Pay very close attention if they propose actually paying you through an "earn out". What this means is you go work for them and if you do T task by D date, then you get paid. But a) that's no different from being an employee and getting a bonus, so if you wanted to do that why start your own company in the first place and b) doing T with new constraints A, B and C which only become apparent once you're committed may be less feasible than you originally envisaged.
so if you wanted to do that why start your own company in the first place
I really don't understand this sentiment. Many entrepeneurs don't found a company because they don't want a regular job: they found a company because they have a good idea that they like to work on and there isn't a regular job that offers that. And because they think they can make a lot more money this way. Taking the money, while taking more money from MegaCorp for a job where you can work on what you like sounds like an excellent tradeoff, especially if you can convince them to let you work under your own rules.
I am very suspicious of people that found companies only because they "don't want a regular job". There are lots of different regular jobs and many in which you have lots of responsibility and set/plan your own rules/project. They come close to a startup. In my book, generalizing 'regular jobs' implies stupidity.
Of course, what is a "regular job"? I started my own company the first time because I was tired of working for idiots. Of course, not everyone I worked for was an idiot, but enough of them poisoned my daily life that I thought I would do better without them. I did.
Now I start companies to "do stuff that matters" and all the ideas I have had just don't seem to fit into a regular company. I find it easier to create something new and attract investors than to find the right company to support me doing what needs to get done.
especially if you can convince them to let you work under your own rules
In my experience (two acquisitions by public companies) it never quite works out like that. Most recent experience involved "we won't change a thing" up front then after the deal went through "stop working on cool new features until you've integrated your product with our legacy code". And from their perspective that was exactly the right thing do to; they'd bought us for what we could do for them after all. But for me personally, reverse-engineering ancient, undocumented Delphi apps wasn't what I'd signed up for.
>>I am very suspicious of people that found companies only because they "don't want a regular job"
Hmmmm... I am thinking is the other way around. Why would people want a regular job? Think about it, why do you want to work under someone else? Do you have such a low self esteem that you don't think you can succeed on your own? Most people get regular jobs because they don't believe they are good enough to start a company. Hurray for those of us that believe that working on a regular job is almost the same as being a looser!
That's a little too echo-chamber-ish for me. I think most people have "normal" jobs because either (a) their life doesn't revolve around their work or (b) it's never occurred to them to found a company.
The first takes a couple forms. During the last two "normal jobs" my life was focused on open source work and music, respectively. I didn't want to "monetize" either of them, so the best solution was having a job that was loosely connected to them and allowed for that (working in the LinuxLab of a large corporation, and then a pro-audio company, respectively). For a lot of people it's their families.
The second I think is also pretty common. It just hadn't occurred to me to start a company until a couple years before I did. Not to mention, that because of visa requirements, it wasn't possible.
Founding a company has been a great experience, but my life revolves around that now. For those who do not find that desirable, working for others seems a fairly sane choice.
Personally, if it was my first start up, I would sell and test the waters over at MegaCorp and if it's not how I like it I've always got the money (and possibly some extra contacts) to jump ship and start my own thing again.
Based on this write-up, that seems short-sighted. It sounds like they've been given a mediocre valuation for an unfinished product that and it's worth more to them (and as they feel, the market) than they're being offered. It seems basically like a talent acquisition more than a tech acquisition, so they'd probably be stuck there contractually for a good long while, which is what they founded a company to avoid in the first place.
The author of the question says, "The money is fair enough..."
His question is one of control, not money. The OP wants to control his life and his product.
Truth is, products don't last forever. They require maintenance and support, marketing, infrastructure, pricing, and a whole lot of other things a few guys focused on development aren't thinking about right now.
A lot of cash in the pocket = a lot of time to think.
I'm not saying they should sell, I'm just saying that I don't understand why you are bringing money into it when money wasn't a factor for the author.
I can't wait to have that 9:15AM phone call again. First time it happened it was a shock. I was still in bed and I wasn't sure who was calling. I had to sit up slowly and pretend I was at my desk. The voice on the other end said they wanted me "in their team". I had to stall them until I collected my thoughts ..
Please happen again, O sweet anonymous phone call at 9:15AM :-)
I think the author of the question is young and excited and someone with influence has recognized their achievement. The team has probably never been in that situation before, so they've never seen how high one can get on such approval that evaporates tomorrow.
That I feel roughly translates to the "money wasn't what we expected". A lot of acquisitions really boils down to the money factor, no startup will ever reject a good offer, since that's pretty much one of most common exit strategy.
If the money was really "fair enough", then this question wouldn't have been posted in the first place. So in their case, it's a matter of weighing the offer vs what they think their startup is worth at this point. So again negotiation 101, never accept the first accept, reply with a counter offer with a price that you feel is "fair enough". If they did not take your counter offer, no harm done, you just keep bootstrapping.
Do you know what percentage of startups bought by big corporations turn out failures? Probably a much higher number than those that end up successfully making tens of millions of dollars.
These guys need advice from a seasoned software entrepreneur (or two) what their particular chances might be,, not from the "peanut gallery" on SlashDot.
There's probably a 75% chance they should in the words of one commenter "take the money and run".
Don´t Sell. Money is not the best reason to sell. You guys have to achieve your best, it´s far important than money. So if you feel that you wont reach your best selling, stay far from they.
