buy 'toys'....I like to play with computers, work with pgp and nym servers, etc.

Money allows me to live in a place and lifestyle I love...

If I won the power ball, I'd never 'work' again.

I can't understand why people way they'd acutally work after they were wealthy, unless just making money was an end to itself. If I had enough money to not work again...I'd not work again.

I was recently between contracts for 7 mos...every day, I woke up, went to the gym. If weather was nice, I rode my motorcycle around New Orleans all day....hit a couple bars for beer, and in the afternoons, met my working friends for a few.

I figured out then, that if I could do this for the rest of my life, I would. Do that, and occasionally take a vacation here and there to MX or Key West...to get away from it all.

I've never understood people who define themselves by their job. Me? I'd rather take the short time I have in life....and enjoy it in any fashion I'd like. I buy sports cars and stuff, not because what other people thign...because I like driving them and driving fast. I like to cook, I like to eat and drink well...I like to hang with friends...buy drinks...give to others...travle..etc.

If I didnt' have to work..I'd not , I'd do the things I said.

I cannnot really believe someone that had the means..would not do the same.

Re:Could you be more vague?

[terjeber]

Amen to this.

When you start up many things can happen. The most likely is that you go bust, the software dwindles into insignificance and you have had a nice experience.

Some times you get a nice offer for your company. Make sure the offer you get includes a lot of cash or other immediately useful instruments of wealth. You will probably also get an offer for a nice job. Don't put too much value on that. Chances are you'll be outta there as soon as the options part of your package has vested. Big corps buying small corps usually doesn't end well for either.

So, make sure your up-front package is good and assume you'll be onto something new later on.

Or, you can do what some people do, hold on for a bigger thing down the line. It doesn't come but it'll be a fun ride. Only a very small number of companies actually make it. Chances are, even though the big guys want you now, that you are not going to make it big. The buy-out option is rare enough, and you should make that one worth your while. Then you go on to the next fun thing later on.

Re:Could you be more vague?

[sh00z]

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

He may think he's already living it, but after a couple of years of doing his own personal and corporate income tax work, trying to find and stay in a reasonably-priced group healthcare plan, and being restricted to a Roth IRA for retirement planning that will do any good, he may find himself working 100 hours a week and 40 of them on "overhead" rather than the work he loves. Megacorp won't look quite so bad then.

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

[cjfs]

Chance of success * estimated payoff, compare that to the offer and adjust for how highly you value stability/independence.

I'd usually say even if the question is simple it might still spark good conversation, but really this is too vague to be useful.

Re: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.

Re:No advice to give

[jabithew]

I think that asking for advice can be a key part of the decision making process, as it can tell you what your true emotions are. If everyone tells you to do something, and you feel disappointed, you know how you feel about that decision.

It sounds stupid, but it can be really hard to isolate how you actually feel in these circumstances.

A coin toss can work quite well for smaller things.

Re:No advice to give

[cptnapalm]

Most of the time, though, people asking for the advice will get combative. If it works for you, great! But the overwhelmingly majority of the time, when anyone asks me advice they will push to get the one they obviously want and will turn hostile if you do not agree.

Not a universal, of course. One friend of mine told me that I am the only person to whom he will give advice because I am the only person who asks for advice when I genuinely am uncertain as to how to proceed.

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.

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

[Steauengeglase]

If there was a +6 Insightful I'd be happy to mod this one up. Just to add a bit, there can always be one paranoid crazy at MegaCorp who will think that your continued existence is a mortal threat to MegaCorp and that you should be eradicated at any cost (lets face it, Capitalism isn't immune to irrational nut jobs).

On the other side of a aisle is there any way you can protect your self in the event that a raider takes over MegaCorp if their stock plummets? By protect yourself I mean other than taking what cash you have, running and going into a completely different field because you are hog tied by NDAs?

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.

Re:run!

[mysidia]

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.

Release the idea [but nothing else] to someone else under other (irrevokable) terms, and/or file a statutory invention registration, before agreeing to the deal?

Maybe your little corporation has to license the core idea behind the technology they are developing instead of owning it outright? Er...

They may 'own' the business and the code, as you agree to transfer them, that doesn't necessarily mean they can automatically own and patent the idea, that's a separate asset. Get a lawyer.. :)

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.

[Clived]

As they say in the songs, "Take the money and run". you guys can always start another gig

My two bits

Re:Take the money.

[Anonymous Coward]

It only takes a few million to retire and to *anything you want to do.*

Umm, there are some of us who want to go on a cocaine and hooker binge for 5 years straight. You think a few million will cover that? I think not.

Re:Take the money.

[oliderid]

Well you can negotiate.

Usually corporations think that way:

• Ok, how much would it cost us to fund such a project in-house and how many times would it take to find the right persons to do it?
• Compared to: how much would it costs us to buy an existing company/team and an existing product?

So in this case they think it would be more reasonable to buy an existing company/team.

"But" you are entrepreneurs, your motivation is essentially "big money". If you loose that appeal and if you receive just a salary instead, you will be less productive. Remember them that fact to negotiate significant shares.

Something else worth to remember, developing a product is the easiest part of the job (I'm a developer and entrepreneur as well). The real difficulty is to sell it.

Usually computer engineers have a very poor estimation on that part of the project.

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.

Re:Take the money.

[wurp]

Usually computer engineers have a very poor estimation on that part of the project.

Amen to that!

I worked on this about seven years ago: http://www.magicosm.net/
And wrote this five years ago: http://frimp.net/ (basically an easier to use version of Craigslist with better coverage)
And this about three years ago: http://www.moochmuch.com/
And this last year: http://www.itunes.com/apps/Pharce

My net *loss* for all this activity (compared to what I would have earned had I not taken a sabbatical from work, not considering all the time I worked in evenings/weekends while I had a full time job) is about $180,000.

My reasons for failure:
For the first one, I really probably have to chalk it up to idiocy on two fronts: we didn't make it playable/fun early in development and have early releases, and when Sun showed us off at the 2001 Game Developer's Convention and *offered to have us on stage at Java One*, I decided I couldn't afford to pay to stay another week in San Jose. The other idiocy was not ours: a funder expressed some interest, then when I talked to them they decided there was no market for another fantasy game. (This was before Dark Ages of Camelot and long before World of Warcraft.)

The problem with the second and third one is that I don't know how to advertise, or they were just bad ideas. The advertising income barely pays for hosting.

The fourth one may still come to something. It has certainly earned more money than the others. I still have no idea how to market/publicize/advertise effectively.

Coming up with a good idea and implementing is hard, but it is nowhere near enough to be successful as an entrepeneur. You need to either make the commitment to become the kind of person who can do sales and marketing, or find someone who is to partner with, or get very lucky.

In short: take the money. Building something great is *not* enough to be successful in business.

Re:Take the money.

[MrPhilby]

Do you value this money above that what you do now?

Re:Take the money.

[vikstar]

What if the day is cloudy and he doesn't want to fish? If he had money, he could do something else. Instead, he has to sit in the rain and fish.

The dream is a fallacy, which only seems attractive to those who cannot think past the lustre.

Re:Take the money.

[rhakka]

You never read about the "Ant and the Grasshopper"?

Re:Take the money.

[Scott Carnahan]

Time and health are finite commodities and you never know when they'll be taken off you.

Sure, but if the fisherman could afford health care, he would be far less likely to die if he accidentally hooked himself and got an infected wound. If he had cash reserves, he wouldn't need to worry too much if he broke his arm and couldn't cast for a month or two, or if his boat were destroyed in a hurricane. If he were well off, he wouldn't have to worry too much if the fisheries collapsed due to his or his neighbors' unsustainable practices or the pollution from nearby farms and factories. If he died of skin cancer from sitting in the sun all day, his wife wouldn't have to go and work the dockyards to keep herself and the children from starving to death.

For most of history, personal wealth was not just a way to attain power for its own sake, but a way to manage risk in an uncertain, dangerous world. Recently, some of the more affluent nations have implemented safety nets that make this less necessary, but it is quite naive to think that an idyllic life of poverty generally works out well.

Don't Sell

[pcjunky]

Independence isn't something the money can buy you.

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:Don't Sell

[McBeer]

[if you are rich enough] you can do pretty much as you please as long as its legal.

At least in the US, legality ceases to be a problem if you're rich enough.

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

Re:Don't Sell

[pm_rat_poison]

Actually, you can do EXACTLY as you please with lots of money. With lots and lots of money, the boundaries of what is legal become veeeery flexible

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:Don't Sell

[MrPhilby]

Truly true. Be young, regret it later, earn your goatee.

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...

[erroneus]

By the way, this sounds terribly like one of those "microsoft partner" deals and if this megacorp happens to be Microsoft, just keep in mind that Microsoft sees partnership as "victory for microsoft" and they own whoever they partner with.

In any case, GET A LAWYER and get them to agree to pay your lawyer. They have lawyers too...lots of them.

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

[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.

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

[Swanktastic]

I'm curious. Do you have any experience in this matter? I do, and I can assure you that the absolutes you've defined are not absolutes by any means. It really depends on the deal. Some companies buy to simply increase market share. Some think they can move a new product through their channel cheaply. Some think they can incorporate unique features into their existing product easily. Others want sales relationships (not in this case, from the sound of it).

There's no hard and fast rules to this. In deals I worked on, typically we wanted to use an acquisition as a seed to enter a new business and leverage our brand to grow it. You better believe we were interested in keeping the entrepreneurs happy. The problem is, once you dump a stack of money in an entrepreneur's lap, it's hard to keep them from moving on or retiring, even with an ironclad non-compete.

As you say, though, the only thing that matters is getting a good lawyer who has experience in acquisitions. They won't let you do anything stupid, but it's gonna be expensive. Probably something along the lines of 5% of the value of the deal. If the deal falls through, then you eat that cost.

In my experience, most entrepreneurs are WAY out of whack with regards to the value of their company. Most are convinced that BUYER X is interested in their company because their product/service/whatever is the wave of the future and has no possible substitutes. Usually, BUYER X has the means to develop whatever you're doing, but simply wants to get there faster.

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

[msormune]

Did you know in many parts of the world, contacts saying you can't work on same field for X years, etc. are actually NOT even legal? Because constitutions say a company or some other party cannot limit your freedom for making a living with such contracts.

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

[amanfromMars]

"Get them to disclose their ENTIRE plan to you at once including their intent to terminate you leaving you high and dry." erroneous, It is much simpler, although admittedly so only whenever one knows what one is doing and is fully cogniscent of the future impact of one's Programming/Project*, to jump right into the Driver's Seat and lay out One's Own Plans, which needs only be a Capital Sum Number and an Ongoing Free Credit Arrangement for Ones Reasonably Extravagant Plant and Material Needs and Feeds** [well, Boys and Girls are entitled to their Toys if you want to engage with and retain their Novel IP Train of Thoughts,surely?] which will then both assure and insure both Parties of Worthy Future Good Service and that is especially so whenever one's product is a real competitive Out-of-the-Big-Blue-Wonder Challenger to the Status Quo Megacorp Stranglehold/PreDominant Market Position. * It is always a Brains Trust/Mindset being bought in any Business Transaction .... A Different/Alternate Future Memory Configuration. ** Thus will this Facility Immediately Always Provide and Driver a Transparent and Always Dynamic Indicator of Mutually Beneficial Action, which is particularly Important should a new Technology be HyperRadioProActive to such an Extent that it would be an Original Virgin Lead rather than Supplemental Traditional Support. Although whenever you get in the Games Set which have millions and billions being discussed and bandied about, are such mind games and numbers only for minions in the Markets to shuffle and play with .... as a Special Magic Card which Provides Limitless Instant Credit, No Questions Asked for All Answers Tendered, takes Care of Everything Automatically as if by MaJIC.

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

[ciderVisor]

Essentially the goal is to create a win-win situation for everyone.

Plus, you get to use the word "synergy" in its proper context.

win-win-win

Hard Call

[IMightB]

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.

Sell dude

[cp4]

Life is short...

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.....

Re:Michael Scott Paper

[Anonymous Coward]

EMC purchased a small IT service management company and screwed the directors. And EMC are actually not to bad as a mega-corporation (except they are inefficient, and don't give very good service to their customers). Yes, the directors got a lot of money, but unfortunately for at least one of them, they had expected to stay on and help manage the company to greater heights. They all got shafted and soon left. If you want to continue to have a hand in managing your teams, then I would advise not selling the company. If you don't mind leaving and starting up another company, go for it. Just make very sure a competent lawyer reads the contracts so you can, in fact, start a similar company, or a company within the same field!

Oh, and I'm going to post this anonymously, though I suspect that I've said enough that I can be identified. But you have been warned!

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.

Re:Think long term

[Cheech Wizard]

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.

I'll echo that. From experience.

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.

Re:Fool

[fucket]

There are worse things than being broke.

Shop around

[ipX]

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.

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.

TPS reports

[seifried]

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?

#1: Things Change After the Sale

[BoRegardless]

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.

The sign is good and bad. Watch your back!

[techhead79]

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?

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.

Re:Sell, take the money.

[BrokenHalo]

Do not wait for the future which may not be there.

That has to be the most succinct and insightful comment in this entire thread.

a possible idea

[ILuvRamen]

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.

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.

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

[TheLumberKing]

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

Hey Slashdot, first time caller, longtime listener. Why not ask the question on Slashdot? Several posters have stated experience in such matters and offered Interesting, Funny, and Insightful information to the OP. I routinely refer Slashdot as the place where all the smart kids hang out in the Internet cafeteria. Don't sell us short, Goody.

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

[jfederline]

The human condition is the ultimate predictor of our own futures, this hits the nail on the head. Get a n employment lawyer ASAP to help you navigate your soon-to-be employment contract with Megacorp and good luck.

Whichever

[nine-times]

I understand I'm not answering the question, and what I'm about to say isn't exactly "the truth", but more like one way to think about it: there's no way of knowing.

If your forego the Megacorp money, you might complete your product and end up making 100 times as much money. Or your whole project could fall apart in 3 months for reasons that you have no way of anticipating right now. Maybe one of your team will get hit by a car, or fall in love and move to Tokyo.

On the other hand, if you sell to Megacorp, you might end up being able to make your project into everything you envisioned and find fame and fortune through Megacorp's extensive resources. On the other hand, the corporate culture may strangle your soul to the point where you need to quit and check yourself into a mental institution.

There's no right answer here. Without knowing the particulars of what your project is and which Megacorp wants to buy it, the only real advice I can think to give is to think it over and then try to act from hope rather than fear. And keep in mind that if you're fresh out of college, you can probably afford to make a few mistakes, and still have time to start over. Instead of spending all your time afraid of making mistakes, remember that you want to make the best use of your successes and mistakes by learning as much as you can from them.

Do you want an exit?

[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.

They don't want to buy you...

[unitron]

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?

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 Cash - NOT Stock Options

[kstatefan40]

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.

he knows what the facts is

[syrinx]

As Steve Miller says: "Some people call me Maurice."

No, wait, wrong quote.

As Steve Miller says: "Take the money and run."

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:Take the money if its good

[pavon]

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

I disagree. Sure, he should absolutely talk to a lawyer and business adviser to help decide if this particular deal is a good one, what pitfalls need to be avoided, and how to negotiate the best deal.

But that isn't what was on his mind. He was asking which of these paths had more potential to make him happy and be more fulfilling for a techie. Other techies which have been in similar circumstances can answer that question far better than any business adviser could.

Re:Take the money if its good

[societyofrobots]

I was also in the very same situation. A medium sized company offered to buy me out and hire me full time.

They wanted my intellectual property and brand name, too, which is why in the end I turned them down.

Good thing I did. Within a year I came out with a new product, and they became a major customer of mine. Dealing with them has always been unpleasant, as I give them a good price and they still hard bargain for even lower. Their secretary often has a serious attitude with me and other companies they deal with (I spoke with others). I would definitely have not been a good fit in that culture, and would have probably lost more than gained.

Re:Fool

[eyepeepackets]

True: Slavery in all its guises comes to mind.

I am SHOCKED and APPALLED

[JeanBaptiste]

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.

Re:I am SHOCKED and APPALLED

[couchslug]

"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?!!?!?!?"

Sell the company, take the money, then kick back and write F/OSS for the personal strokage.

Anyone with imagination can find something rewarding to do if they have money.

Not everyone with imagination can necessarily obtain money, so get the money when the getting is good.

Re:I am SHOCKED and APPALLED

[MrPhilby]

So true. This goes to the heart of who you are as a person. No one else can answer this for you because this decision defines who you are and no one else can answer that nor judge that from your perspective. Who are you?

Re:I am SHOCKED and APPALLED

[drcesteffen]

Why? One method of making money is to develop closed source software then open source an older version of the software (F/OSS) to gain market acceptance/share. The open source company then charges for either commercial-use or latest-version-use. I believe ghostscript follows one of these models. The open source company could sell the copyright in the non-open source code base. I believe the Tripwire (intrusion detection) developers did this recently. Technically, people releasing code under the GPL or at a later contributer's option any later version of the GPL could find a later version of the GPL allows the close sourcing of the code by company X only. This seems to be a dangerous clause if your goal is to keep it in the same state as the GPL license you released the code under. That said. Hiring professional help is not a substitute for educating yourself on possible problems in a sale of this nature. The variation in knowledge in the other professions is equal to the variation in knowledge in the programming profession. I would recommend the "Science Fiction Handbook" by L. Sprague De Camp http://www.amazon.com/Science-Fiction-Handbook-Sprague-Camp/dp/0070161984 for an insightful description of contract issues and desired clauses with selling book rights which might be applicable to the current situation from someone who did it for a living. Another book which might apply is: Inventions, patents, and their management / by Alf K. Berle and L. Sprague de Camp

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.

DO IT!

[Jethro]

Oh for gods sake! TAKE THE MONEY AND RUN. Milk it for all you can! To quote Homer Simpson when Bill Gates offers to buy him out, "I put my heart and soul into this business and now it's finally paying off!"

Seriously, get enough money to be comfortable. If you guys end up not liking working for the megacorp, QUIT AND START ANOTHER COMPANY doing something else. Maybe you'll get bought again!

Just make sure you don't sign anything stupid.

Everyone has a price

[prakslash]

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...

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.

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.

Accept it if the the money is substantial enough.

[multiplezeta]

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

Be careful of spies and pretenders

[rollingcalf]

Sometimes a big business or somebody posing as one comes along offering to buy up a small startup company, when in reality they only want to get inside information so they can copy the ideas and technology.

So you really need to find out if these people are actually capable of buying your company for millions (anything less, and by the time you split it up between all of you and take out taxes it won't be worth it), and that they are genuinely interested in buying the company, before you even think about selling it to them. Then if you think they're real, get a lawyer ASAP with experience in these type of deals, and be very careful of how much information you reveal to the buyer.

You answered your own question

[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.

Re:You answered your own question

[cryptoluddite]

Nobody wants to sell their pride and joy, their little tech baby. That's not the question. The question is should they sell it.

Ultimately there are just two factors to consider:

1. How much are you really going to get paid?
2. Will it still be your pride and joy?

Both are completely situational. Do you get paid up front in addition to maybe being an employee? How much do you expect to lose by selling it? Does the company want to develop the product, or shut it down? Megacorp might fire you right away, so make sure to get a guarenteed payment of some kind that is substantial. You might be able to make more money off your code yourselves, or you might fail. Nobody here can tell give you any advice, because you gave us no information.

But I would tend to say that guaranteed money is better than potential money. Also remember human nature; people that have their ships come in and get lump sums as a rule end up blowing it. You don't know what kind of taxes you get when you get a 100k lump sum (or whatever), or how fast it's going to burn. Don't go out and blow it right away on cars and fancy houses, or decide to become a day trader!

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

[russ1337]

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

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

Re:Make Decision Executive-style

[BrokenHalo]

If the OP hasn't even started getting sales, now might be an excellent time to accept the offer. He is spared the pain of getting one startup off the ground, and the sale should provide him with useful collateral to pursue some other opportunity if he so chooses.

Anyone who is able to get a venture to the point where people are queuing up to buy it (especially in this economic climate) should have no trouble coming up with an equally interesting idea to pursue.

I Am Not An MBA, but it seems intuitive that knowing when to get out of a business must be a large part of the strategy. To harvest a good offer while having had to put in a relatively small amount of work sounds like a winner to me.

Re:Make Decision Executive-style

[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

[richlv]

in the best case. somehow i got reminded by the abstract of http://en.wikipedia.org/wiki/Antitrust_(film), mentioned on /. recently ;)

Re:Make Decision Executive-style

[Lonewolf666]

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.

Alternatively, demand a large enough fixed sum that $Megacorp has to pay you as soon as the contract is signed. So even if they drag their feet, you got your profit from the deal.
This also protect you against the scenario whre they hire you first to get your technology, then fire you under some pretext.

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

[TheRaven64]

No need to mention Google specifically. If a megacorp wants to buy you, it usually means that it has decided that you are in a business that it wants to be in and that buying your company is the easiest way into that market. It rarely means that buying your business is the only way into that market. Your choice is either to have the megacorp as an owner, or as a competitor.

Re:Make Decision Executive-style

[monktus]

"Buy 'em out boys!"

Re:Make Decision Executive-style

[Anonymous Brave Guy]

Your choice is either to have the megacorp as an owner, or as a competitor.

Of course, a few years ago, that's probably what Yahoo! and Altavista were telling a couple of young kids named Sergey and Larry.

Our industry is one of the few where a start-up with dedicated, smart people and a really good idea actually can take on a megacorp, because the running costs and barriers to entry are so low and market share can explode.

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.

Re:Make Decision Executive-style

[Passman]

Microsoft, Google, Apple... Buying may be cheaper than building, but if push comes to shove they can outspend you for development by orders of magnitude. Just because you had the idea first doesn't mean you will be first to market. Take this into account when you consider selling.

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.

Here's some suggestions

[Okian Warrior]

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.

Re:Here's some suggestions

[ColaMan]

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.

You: "I've thought about it and I'd like 10% more."
Company: "Ok, Let us think about it and we'll get back to you."

The company drops your application in the shredder, picks up the application of one of the other final three candidates that made it past the grueling 10-stage interview process, and gives them a ring instead.

Meanwhile, you're all, "those assholes never called me back", never realising that it's rare to be the only possible good applicant a company gets these days.

So you ring back in a couple of weeks to talk to a secretary in HR, to hear faintly in the background,
"Oh yeah, that guy? He seemed alright, but he wanted 10% more, thus he wasn't suitable for the position."

The American Dream

[cybscryb]

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.

2 Words

[Tjp($)pjT]

Golden Parachute.

and to keep Slashcode happy on length, a quote from the Python. You bastard. You lucky luck bastard.

True, but...

[Weaselmancer]

There aren't many things better than being rich.

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.

Re:True, but...

[Logic and Reason]

What a sad, sad outlook on life.

Re:True, but...

[Traze]

Just want to point out, he did say, not MANY this better. As in, there are better, just not MANY.

Re:True, but...

[WillKemp]

I guess that's true for some values of "many". But when the things that are better cover such a high proportion of the things that are genuinely important in life, it looks like "many" to me.

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:True, but...

[WillKemp]

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.

Maybe. But all i'm saying is there are more important things in life than money. And you don't have to be rich to be happy.

Re:True, but...

[TheRaven64]

You're not really disagreeing with the grandparent. It is better to be happy and not rich than to be rich and not happy, but if you are happy and not rich then being happy and rich is even better.

And there's no reason to believe that being rich makes any of that happy-generating life events more difficult or less likely.

Exactly the grandparent's point, although I'd disagree. Being rich generally changes the kind of problems you have, rather than eliminating them. It removes some potential causes of unhappiness, and it introduces others. You still have to avoid the remaining ones yourself, and how easy it is for you to do this depends a lot on the kind of person you are. While there may be a correlation between wealth and happiness, there is definitely not a direct causal relationship. If you start happy and then become wealthy, you are likely to be in a much better position than if you start wealthy and try to become happy.

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:True, but...

[arb phd slp]

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.

I've read those studies (or at least the abstracts), and this is true only up to a certain point. Being truly poor is likely to make one unhappy, but I think most of the people reading Slashdot already have incomes over the threshold where it doesn't matter.

However, I think the original poster should sell the project to Megacorp and if it turns out to be unsatisfying later, there can always be other projects.

Re:True, but...

[pbhj]

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.

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.

I don't think poor people tell themselves that. I live below the poverty line (according to our UK governments figures) and work 2 jobs. Being rich would make me happier but that's because the problems in my life I genuinely feel are directly money related.

Not knowing if I can afford to pay the bills each month. Not being able to afford to eat healthily. Not being able to afford to take time off, nevermind take a holiday. No time for socialising, exercising properly, ...

Mind you all these problems could be solved if you paid off my mortgage (about 80k GBP) ... but I'm sure I'd find something to bitch about.

Re:True, but...

[portscan]

actually, it has been widely shown that the correlation between wealth and happiness is very low and if anything, it is negative.

i suppose most people who are "rich" got that way by working 80+ hrs per week, ignoring their kids, families, and friends. either that or your parents were like that and you haven't had to work a day in your life and instead have bounced around the offices of various psychiatrists and rehab centers.

defining success by earnings and what it can buy you is and endless game of self-inflicted misery. you will not be the next bill gates or warren buffett, so there will always be someone with more money than you, nicer toys than you, etc. so you bought the 60" plasma, but now you want a whole movie theater room in your house. your ferrari is pretty nice, but the new lamborghini just came out. a 70' yacht is nice, but wouldn't 110' be so much nicer... and so on.

mo money, mo problems, so to speak.

still, he should sell. most new businesses fail miserably and a bird in the hand is worth two in the bush.

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.

Re:True, but...

[Bertie]

Right. There's poverty and there's poverty.

I've just got back from Ethiopia. I don't need to tell you what a poor country that is. Millions and millions of people there have fuck all, and in their eyes I'm rich beyond their wildest dreams. It pulled me up sharp when I realised that I could make in a day's freelancing what somebody in a reasonably good job - a junior teacher, say - could make in a year. I don't mean that to sound boastful - I can make a more than reasonable amount of money doing what I do, but the point is not how much I make, but how little they do.

Kebede was the caretaker-cum-security guard of the place where I was staying. His job basically consisted of hanging around and opening the gate when one of us went through it. He was there round the clock, every single day. He slept on a bed directly above a squat toilet in a shed made from shipping containers. No heating, and Addis Ababa can get much chillier than you'd probably imagine at night. I wouldn't have kept my fucking dog in the conditions this guy had to live in. I never got to ask him, because neither his English nor my Amharic was up to it, but I'd bet he counted himself relatively fortunate.

And you know what? In a way I'd rather be him, or a subsistence farmer scraping by on $100 per annum, than the aforementioned poor bastard who has to work three shifts on minimum wage, praying the car they drive to work doesn't break down because they can't afford to fix it, just to keep their kids in shoes.

There's a particularly insidious kind of poverty that's prevalent in the US and to a lesser extent in many other developed countries that would just make you want to cry. It really traps people, steals their time, steals their health, just so they can keep their heads barely above water. The many, many Ethiopian people I met who have literally nothing more than the shirt on their backs are in some ways more fortunate, because they never expect to have anything and live in a society which is geared up to cope under these circumstances. America's a very, very difficult place to be poor.

Re:True, but...

[witekr]

I have considered giving all of my money away, simply because it is a burden.

Well, if you're still considering that, I could definitely use a few grand right now! :)

More info

[ktappe]

I agree with those saying you've not provided quite enough info. But there have been some good responses thus far. To wit:

• Ensure their offer leaves each of you enough to live on for several years. The non-compete clause they'll undoubtedly have you sign may leave you unable to work in your field for a while if things go sour after signing.
• If they are hiring you, see if you can get a multi-year contract so that they can't fire you next week. (Doubtful they'll go for this, but worth asking for...you never know.)
• Even better, see if they are willing to allow you to keep working as the team you are now. Perhaps you can stay semi-autonomous so that you still feel free and unfettered and able to allow ideas to flow. Smarter corporations recognize that atmosphere matters and have been known to permit situations like this. Of course you'll need to report into H.Q. regularly, etc., but perhaps that's not the end of the world.
• Do try to be a wee bit less idealistic. Yes, you want to change the world and be free, but in a few years if times get tough and you're wondering where your next meal is coming from you'll be wishing you had taken the deal. Don't turn it down out of idealism. If you must turn it down, do so for financial or true business-related reasons.
• Hire a lawyer yesterday.

Good luck!

Re:More info

[egcagrac0]

• If they are hiring you, see if you can get a multi-year contract so that they can't fire you next week. (Doubtful they'll go for this, but worth asking for...you never know.)

... with a guaranteed severance package which matches or slightly exceeds the duration of your non-compete agreement. If you can't take a job that you want for a year, they should have to pay you for that year.

I would not have thought about this point until I saw what some people got for severance packages during a recent restructuring.

Depends

[cenc]

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.

That's what makes it a good offer

[holophrastic]

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.

If they offer you decent positions..

[drolli]

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.

If You Sell, Plan To Leave

[dcollins]

I've worked at two small technology companies (video games, actually) that got bought out by larger corporations.

The wise owner/managers in both cases did this: Work up until required by their contract (1 year in both cases), and leave the next day. The not-so-wise programmers (including me) tried to stick around, make it work, become frustrated, etc.

I now see there's a standard protocol for company buyouts. Step #1 is where big company sends spokesperson on site to give a boilerplate spiel, "We're not changing your working practices; your culture is great, we don't want to change that; etc. etc.". All bullshit. They say that to forestall mass departures, and proceed to make whatever changes they wish, at whatever pace is desirable for them. Now I know: When your small company is bought out, leave ASAP. It's over.

I actually do recommend that you sell and leave ASAP.

JM2C

[Bob9113]

Hi,

Thanks for the interesting question. Hope this helps.

The money is fair enough, and the employment conditions would seem excellent, since they would enable us to manage good-sized motivated teams, but we are very emotionally attached to our development and we place great importance to being independent. We founded our company because we didn't want to follow rules. We wanted to be the ones who make the rules instead. Money really doesn't mean much to us as long as we can do whatever we want while excelling at our passions.

I feel you, my friend. I have not been exactly there, but have been in very similar situations. While I don't know your exact situation, I can tell you how I would think about it. What follows is stream-of-consciousness, late on a Friday evening - take it for what it's worth. :)

If my main goal is to do independent development, I would look for paths that get me to that goal while satisfying my other important needs.

Supposing I were a young hot-shot with a belly full of fire, I would feel confident that I could succeed running my own company, working as a unit of a larger company, or trying something else. That last bit is important -- technology, and technology skills, are highly fluid. If you got to where you are, you can probably get there again, given the opportunity.

Mixing those two ideas together, I would start thinking about how to structure the deal with the big company. What would I want to get out of it? Well, if I want to be independent again, preferably while I still have a belly full of fire, I'd want to think about my exit strategy from the parent company. Do they want me to commit to them for some period of time? Are there golden handcuffs that are going to tempt me to stay after I'm ready to leave? A golden parachute if they take the technology and cut me out?

That would lead me to think about how the payout is structured. There will probably be some mix of cash, immediately vesting stock, and stock that vests over time. Suppose you want to leave in one year -- how much of the total payout would you have to sacrifice? Is the parent company willing to shift to more front-loading? How much back end do you have to give up to get more now?

But why go through all that thinking if your intent were to stay with the parent company and see the product through to maturity? It is entirely reasonable to want to see your product grow, and to guide its development. That is a very healthy way to view system engineering.

The reason to think that way anyway is this: If you can work out an exit strategy that you and your friends can agree on, you don't have to worry as much about whether the relationship with the parent company will remain healthy. That future is an unknown, and there are many examples of your sort of situation going well, and just as many of them going poorly. If it works out, that's great! If not, you and your friends can head off on a new adventure together. As long as you have some front-loading and/or short horizon payout, you have a safe way out. That safe path in case things go awry can give you the confidence to join the company.

Also consider it from the big company's perspective: If they are confident that they will be a healthy environment for you and your friends, they should not be too afraid of giving you some front loading to guarantee that you will come out reasonably whole.

At the same time, don't be rude. You don't have to tell them that you're looking for a reasonable exit strategy -- they will understand that. Just discuss the options of front versus back loading, and then talk with your friends in private to discuss whether the range of options includes something you are comfortable with.

And, honestly, I'd lean toward doing the knowledge transfer to the new company and moving on as soon as it was working for them. Make sure you have the right to work together on non-competing projects in the future. Make sure you have the right to develop independent ideas with

U can't predict the Future

[ElitistWhiner]

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

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!

Here's what you do

[pvera]

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.

This one's easy(-ish)

[fodi]

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.

[Animats]

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.

Bargain a little, then take the money

[haemish]

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.

Take the money

[BobandMax]

If the offer is reasonable, take it. If you do not, they will probably bury you.

Read your post.

[fishbowl]

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.

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/

Take the $$$$!

[Tablizer]

Speaking as the (ex)owner of 3 failed dot-coms, take the fucken money!!!!

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:This is silly.

[Jane Q. Public]

No, you have it all wrong. I am not demanding accounting details. I am not demanding any details. But this person is supplying no details at all. There is simply not enough information to make a judgment. As I wrote the first time around, he is basically saying no more than "I have a business, and someone wants to buy it. What should I do?" And that is just plain not enough information to give any kind of intelligent advice.

Without some kind of more detailed information, any answer would be nothing but a guess. You can collect all the nerds in the world, and each one of them would be doing no more than guessing. And so, I repeat... this is silly!

Re:This is silly.

[Scr3wFace]

Obviously you're new here....
The business plan is simple.

1.Collect underpants
2.???
3.Profit!

I'll double the offer!

Can you out-compete them?

[myxiplx]

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.

As others said, think money.

[houghi]

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)

One Sad Thing to Consider

[dmomo]

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.

Sell it

[mrmeval]

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.

Research

[gmuslera]

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

If the money really isn't that important

[syousef]

...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.

Re:Be sure you understand how risky going it alone

[cerberusss]

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.

Become a contractor

[w0mprat]

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.

Don't sell completely

[gnupun]

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.

Take the money and don't look back

[thefickler]

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.

Depends on the Megacorp and on you

[jvin248]

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.

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.

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:Depends on the Megacorp and on you

[mysidia]

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 they'll make their fear a self-fulfilling prophesy? You might do it again because they make your time short, or lock you in to a certain level...

Re:Depends on the Megacorp and on you

[mysidia]

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.

Well, you can do whatever you want. If you really like you can blow it on booze and sex.

However, you will invest some of that money, so you have wealth going forward. Investing a little in another venture is risky, but definitely something you will do if you're managing the big bucks responsibly.

Basic wealth management implies you make sound investments suitable to you as an investor.

In current hypothetical case: primarily because the other investment options don't have nearly the rewards. If you have little cash, you buy only safe investments (you can't afford to lose anything).

If you have a good bit of cash, you make a few risky investments that are likely to pay off but you could expect to lose 50-60% in the long run if you're wrong, you make mostly safe investments.

If you have massive piles of cash, you make some safe investments (safety net), substantial risky investment (that are very likely to pay you a lot, but you could lose some), and some ultra-risky likely you expect to produce a lot of return if successful, but have a big risk of some loss (failure of the business), and a substantial risk of total loss.

Re:Depends on the Megacorp and on you

[sam_v1.35b]

I thought that quote from the parent was fascinating. To me, it's that kind of philanthropy that the US excels at. It's a LOT harder to find venture capital in many other countries. Of course they have no real 'responsibility', but it's akin to sharing food with the rest of the tribe.

My 2c worth

[BlackSabbath]

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)

You have already answered your question...

[aurb]

...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.

What? Trick question??

[rts008]

...even though all of us agree that if we finished our thing, we'd earn more than what the corporation has offered us.

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?

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.

Yeah, right

[hyades1]

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."

Re:Yeah, right

[hyades1]

Except it's intended for Slashdotters instead of pure, unapologetic wankers.

You asked for it.

[Reservoir Penguin]

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).

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.

if your business is any good, don't do it

[hherb]

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.

Seller's market

[Sparohok]

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.

Thing to remember

[supun]

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?

Re:Thing to remember

[butlerm]

Killing a branch through nutrition would be quite a feat. Want some fries with that?

It's a trade-off

[NewtonsLaw]

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.

If the offer is even 5%

[IntentionalStance]

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

binge for 5 years straight....

[Simonetta]

You think a few million will cover that? I think not.

Of course it will. Get the money, transfer it out of the USA to the Caymans or Luxembourg, and move to a nice beautiful discrete villa on the outskirts of some major city in or near a cocaine-producing country where the blow is cheap. Like say, Lima Peru.

Marry a beautiful young proper landed old-family upper-class girl who likes to have sex and who's family is experiencing a cash flow problem. Learn Spanish, meet your neighbors, learn the local customs, go to local cultural events, have your wife's family and friends teach you all that you need to say and do to be treated respectfully in your newly-adopted country. Go to Mass once or twice a year. Make some noticeable donations to local respected charities. Make a few unnoticeable donations to local police department's widows and orphans fund. Keep up appearances and indulge your appetites discretely. Know your limits but keep expanding them.

  Do this and your millions will last a long, long time. Party Hardy, dude.

Re:binge for 5 years straight....

[fbjon]

You sound like you've done this twice already.

Re:binge for 5 years straight....

[yuri82]

Somebody is speaking from experience... ;)

Staying on topic, to the person who's in doubt about the company: if you do decide to stay in the garage with your friends, here's a very important lesson about your company:

The main goal of a business is to MAKE MONEY. Everything else is part of the STRATEGY to MAKE MONEY, but it is not, however, the main goal.
(Read "The Goal" by Eliyahu Goldratt).

Re:binge for 5 years straight....

[vikstar]

What do you do about the piranitos?

Get investment.

[SanityInAnarchy]

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.

Value to them vs value to you

[francisstp]

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...

Listen

[dread]

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.

What is so attractive to them that isnt to you?

[CaseyStrom]

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.

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!

Re:rule 1 in business...

[elronxenu]

That worked out well for Jerry Yang in May 2008, didn't it?

He rejected Microsoft's $33-a-share offer for Yahoo, then both Microsoft and Google walked away from a deal and now the shares are selling for a touch over $15 each.

Defne fair money

[SpaghettiPattern]

Be aware of how a sell or no-sell will affect you. Questions here are more important than answers. The answers you will provide yourselves in the course of growing awareness.

What's fair money?

• More than you can imagine you would be worth?
• How much did you imagine to be worth?
• What will your position be after the sell?
• How long will you have to be employed by the buyer?
• After the sell, will you be able to work in your field and compete with the company you just sold?
• Will you be happy to suddenly being managed by some guy waving spreadsheets that is very friendly with senior management?
• Why are you being bought?

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 wouldn't

[Atrox666]

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.

 

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.

3...

[DavidD_CA]

3. Profit.

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.

How about you show them the finger

[amn108]

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.

Get back to us in a year

[MadLad]

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.

sounds like you already made your decision...

[j0nb0y]

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)?

Zuckerberg, can't you afford real advice?

[thebian]

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

Danger Will Robinson...

[gooneybird]

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.....

protection

[yakumo.unr]

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 anyway

[turgid]

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!

Think about it...

[meuhlavache]

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.

Hot Buyout

[PopeRatzo]

What To Do When a Megacorp Wants To Buy You?

This is the business school version of a Penthouse Forum story.

It's a business relationship

[plopez]

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?

Cringely Tale

[BucketOfLard]

Robert X. Cringely has a tale about Neokast which turned down a nice offer many moons ago. Just something to ponder over:
Cringely.com

trade offs

[virchull]

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 ... ? Take it.

[Qbertino]

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.

Sell!

[nurb432]

Get the cash while you can, then go start something else. Rinse and repeat.

Good fences make for good neighbors.

[implet]

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!

More exactly....

[Lonewolf666]

...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.

you're young, screw the money

[eatvegetables]

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.

Part of being bought no one seems to talk about

[hardie]

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

Does it feel right?

[Garwulf]

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.

Take it from an old guy: Take the money and run...

[dwf4646]

...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.

is the offer buy out or buy in?

[davros-too]

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.

Whatever you choose...

[Zarf]

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.

If the Megacorp is known, investigate.

[miffo.swe]

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.

Share!

[Thumper_SVX]

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.

Wow, a coded message from the near future!

[toby]

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.

Why ask?

[krray]

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 don't have a company..

[MikeV]

..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.

Several thoughts

[Registered Coward v2]

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.

It all depends...

[toby]

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...

Unfair!

[toby]

He asked on irc as well...

Not in your area of competence

[DerekLyons]

"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.

Why do they want to buy you?

[Antique Geekmeister]

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.

Some things to consider

[rfc1394]

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.

How about selling, and starting over?

[brasselv]

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.

Be Practical, consider what the money will buy you

[Presence1]

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!

RUN AWAY!

[Grog6]

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...

Digg vs ol' Slashy

[bagofbeans]

To me, the signal:noise ratio of /. is much higher than Digg.

At the risk of being redundant....

[NemoinSpace]

I think most "commenteurs" agree

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.

Sell... and start another company...

[lordsid]

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.

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.

Re:Bingo!

[silent_artichoke]

Don't forget to glue a large number to it and have one of Howie Mandel's girls hold it for you!

The HotMail Story of Jack Smith and Sabeer Bhatia

[Suki I]

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.

Someone needs a hug

[its_schwim]

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.

Re:Are You Looking For Success?

[pyro_peter_911]

* Human Resources, Legal and Staff -- people named "Peter"

You're in luck! I'm available for hire right now!

Peter

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.

Who wants to be a wadge slave anyways.

[branboom]

I think running the company yourselves will teach you a lot more then you could jumping in bed with someone else.

Re:Who wants to be a wadge slave anyways.

[branboom]

Also its interesting to see how these comments portray the Slashdot community as so conservative in regards to business.

Pros and Cons

[Big Smirk]

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.

Re:The economy is disintegrating, take the money n

[portscan]

um, AOL bought time warner, not the other way around.

On Rules

[naoursla]

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.

Slightly different take...it's all temporary

[RJFerret]

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.

my thoughts

[portscan]

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.

More advice based on my experience

[0xbeefcake]

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!

I don't have the answer . . . . .

[bogidu]

but if I were you I'd seek the advice of Justin Frankel or Shawn Fanning. :)

To not sell

[4D6963]

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.

Set sail

[AnAdventurer]

Sell out, move on, take a long vacation, go do something else!

avoid the deal

[cecil_turtle]

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.

story lacks credibility

[shakuni]

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!!

Two words:

[dhaines]

Stay fucking indie.

Sell.

[Pig Hogger]

Sell. You’ll have plenty of dough to start something else if the conditions become unbearable and have to leave.

Don't do it

[SoftwareArtist]

It sounds like you've already answered the question yourself. Your analysis of the situation is exactly right. If you accept the deal, you will lose your independence. You will lose control of the technology. You may lose the technology altogether: once it belongs to the big corporation, they are free to fire you, or transfer you to a different project, or cancel the project and throw away all your work. If you don't think that's realistic, think again. Companies cancel projects all the time, often for terrible reasons, often after they've invested a lot of time and money into them.

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.

Ask yourself...

[Jaysyn]

...what would a young Google do?

MOD PARENT UP!

[religious freak]

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.

From someone who has been there...

[MaxNomad68]

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".

not a lot of info

[ifeelswine]

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.

The answer in a nutshell

[Brandybuck]

What To Do When a Megacorp Wants To Buy You?

Answer: If you want to remain in control, don't sell.

Re:Could you be more vague? If he's Ben Leobin,

[davidsyes]

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...

Money vs. Control

[tedgyz]

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.

Ditto!

[dr2chase]

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.

mod parents up, please

[dr2chase]

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.

be OPPORTUNISTIC

[mahadiga]

Exactly. You need to be OPPORTUNISTIC and (not AMBITIOUS) in Globalized World.

Watch the agreements - Non-compete, etc.

[drwho]

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.

Keep the possible downside in mind....

[twasserman]

It sounds as if Megacorp didn't make you an offer that you "can't refuse". If the offer was big enough, then we wouldn't be having this discussion, since you probably wouldn't pass up the opportunity to be set for life, no matter what your feelings about the loss of your "baby" to Megacorp. Ten million dollars in your bank account can safely generate $400K or more each year from taxfree bonds, without affecting the principal. You shouldn't walk away from a cash offer of that size, especially because things can go wrong later.

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!

Take the money...

[Merlin_]

...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.

An offer you can't refuse...

[SgtChaireBourne]

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"?

Re:An offer you can't refuse...

[Eskarel]

It could also go under because the idea doesn't really work, or because the people running it aren't actually capable of running it in the long term, or because the owners or the staff got bored

That's the way the math goes, the little guy sells because he might fail and the big guy buys because the little guy might succeed. If the little guys technology was worth having then the big company often integrates it into their product. Consumers get the new features, little guy gets rich and can start working on another new idea which is what the little guy is good at, and the big guy gets what they want too. Generally everyone wins. True the consumer loses out a bit in price competition, but effective competition doesn't really work all that well in an OS environment because Operating Systems aren't equivalent. A bit like comparing cars to tractors. They've got a lot in common but you can't generally go out and buy one to replace the other.

Bringing more people to the party is good

[philmck]

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.

Stay true to your heart

[HunkirDowne]

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.

Why did you start your company in the first place?

[JasonChen]

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.

Brilliant Negotiating Tactic

[jeffrlamb]

I sold a company that was 11 of my friends, all working remotely from our respective, basements, kitchen tables, garages, extra bedrooms. . .

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.

This one is easy:

[Hurricane78]

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.

Buy the assets and start over

[erice]

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. :-)

Re:Buy the assets and start over

[johnlcallaway]

He needed an investor to market and develop his asset. He would be left with an asset that he couldn't use (unless he found another investor) and an empty wallet. If he could have found another investor, then the original investor would have sold instead of shutting down.

He keeps in touch with the original investor, I'm sure if an opportunity presents itself he will pursue it.

don't sell, license and patent

[ypctx]

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.

Dont Sell Out

[Daenks]

Don't Sell Out!

Hope for the best, prepare for the worst

[pizza_milkshake]

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..."

I only want...

[keith_nt4]

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.

Be careful, and get professional help

[Sheepless]

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