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?
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.
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?
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.