The corporate M&A cycle can sometimes feel like a black hole of mismanaged time, distracting meetings, and false hope. Paul Graham even went far enough to write Don’t Talk to Corp Dev, in which he compared corp dev teams to robber barons and argued that it is a costly mistake for founders to engage with corp dev teams if they don’t have immediate plans to sell their company.
However, especially given the nature of enterprise technology, this is not always the case for startups selling to the Fortune 500. Corp dev teams can bring a lot of value to the table for enterprise technology startups, and the benefits of interacting early with a corp dev team can extend far beyond acquisitions talks down the line.
From securing champions within an organization, to helping startups navigate a Fortune 500 partnership, here’s what Andrew Stern (VP and Worldwide Head of Corporate Development at F5 Networks), Debra Danielson (SVP of M&A Strategy and Distinguished Engineer at CA Technologies), and Helder Antunes (Senior Director of the Corporate Strategic Innovation Group at Cisco) had to say about working with corp dev teams on a panel at a recent New York Enterprise Tech Meetup:
1. Get on their radar early
First and foremost, all of the speakers observed that most of their acquisitions came from pre-existing relationships. Acquisitions can take anywhere from 4 months to multiple years (and Fortune 500s acquire startups throughout their entire lifecycle), so it makes sense to get on their radars early.
2. It’s a buffet, not a prix fixe
There is no one-size-fits-all investment, acquisition, or partnership opportunity. Beyond acquisitions, companies like Cisco now offer IoT competitions, grant money, and opportunities to be a trial vendor. There are now more avenues than ever to get in touch and find ways to partner with corp dev teams, as they now liaise with universities, accelerators, government organizations.
3. Be transparent and request the same
Given the numerous vehicles through which Fortune 500s can add value, it’s almost always worth taking a first meeting to open up the lines of communication. That said, to avoid superfluous conversations (and just being marched around for show and tell), one of the most important aspects of working with corp dev teams is being transparent and requesting the same in order to build trust and have a meaningful engagement. It’s always fair to ask what their intentions are before taking a second or third meeting.
4. The hype of valuations has lengthened acquisition talks
The recent froth of artificially created valuations has affected startups in two primary ways. First off, some founders have begun targeting trendier markets, be it cyber-security or artificial intelligence. However, Antunes warns that the pre-planned strategy and horizon of a legacy corporation can be vaster than a current trend. Second, although many founders now have elevated expectations, the math of a high valuation is often unsustainable under the light of reality. The fact that a company sold 10% of their equity with high liquidation preferences and ratchets for 100 million does not mean that 100% of the company is worth 1 billion. “Our typical engagement,” Danielson said, “increasingly occurs in two pieces, as we first touch base with a company and then come back a few months later to see if they have developed more realistic expectations.”
5. Less is often more
Resist showering demos across the breadth of the corporation. While your technology may be great, that doesn’t mean it’s universally applicable. You’ll cut down on fruitless demos and discussions if you are a sharpshooter, rather than a machine gun. Antunes groans to think of the startups who made it clear within ten seconds that they were “offering something totally irrelevant to our company.” Once you’re in the room, articulate your value-added pitch in 3-4 slides: what problem are you solving; why are you a good fit for the company; how can we work together.
Although the nature of the beast is that sometimes even corp dev teams with the best intentions can lead startups through slow marathons before producing a final offer, the benefits of interacting with corp dev teams now extends far beyond acquisition talks. There are numerous vehicles for corp dev teams to add value, and getting on a Fortune 500s corp dev radar can have outsized returns down the line.
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