

Ask HN: Investor Warning Signs - curio_curly

How can I prevent being screwed over during investor/acquisition discussions and detect whether or not the pursuing company is more than just a scheme?<p>My latest project has attracted the attention of an acquaintance on FaceBook and the company he works for. There's talk of buying my project out right or setting up some sort of partnership.<p>This talk is all new for me and we've scheduled a meeting for next week to go into more depth. I'm concerned that because I am new to this, I may be missing some blaring warning signs that this is all too good to be true. What are some questions I should ask and warning signs I should look out for that would signal I'm setting myself up to be screwed?
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epc
I don't have any advice for you, just questions:

Are they interested in you?

Your technology/product? Your customer base?

Do they compete/provide services in "your space"?

Companies do acquisitions for a variety of reasons but they boil down to:

\- eliminate a competitor \- block a competitor \- acquire
technology/product/service/customers for less than it would cost them to
develop in house \- acquire experience (personnel)

Do you have an idea or a actual live project/business with customers and
responsibilities and a code base?

Is it dear to you? If they bought it and then ran it into the ground, ignored
it, killed it off (think: Yahoo!'s acquisition history with mybloglog,
delicious, etc) - would you care? Would you be able to take the $ and move on
to the next project or would it gnaw at you?

What's in it for you if you go forward with a partnership or acquisition? Does
the company provide other opportunities for you to pursue? More capital to
invest in this or other projects of yours? Do they have a good history with
acquisitions?

Do you have other ideas, goals, dreams, whatever which you could potentially
have to shelve while you're tied up with the company? Are you ok with that?

Do you have a solid sense yourself of what your goals are, ignoring whatever
opportunity this other company offers?

My one bit of advice: get a lawyer familiar with commercial contracts &
acquisitions who can sit in with you in the meeting. I can't guarantee that
you won't get screwed over even WITH a lawyer, but you're more likely to
protect yourself.

~~~
curio_curly
Great questions. Thank you VERY much. :)

