Interview, Podcast
a16z Podcast | Dealing with Corporate Dealmakers -- When to Talk to Corp Dev
- Startup engagement with corporate development is generally discouraged before the one-year mark or prior to product launch, while timing interactions correctly is essential to prevent them from becoming a constant time sink.
- Founders are advised to avoid engaging corporate development at Series A and Series B stages unless a compelling reason exists, as premature engagement can create conflicts that preclude future opportunities.
- Engaging these teams at any stage can create options for partnering or a potential acquisition, which may materialize as early as two years later, though such acquisitions are infrequent events in a founder's career compared to the constant negotiations of corporate development professionals.
- A strategic acquisition is presented as a valid exit strategy alongside maintaining independence, countering the notion that companies are acquired only when underperforming.
- Founders should share information with the same level of transparency expected with investors, sales teams, or competitors, while withholding highly confidential data.
- Every initial management meeting will likely require signing a non-disclosure agreement (NDA) that tracks deviations from standard terms, often including a non-solicitation clause to protect employees.
- Term sheet terms are non-binding and subject to change during diligence, whereas the content of the definitive merger agreement remains the final binding document.
- Corporate development teams will probably attempt to include indemnification clauses with unlimited caps on term sheets during negotiations.
- Large strategic companies like Oracle, Google, and Yahoo can serve as one-stop shops to access multiple executives across different functions, often focusing on broad directives such as specific product categories to drive learning and narrative shaping.
- Strategic investments in later stages will usually not involve board seats, quarterly financial requirements, or first rights of notification, as these mechanisms can be deal breakers.
- Founders can increase efficiency by requesting upfront confirmation of whether other product or executive stakeholders must meet, allowing interactions to be bundled.
- Founders can force corporate development teams to be more efficient by asking upfront if other product or executive stakeholders will need to meet, thereby bundling interactions.