

Need advice: A company just offered to buy my project for $6M - sllrpr

Its not a straight-up acquisition. It is "seller financed".<p>They are an enterprise software vendor, and it just so happens that something I've built over the past few months (with the help of my 3 partners in the project, its a 4-way split) perfectly solves a difficult problem for them.
Apparently they were on the verge of acquiring another company to do the same thing, but they prefer my solution (this is why they were able to move so quickly).   This, however, means that there is time pressure as they will need to cut the other company loose.<p>This is so out-of-the-blue that we haven't even formed a company yet around the software we've written, but we have agreed an even 4-way split.<p>The prospective acquirer has said that they are willing to do the deal with us as individuals, although I'm concerned about the lack of Limited Liability in that scenario.<p>Basically, they don't pay immediately, but the faster they pay the lower the acquisition number (ie. they get a discount for paying quickly). Its something like $6M if it takes them 3 years to pay, but down to $2M if they can pay within a year (something they said was very unlikely given their current projections, which I've asked to see).<p>They want me to sign an LoI within a week that will give us 45 days to finalize the deal.<p>How typical is this deal structure? Any gotchyas I should watch out for? Should I try to negotiate on the numbers? (ie. try to go for more than $6M)<p>Not to be rude, but please don't respond unless you know what you are talking about, I'm perfectly capable of uninformed speculation all by myself ;-)
======
dmor
Just a character evaluation here, but if they are willing to cut this other
company loose, I think you should evaluate how binding they consider contracts
to be before you enter into one with them yourself. At the very least I would
ask them to make a substantial (500K minimum) deposit against the balance up
front. If the don't have the cash to do that, I would not deal with them as
they probably shouldn't be doing acquisitions.

Other crazy idea: this is HUGE validation, go raise VC against this offer and
make it a real business.

Also, if they are truly in the enterprise space and can afford to acquire
companies to "solve a difficult problem for them" they should be able to pay
you serious money and $2m in first 12 months should be no big deal.

Another thought, If you are really going to get in the business of giving a
$6M loan over 3 years with your 3 cofounders, you should consult a lawyer
about more than the LOI. The entire corporate structure needs to be designed
to make sure people get paid out correctly and that taxes are accounted for.

~~~
sllrpr
> Just a character evaluation here, but if they are willing to cut this other
> company loose, I think you should evaluate how binding they consider
> contracts to be before you enter into one with them yourself

I'm fairly sure they don't have a contract with the other company, the time
pressure is that they were about to sign an LoI with them.

> At the very least I would ask them to make a substantial (500K minimum)
> deposit against the balance up front. If the don't have the cash to do that,
> I would not deal with them as they probably shouldn't be doing acquisitions.

I'm not sure, they've been open about their financial situation and I
understand why they've proposed the deal structure that they have.

> Other crazy idea: this is HUGE validation, go raise VC against this offer
> and make it a real business.

Problem is that I've already got other projects that would be extremely
difficult for me to abandon.

> Also, if they are truly in the enterprise space and can afford to acquire
> companies to "solve a difficult problem for them" they should be able to pay
> you serious money and $2m in first 12 months should be no big deal.

Like I said, I'm familiar with their finances, and that isn't an option for
them.

> Another thought, If you are really going to get in the business of giving a
> $6M loan over 3 years with your 3 cofounders, you should consult a lawyer
> about more than the LOI. The entire corporate structure needs to be designed
> to make sure people get paid out correctly and that taxes are accounted for.

Lawyers and accountants will all get to have their say before anything is
signed.

~~~
k33n
Why ask for advice and then pick apart just about everything people are
telling you? Seems like you've already made up your mind to me.

~~~
sllrpr
Asking for advice is not an assurance that I'll accept it uncritically.

If you can't or won't back-up what you are saying then you should probably
refrain from giving it in the first place.

Indeed, that is my general view on advice. Advice that can't survive a bit of
"picking apart" isn't worth much.

~~~
k33n
Okey dokey. Good luck.

------
xrd
(I sold my company a year ago for $0.5M with me at 67% owner in a similar
structure as you are describing, and another company six months ago for low
six figures.)

Do it as a "stock" sale, rather than "asset" sale. You get double taxed as an
asset sale: first as corporate income, then as dividends which are taxed at
zero-basis (unless you were very smart about how you paid into the company),
meaning the whole thing will be taxed twice and at bad rates rather than
capital gains, which are modest. This is regardless of whether you lived in
ramen for the last few years building it, which is probably as you described
not having yet formed a company. The buyers will probably want to do it as an
asset sale, because this reduces liability; they are buying only the assets,
not the entire company. If you have customers, a stock sale has them
purchasing the liabilities of those customers. And, they can depreciate the
assets, not stock. But, you can state that you should get a higher price under
an asset sale, or at least have it in your pocket when you ask them to give
something up.

Make sure you have a good lawyer. I know a great one in Seattle, contact me
privately if you want his information. You need to make sure you have good
contracts.

Remember, the buyer will be less motivated in a year. Excitement and
possibility have a bad half life. What leverage do you have if they decide to
pay late, or tell you they cannot pay you the next year? This situation is
happening to me with the first of my deal. The structure of my buyout was a
three year deal, with a new company formed, with one of the buyers putting in
a large cash payment up front to purchase 40% of the new company, and then the
other buyer buying the rest over three years. He has been perpetually late,
and I am unclear if taking him to court makes sense, or waiting it out as the
payments trickle in. Make sure you have clauses which indicate what happens on
late payments. It sounds like this structure is there basically, not sure if
you are unhappy were they to pay you $2M early. Sounds like a fine deal to me.

I would recommend getting to know your buyers and their history. In the second
startup I sold they were very motivated to pay me because they did not want to
scuttle a round of investments. If you have good contracts and they start
waffling on payments and you know they are trying to keep their nose clean at
that moment that can be an additional motivator to following through on paying
you.

Always a great idea to have a second buyer. Even if you have to make them up.
Said a different way, look around and see who else would want what you have,
and give them an opportunity to get in on the bidding.

Good luck!

------
noonespecial
Just make sure that they don't "own" the product until its paid for. They get
_non-exclusive_ rights to use the product until they've paid for it, then they
get exclusive ownership. Its like rent-to-own.

Worst case scenario, they are paying licensees for a time.

~~~
ra
That's good advice. But you (OP) _really_ should talk to a lawyer who
specializes in this sort of thing.

------
russell
I dont care I'm going to give you my uninformed opinion myself :-)

What is the financial condition of the acquiring company? Not being able to
come up with a couple of million should be a red flag. What is the reputation
of the company and its principals. Unfortunately, there are plenty of players
willing to string you along to get your product cheap, lock you out, whatever.
Dont do anything without the advice of a lawyer.

I hope I'm just being a crank but I learned these lessons from Jack Tramiel
the SOB that ran Atari. Fortunately, I walked away before I got burned too
badly.

I wish you the best of luck.

~~~
sllrpr
> What is the financial condition of the acquiring company? Not being able to
> come up with a couple of million should be a red flag.

They have been completely open about that. They are about to close a $2.5M
round, and have $10M in revenues booked for next year.

> What is the reputation of the company and its principals.

Good so far as I can tell, they seem like smart, honest guys.

> Unfortunately, there are plenty of players willing to string you along to
> get your product cheap, lock you out, whatever.

With this deal structure stringing us along hurts them as they have to pay
more.

> Dont do anything without the advice of a lawyer.

Roger that.

~~~
solsenNet
hmmm, "almost" 2.5m round and $10m in revenue "booked for next year" is not
that credible of a company. you are taking a lot of risk that the money does
not come through.

if you sign a deal w/ everything "on the come" they can jack you around pretty
hard.

venture backed companies _consume_ cash, they usually don't throw it off (6m
extra in a few years) until later.

~~~
sllrpr
> hmmm, "almost" 2.5m round and $10m in revenue "booked for next year" is not
> that credible of a company. you are taking a lot of risk that the money does
> not come through.

What is the risk? Only that we end up back where we were before their offer,
so far as I can see.

Their fundraising deal seems well underway, I've raised venture capital
myself, and these guys know what they are doing.

> venture backed companies _consume_ cash, they usually don't throw it off (6m
> extra in a few years) until later.

It's a line item for them, they pass the cost directly to their customers.

~~~
glimcat
Yeah.

There are plenty of risks ranging from the minimal (they waste a little bit of
your time and you don't get paid) to rather extreme (they waste loads of your
time for years and you lose your IP to legal wrangling).

Book a competent lawyer who has dealt with this sort of problem to nail it
down and make sure the risk stays minimal. Ditto in the accountancy
department. Everyone does their due diligence, everyone stays happy down the
road.

------
cvinson
As someone who has received >$5m offer that fell through, here's what I
learned:

1) until the final documents are signed, don't consider any offer to be a done
deal. There are many reasons for it to not happen at this stage.

2) Keep the project running as normal, and try not to get too distracted by
this. You have something of value, don't jeopardize that by taking your eye
off the ball.

3) As others have mentioned, get a lawyer who is experienced with these types
of deals ASAP -- before discussing any more terms. Without help, you may be
leaving a lot on the table, or conversely souring the deal.

------
cbarry
I would be concerned. Seller financing is generally used when the acquirer
will have a stable business with concrete underlying assets (factories, real
estate, etc.). I don't think this is the case for you. Your acquirer is a
venture-backed startup. They only pay you in states of the world where they
blow up, and you have little recourse if they don't blow up.

More generally, you are taking on the risk of your acquirer's business (they
may fail to get traction in the market, they may fail to develop their
product, etc.) without getting compensated like an equity holder. This is a
bad situation to be in -- entrepreneurs do all kinds of things (take VC money,
incorporate rather than form partnerships, etc.) explicitly to shift risk to
OTHER people. Not only are you taking on additional risk by taking the offer,
but you are also not getting reimbursed appropriately for that risk.

Other issues: \- You get paid more if they take longer to pay => You're going
to work for a company that you hope doesn't blow up tomorrow (because you get
paid more if they blow up in 4 years). => This is a dangerous spot to be in;
your incentives are not aligned with theirs.

\- It might be tempting to think that the acquirer could pay you with the
proceeds of their next round even if their business does not take off. But $6M
in short-term debt will likely scare off VCs who might fund them in their next
round...

~~~
sllrpr
Sorry, some more:

> Other issues: - You get paid more if they take longer to pay => You're going
> to work for a company that you hope doesn't blow up tomorrow (because you
> get paid more if they blow up in 4 years). => This is a dangerous spot to be
> in; your incentives are not aligned with theirs.

Yes, I did point it out to them. Their response was a polite version of
"that's our problem".

> \- It might be tempting to think that the acquirer could pay you with the
> proceeds of their next round even if their business does not take off. But
> $6M in short-term debt will likely scare off VCs who might fund them in
> their next round...

I think if the business doesn't take off, we get our technology back and we
keep whatever they've paid us to-date. It doesn't seem like a terribly bad
worst-case-scenario.

~~~
cbarry
> Yes, I did point it out to them. Their response was a polite version of
> "that's our problem".

But it's not actually just their problem, because you don't get paid if they
don't succeed... I'm sure you've already realized this. :)

> I think if the business doesn't take off, we get our technology back and we
> keep whatever they've paid us to-date. It doesn't seem like a terribly bad
> worst-case-scenario.

Good point. Still the opportunity cost of your time to consider (all that time
you spent watching them fail, you could be spending building your own
business) and your technology's shelf-life.

Also, it might be difficult to build a business around tech that failed
somewhere else (even if your acquirer's failure had nothing to do with you or
your tech). I don't know the specifics of your situation, but I would imagine
good early hires might be wary, potential investors would be skittish, etc.

------
brudgers
I've never done a deal any where near as big, but I've wrangled the bulk of my
income over the past twenty years from clients rather than employers - you
won't hurt my feelings if you decide I don't know what I'm talking about.

My opinion, the LOI in a week is fishy. A cursory glance at your situation
should be enough to scare them off such a tight timeline until you guys have
your shit together regarding corporate structure and IP ownership - right now,
there is all kinds of risk associated with your acquisition because there are
no formal relationships between your team's members. Nothing personal, but you
guys sound like a litigation clusterfuck waiting to happen. Not just for them,
but for their enterprise customers as well.

The $2m now or $6m later is also suspect. Notice that you've pegged the deal
at the higher figure in your title? The four of you are thinking low Fuck You
money, but do you think they're really going to cough up an additional $4m
when they can't raise half that? And if you are worth $6m, you can bet your
ass someone will probably loan them $2m pretty damn quick.

Of course that's assuming you ever get paid at all.

Ever heard the expression, "Borrow a thousand dollars from the bank and the
bank owns you. Borrow a million from the bank and you own the bank?" These
guys are going to own you.

Once you have several million riding on their success, their problems become
your problems - even those outside the scope of your software.

So now for the answers to your questions:

1\. Screwy deal structures are not uncommon in the industry I'm in, people
getting screwed is not uncommon either.

2\. The biggest gotchya's are greed and an unwillingness pass on a sketchy
deal. If your team and project is really worth something, this won't be the
last deal you ever see in your life.

3\. The starting point for negotiation should be to put all the cash in your
pocket today. The reason they are "able to move so quickly" is because it
won't cost them anything to try out your software - and they can probably get
you guys to throw in a bunch of effort to make things work without any
additional cost as well.

Take it for what it's worth and good luck.

------
Joakal
I never heard of payment plan to acquire a company. There's something fishy
about this.

Unless it happens sometimes (that I never heard about), get a top lawyer in
acquisition deals. Make sure that they at least understand the payment plan
thoroughly and you must pay them a retainer because you will need the lawyer
for 3 years to ensure the company does pay every time and not try to delay it,
unethical-style. I think the deal is just extra costs on both sides. Your
company is taking extra risk as other posters said because the buyer may go
under and you'll be SOL, retainer or not.

Straight-up acquisition means only getting the lawyer for the purchase and to
get company to pay one-off. Much cheaper. I would reject the deal due to the
overhead but I do not know your full situation.

Disclaimer: I am not a lawyer, or had an acquisition, accountant, etc.

------
gallerytungsten
Have you read the book "Venture Deals"? It addresses this topic and points out
a number of things to watch out for.

The "can't pay $2M in a year" but "can pay $6M in 3 years" seems a bit dodgy.
Is it wholly dependent on the success of your product?

Do you have to work for the company as part of the deal? If you have to "earn"
your earnout, the salary numbers have to make sense too.

~~~
sllrpr
No, it's basically they get a discount the faster they pay. 12 months it only
costs them $2M (they've said this is very unlikely).

It gives them an incentive to pay me as quickly as possible.

There is no "earn"out, but we do need to provide them with some support - but
we get to charge whatever we want for this (they pass the cost on to their
customers). We certainly don't have to work full-time for them, and they know
we can do this (we all have other gigs).

~~~
gallerytungsten
This payment plan and the amount of discount strikes me as a point of concern.
Why is it "unlikely" that they can pay the $2M over a year? Why such an
extreme discount? I'd start digging there. Is their business viable for 3
years?

Why don't you to ask them to borrow $5M, pay you that amount now, then let
them pay off the loan over 3 years? At 12.5% interest, total payments come to
about $6M for a 3 year loan term.

It's a way of shifting risk from you to them. Somehow, I doubt they'll agree;
but their response may be very informative and helpful for further
negotiation.

~~~
sllrpr
> Why is it "unlikely" that they can pay the $2M over a year?

Because this will be a new product for them, they expect it will take several
months before they start to make any revenue with it.

> Why such an extreme discount? I'd start digging there.

Yeah, it seems like a big jump. I asked if it could be monthly pro-rata and
they agreed to that.

> Is their business viable for 3 years?

I think so, or they'll get acquired.

> Why don't you to ask them to borrow $5M, pay you that amount now, then let
> them pay off the loan over 3 years? At 12.5% interest, total payments come
> to about $6M for a 3 year loan term.

Because they don't know that they'll be able to sell the product that they'll
be building around my product. This way if they can't they can cut their
losses without being on the hook for the entire amount.

I don't see that I'm taking much of a risk, if they terminate the agreement we
get to keep whatever we've been paid to-date.

------
mrschwabe
I might recommend you get in touch with someone like Sandy Kory.

<http://www.horizonpartners.com/users/show/skory>

He specializes in brokering technology deals and has done some pretty major
deals involving figures well north of what you are looking at now. I bring him
up only because I recalled a Mixergy interview he did:

<http://mixergy.com/sandy-kory-horizon-interview/>

Import thing to know at this point: your focus should now be on a separate
negotiation entirely. The one you will be having with a lawyer and/or broker
to help make this deal happen.

What you have right now is tremendous leverage. You have a multi-million
dollar business deal on the table. And that can get you top priority with
lawyers & brokers. You can leverage that not only to get appointments and your
phonecalls answered promptly - but you can leverage this to offset perhaps all
or most of the up front costs you would typically have to fork out to deal
with these professionals. What they'll be looking for however is a significant
cut % of the deal so that is what you have to think about next. The ball is in
your court. Goodluck.

~~~
sllrpr
> What they'll be looking for however is a significant cut % of the deal so
> that is what you have to think about next

The thing is that I've got a termsheet on the table that doesn't look half
bad. What is my RoI on engaging someone like this if they are going to take a
significant portion of this deal?

~~~
mrschwabe
That is why this is your new focus of negotiation. Cause its up to you. And by
the way, you can go to the professional with this same question. You're the
one with the hot deal. If he wants in, he'll have to give you a compelling
reason to bring him in. And perhaps that could be a combination of experience,
legal assistance and a reasonably modest commission. You're looking for
win/win.

------
plasma
A few red flags (I know nothing about startup acquisition myself though).

1) Time pressure to have the deal happen quickly (that's not your fault)

2) 6m vs 2m is a big difference. I would be very careful. I think asking for a
fixed price (and letting them worry about how quickly they can pay back their
lenders) is better. Their price difference is way too fuzzy.

3) "something they said was very unlikely given their current projections"
yeah... Look, then they should be fine accepting a deal of say 4.5m (or
whatever), because according to their current projections, they will end up
paying that amount anyway.

If they refuse, then you need to ask yourself why they are doing so (perhaps
they really do expect to later buy your company for $1).

4) Get your own lawyer. Their lawyers are for their interests, not yours.
Personally, the thought of not even knowing how much you are being bought for
(and that it could be dramatically less based on "X reason") is very bad to
me.

------
martinkallstrom
So much on stake, so much depends on the minute details of the agreement
(under what circumstances can they pull out etc). All in all, get a lawyer.

~~~
sllrpr
No question that we will have the LoI reviewed by a lawyer before we sign.

~~~
martinkallstrom
You're loaning them millions of dollars at interest. Without a down payment.
With all of the interest paid at the back end. With a cap on the accumulated
interest.

My bet is you'll never see the money. Either there will be a clause hidden in
the agreement that allows them to reverse the sale if their project doesn't
pan out. Or they are on the brink of bankruptcy. Either way, they are
structuring the deal as if they know they'll only have to pay if the project
is a home run.

Don't waste your time with HN. Get a lawyer.

~~~
sllrpr
Fear not, a lawyer will review the deal before anything is signed.

~~~
martinkallstrom
By then it will be too late. It is right now legal advice can help you. The
term sheet you have in your hand looks good to you, but only someone with
experience from a hundred deals that went awry can look at that term sheet and
see what is missing. You have the wrong view of how you use lawyers.

Your process is basically the same as having a lawyer write the code for your
web app and then have a programmer review the code just before you launch. Now
you are probably thinking "no that's not the same because that won't work".
Well, exactly. It won't work.

Reading all your answers here you come across as either very inexperienced or
drunk with the prospect of striking it rich or both.

~~~
sllrpr
I'm talking to a good lawyer today, they already have the LoI.

~~~
martinkallstrom
Great, I'm happy to hear. I hope everyting works out!

------
mikeryan
Get a lawyer, someone local and good. Talk to him. Everything else is just
noise.

------
chris_dcosta
Seller financed is one of the oldest tricks in the book. It means you (the
seller) pay yourself for the sale from the proceeds of any furture profits.
There are a couple of other red flags in what you wrote above, like time
pressure (always a bad sign) and "the ratchet". Of course you may be informed
and able to speculate, but there's nothing better than getting yourself a very
good legal firm. Good ones are very honest about the downsides to any
situation, which is what you need. Nothing is worse than being told everything
is fine only to find out later that there were foreseeable issues.

You should go into this with a take-it-or-leave-it approach and call the shots
so that it's what you want, and not what they want to give you. But you'll
have to get a standard position from everyone of your partners, and the only
way to do that is to say NO to dealing with individuals. The reason is divide
and conquer. That's another thing they'll do.

Also DO YOUR RESEARCH. Who are the buyers? Can they give you personal
guarantees to pay you even if what they're doing does not work out? Who is
this mysterious competitor? Why didn't you know about them when you started
your project? Again good lawyers will help you out here.

So form a company, set your equity, get the best legal advice there is, and do
not have multiple positions on your side when you go into negotiations. Be
prepared to walk when you don't get what you want.

~~~
sllrpr
Thanks, good feedback.

Actually, after seeking a lot of advice I'm starting to think of the deal
differently - I'll update the story so everyone can benefit.

------
bootload
_"... Its not a straight-up acquisition. It is 'seller financed'. ...within a
week that will give us 45 days to finalize the deal."_

You have not made it clear if you really need the money? Independence is good
#5 ~ <http://www.paulgraham.com/fundraising.html> I also see potential founder
fights #17 ~ <http://www.paulgraham.com/startupmistakes.html> and ...

 _"... Shielding your optimism is nowhere more important than with deals. If
your startup is doing a deal, just assume it's not going to happen. The VCs
who say they're going to invest in you aren't. The company that says they're
going to buy you isn't. The big customer who wants to use your system in their
whole company won't. Then if things work out you can be pleasantly surprised.
..."_

Good luck #7 _"Dont get your hopes up"_ ~
<http://www.paulgraham.com/startuplessons.html>

~~~
sllrpr
We don't really need the money, we each have other incomes that we're
comfortable on. This was a speculative side-project.

~~~
bootload
_"... We don't really need the money ..."_

Then consider, who has the power in the negotiations?

~~~
alwaysclosing
Screw the variable payout notion. It's a hook (as said).

\- $6m in 3yrs is a substantial risk and unlikely due to what everyone else
said.

\- $4m in 2yrs is still a decent time horizon, but as mentioned, they are
trying to lure you in for on the promise that it will be hard to pay in 1 year
and probably more than they are prepared to spend.

\- Try $3m in 18 months with $1.5M upon close and $500k divided over the next
18 months.

You get 75% upfront and can hedge on their success/failure.

Waiting and anticipating checks to arrive is a nightmare and if you are like
most, you will be highly bothered by this - whether or not you get your code
back. (At which point, it will likely be duplicated elsewhere or deemed
irrelevant.)

~~~
bootload
_"... Try $3m in 18 months with $1.5M upon close and $500k divided over the
next 18 months. You get 75% upfront and can hedge on their success/failure.
..."_

Nice answer.

------
jvehent
Any company that doesn't have cash, and is struggling for survival, will tell
you that their revenue will explode "next year".

They might very well be covered in debts and try to acquire you to generate
more revenue. In which case, you take the risk of losing your product and your
revenue.

I'd ask for money up front, like 30% of the total, to see their reaction and
then negociate the financing.

~~~
sllrpr
> Any company that doesn't have cash, and is struggling for survival, will
> tell you that their revenue will explode "next year".

They aren't struggling for survival, where did you get that idea?

> In which case, you take the risk of losing your product and your revenue.

Nope, if they don't pay the agreed amount we get the product back.

> I'd ask for money up front, like 30% of the total, to see their reaction and
> then negociate the financing.

I might seek more up-front, but I can see why that would be tricky from their
side.

------
thrill
This is a good sign - they think your software and their expertise, whatever
it is, can make money. I'd recommend that rather than selling it all for $6MM,
that you evaluate it for a couple of days, and if you are comfortable with
them, suggest selling 60%, perhaps for the same $6MM, which gives them the
control they seem to want, and retain 10% each, with the option for each of
you to negotiate a sale of that 10% later, with them getting first dibs.

If the product does very well, it'd be good to have some skin in the game. If
it fails to grow as much, then you have secured some upfront cash.

------
luckydude
Hi, really hard to evaluate based on the info you've laid out. As a 49 year
old guy who's been in the Valley since ~1988 or so, running his own company,
been courted by the VC's (Hummer-Winblad), had a buy out offer from Borland
(yeah, I know), I'm happy to pay things forward with free advice that might be
worth slightly more than you paid for it :)

Email in my profile if you want to talk. Send me a phone number if so. If not,
best of luck.

BTW, this sounds sketchy to me based on what little I know.

------
kellyreid
Hurry, supplies are limited. Call NOW! Why are they rushing you? That was the
part that bugged me. Don't play that game; take your time and do the work to
get it right.

~~~
sllrpr
Yeah, I suspected it might be artificial pressure, but the pressure is only to
sign an LoI, and their justification is plausible (we need to cut the other
deal loose).

After signing the LoI there is 45 days to complete the deal during which
everyone will do due-diligence.

------
kgc
Get a lawyer.

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petervandijck
It sounds like a good deal to me. I would (uninformed opinion):

\- call everyone you know to find someone experienced who can advise you
through this

\- get an experienced laywer to review the deal, and also talk to a good tax
laywer

\- tell them you need 3 weeks before signing: you need to get an LLC and your
internal agreements on paper before signing something.

------
devs1010
Find a lawyer who specializes in this field that you can trust and hire him to
oversee the deal, there really isn't any other advice to give on a matter like
this, its a complicated business dealing and you need someone on your side to
make sure you don't get screwed

------
papaver
i'm sure i'll get down voted for this, but i'll say it anyway. what is the
point of posting this on hacker news? are you just trying to show off? i mean
you are smart enough to have made a product that seems to be worth a
significant amount to an third party. what advice can anyone here offer
without knowing the exact details of the deal, doing a little research on the
company, reading the loi, etc? i seems obvious that the only route of action
to take would be to talk to a lawyer (or possibly two) that can advise you.

i think a better question to ask would have been: anyone know a lawyer that
would be willing to discuss this with me and give me a little advise?

~~~
sllrpr
Not trying to show off, I mean, this is a throwaway account FFS!

I'm posting it here because I was told to:
[http://www.reddit.com/r/startups/comments/loylh/need_advice_...](http://www.reddit.com/r/startups/comments/loylh/need_advice_a_credible_company_just_offered_to/c2ufuc9)

> what advice can anyone here offer without knowing the exact details of the
> deal, doing a little research on the company, reading the loi, etc? i seems
> obvious that the only route of action to take would be to talk to a lawyer
> (or possibly two) that can advise you.

Just because I'm asking you lot doesn't mean that I won't also seek advice
elsewhere.

------
arctangent
If your product is worth $X million to this company, it may be worth $Y
million to one of their competitors - and one of those competitors may have
the cash on hand to make a much more compelling offer...

------
JoachimSchipper
One thing that I haven't seen mentioned: you don't want the acquirer to pay
you until they've found a market and then build a clone. Some kind of
noncompete may be desirable.

~~~
sllrpr
This may sound arrogant, but I don't think they could build a clone. Our stuff
is pretty sophisticated and non-obvious.

~~~
brudgers
Could they hire someone to do it for $1.75m?

------
factoryron
no direct experience but i'm betting this is where a good lawyer is worth the
expense. preferably one well versed in reading term sheets.

------
chris_dcosta
I'm going to add another comment because I've read the bulk of the responses
here from the asker, and I think they are being deliberately provocative to
wind people up. I'm not sure if its to get Kudos or what.

Nobody is as downright arogant as the asker seems to suggest he is, without
wanting to be provocative.

Go ahead take the deal, ignore the advice here and don't come back for any
more.

------
teyc
they can't buy you with money they don't have. What have they got? Technology
or just vc money?

~~~
sllrpr
They have technology and customers.

~~~
teyc
Did they "acquire" the technologies or develop it themselves? How do they even
figure out the price to offer you?

------
HackR
I don't have much to say but congrats on the offer, I hope everything works
out for you!

~~~
sllrpr
Thanks! Still a lot that can go wrong :-)

~~~
OstiaAntica
Definitely let us know how it ended up!

------
petervandijck
Definitely talk to a tax laywer.

------
gtb
May I ask what problem does your project solve?

~~~
sllrpr
Ugh, I'm trying to keep this anonymous-ish.

May I ask why you'd like to know?

~~~
gtb
Just looking for opportunities and ideas. Transplant your idea to another
market, another industry ... and make 6 millions myself :)

