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On December 9th, Venture Archetypes and Greenberg Traurig pulled together a panel of some of the top entrepreneurs and most active acquirers in Silicon Valley to answer your questions about start-up M&A. So whether you’d like to know what the serious players are looking for or how to position your start-up for a healthy acquisition, you’ll find the wisdom right here!. Read the rules.
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asked at live event
How does an entrepreneur get on your radar? Is it better to go in through a business unit or a product unit than to go in to Corp. development? How do they start talking to corporate development folks? see video
Click on a photo to learn more about each panelist
Amin Zoufonoun
Google 
Director, Corporate Development 
I think it's pretty much what my colleagues here said. I would just add that I would also go back to why we looked to acquire. If it's for engineering prowess, obviously having an engineering team within the company that supports that and feels there's a need for a team with that kind of expertise is something that's more determinative, as Mike mentioned, through the engineering and products teams than it is through Corp Dev. But we acquire for other reasons as well. We acquire products or technologies which we feel give us time to market advantage and help us achieve some goal that we're trying to achieve faster or better. Other times we acquire for what I would call "big bets." Android is a good example of that. And we also acquire things that have some kind of leadership position, market leadership and technology leadership, and we can think of all the big deals that Google has done that are good examples of those.
Michael Brown
Facebook 
Manager, Corporate Development 
Facebook's an engineering company. Engineers rule. So the best way to get on our radar is through the engineering side of the organization. You can come to me and say, "Hey Mike, we're thinking of our strategic options," or whatever parlance people use. And I'll certainly do my best to be helpful. I will make the right introductions to the right people inside the company. But ultimately if you can get a product or an engineering leader at Facebook excited about what you are doing, especially if they know you, if you have known them from prior work experiences, that's really the best way create momentum. Then my job actually gets a lot easier. And the process goes smoother because when I sit in front of our CEO, Mark Zuckerberg, and he looks at me and says, "Mike, you don't know how to code your way out of a box," which is true. I can say, "Yeah, but so and so really thinks these guys are good." When we have that kind of support to get a project done, meaning an acquisition consummated, it really is the most compelling thing for Facebook and it gets us excited to move faster and to make it happen.
Taylor Barada
Yahoo 
Senior Director, Corporate Development 
I think we see both. We do a lot of extra outreach in terms of just being out there, such as doing events, talking to different people, checking in with all the VC relationships we have, and seeing what they're talking about and what they have invested in. So introductions through people we know is always a good thing as part of the theory of social networks and what not. And I think certainly coming from product is also great, but I totally agree with Mike. We are trying to partner with our business leaders and product leaders to build the business. While in many ways we may be the people to get it done, often times in the early stages we act more as a concierge to make a connection, because you may or may not be at a point where you are actually even looking to exit and you’re just looking to establish that relationship. So I think that's another thing that we end up doing quite a bit of. In a big company like Yahoo, Google, and Facebook it's probably well on its way to getting that way too. People say, Hey, I'd like to talk to you about x, y, and z, but I just don't know who to go to, and I think with us being more externally focused out there and talking to people, it’s more than likely you know someone that we know, and you can just get connected into us. Then we can get you in touch with the product person if there's a product partnership you are looking to do in the short run. And then in the long run we're aware of you, that's a good thing too.
Elad Gil
Twitter (sold Mixer Labs) 
Director 
Question: How did the initial discussion start off with Mixture Labs? I guess I'd go back to an old saying, which is: Company's don't get sold; they get bought. And I think our case was an example of that, where we basically had a hostage geolocation service and we were going through a large list of partners that we were actually trying to get on-board as a partner who would actually pay us for the service in terms of, you know, we'd build a monthly kind of thing. After the third or fourth conversation I got an email from Ev, who at the time was a CEO of Twitter, saying, Hey, we don't think it makes sense to have you do this as a partner, but we'd love to talk about having you come in-house to actually work with us. And that's what actually kicked off the discussions.
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asked at live event
How can founders go about getting more than one party interested in the deal to improve leverage? see video
Click on a photo to learn more about each panelist
Taylor Barada
Yahoo 
Senior Director, Corporate Development 
The fact of the matter is that Google has tens of billions of dollars on their balance sheet. So if we jerked our head around every time we heard on the market they were looking at something and started chasing it on price ... frankly, if Larry and Sergey want it, they're going to get it. So I think we've taken a different approach and it goes back to a longer dialog and trying to find the right fit and trying to find people who think that truly it's not just about an exit and it's not just about the fact that they are going to get to keep doing what they are doing inside of us, but that there's something that we have, whether it be the reach of the network, the sales force or something that they look at and say, "You know what? Yes, I can get an exit but number two, I actually get to build a bigger business inside of Yahoo!" I think we fully realize the forcing function of getting to a decision on a rapid time line. If we're having someone else in the boat it totally matters, but I think you can't get to hung up on just chasing another offer for the sake of chasing another offer. I would just ask yourself whether or not it's fair. If you think it's fair and it's where you want to end up, you may be completely wasting your time if you're really really in with Amin and you want to end up in Google, calling us, trying to get a competing offer when he's already put a fair offer on the table. That's weird. You should know enough about the differences of the companies, their strategies and the people to understand which one is a good fit for your team and your product. And so I totally understand where Mike's coming from and, again, it's a capitalist country. And you should absolutely go for it and we're all fine with that. We're going to pay what we're willing to pay and you're going to sell for what you want to sell, and if those two things match we're going to get something done and we're fine with that. But remember that, fundamentally, a deal is a beginning, not an end.
Michael Brown
Facebook 
Manager, Corporate Development 
Listen, you are all very smart, and to tell you anything other than the truth would be stupid. Get multiple offers and get a bidding war going, right? If I were in your shoes, that's what I would try to do. There's not a lot of rocket science to that aspect of it. Of course, we're going to tell you we want to be the only home for you. We think we're the right home, we're going to be your best friend, blah, blah, blah. We do think we have a good company and we're happy with what we're doing but, you know, yes, let's talk money for a minute because this is life-changing stuff for many of you. So, get multiple bidders, manage your process, and don't sign a term sheet until you are really sure you want to do the deal. We don't give term sheets unless we want to buy your company. It's not a kind of a joke or a second date for us. It means we really want to buy your company. And by the same token, when you sign a term sheet, a term sheet from us and most companies usually has a "no shop" clause in it. For those of you who don't know what that is, it means that you can't try to get a better deal or a comparable deal. You have kind of said, I'm hitching my horse to this wagon. So don't do that unless you're really sure. Until then, do it a lot and hustle. Hustle because you owe it to yourselves and the people who presumably work for you to get them the best deal that you can.
Amin Zoufonoun
Google 
Director, Corporate Development 
I keep going back to: Why are we doing the deal? Where are we in the process of doing the deal? Because if we're at the point where we're issuing the term sheet, and we're the same way when we issue a term sheet, it will be a no shop clause. We feel like we're dedicated at that point, and we hope that you're dedicated as well. We've assessed it on both sides, so at that point if you actually take our term sheet and go shop it, that would be upsetting for us, quite frankly. And it depends on the kind of deal. If it's DoubleClick, which was owned by a private equity firm, one could argue that it's purely a financial incentive for the private equity firm to run an auction process and try to maximize valuation. It's not about team fit and that kind of thing. But if it's a team fit kind of acquisition and you've gone to Facebook or Google 10 times and you know you've had various dialogs with engineering managers and product managers on what you're going to do, how you're going to fit into the organization, then there's this trust that's been building. If we get to the point that we're issuing a term sheet and then you turn around and shop that, I think that's inappropriate. So it depends on where you are and what you're seeking to do.
Elad Gil
Twitter (sold Mixer Labs) 
Director 
I think, fundamentally, once you have one offer, then it becomes very natural for other people to get interested. That could mean mentioning the offer to advisers. And this is before you sign any sort of exclusivity or anything else, so you need to make sure that you're timing it properly. So if you mention it to advisers or other people who have connections to these guys, and they hear, for example, that Google is looking at a specific company, then they may get interested. And then the company can sometimes end up going through the rounds. Or, alternatively, if it is an interesting enough space where it’s considered a big strategic asset, then often times companies will proactively be going after the company. I don't know anything at all behind the details of what has been happening to Foursquare, but I am assuming that in a lot of cases companies have been going and approaching them versus them having to go and solicit interest. I would also add that you can optimize for valuation, but you don't want to go somewhere that you're going to be miserable. Especially if you have a multi-year vest, because that just means all that value is going to go away because you'll leave early anyhow.
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asked at live event
How many deals do you expect to do in 2011? What types of deals are they? Also, who else is going to be a very active acquirer in 2011 beyond you guys? Is Apple going to pick it up? Is Amazon? eBay? see video
Click on a photo to learn more about each panelist
Elad Gil
Twitter (sold Mixer Labs) 
Director 
Actually, I have no idea how many companies Twitter is going to buy since I'm not involved with that area at all. But to answer the other part of your question, two companies that I personally am guessing will become very inquisitive next year are Salesforce…I think there's a fundamental shift in their strategy and they're going to buy a whole bunch of stuff. And I actually think there's a whole wave of innovation in ecommerce. And so my prediction would be Amazon and potentially Gilt...and I think Groupon will continue to sort of plow through companies.
Taylor Barada
Yahoo 
Senior Director, Corporate Development 
Well, as a public company, I'll leave the prognosticating on the number of deals to Tim and Carol. But the short answer is, we are going to do as many as make sense that we can get done. There’s no quota. We're trying to find things that will help our business and our business leadership, that will grow the business faster, and that are new and interesting that we couldn't do on our own. And so we want to do as many of those as we possibly can. We want to do deals that put us in a better spot in 2012 than we are here leading into 2011. In terms of where we're focused, we've continued to focus on what Carol ended up calling the four Os [which confused us at first]: mobile, local, social and video. Basically, I think those are major horizontal themes that the Internet is dealing with, and Yahoo, being a big cross section of the Internet, is absolutely dealing with that. We continue to see a bunch of innovations in ad tech and we believe that we have something of a lead and an advantage there, and we want to make sure that we continue to move as fast as the industry is going. Something that came out of the Dapper deal that we just did a few months ago is those guys started out on a content play and ended morphing into being able to ingest content from websites and target ads in a dynamic fashion. I think that's interesting and unique because when we stepped back and looked at it, we realized that in many ways the ad part of the world has gotten more personalized than the content experience part of the world, and I think things that Facebook and others are doing are fascinating in terms of curating content. Twitter's doing it as well with your social network and I think clearly, in the future, just like ads are targeted algorithmically and based on what we know about you, I think that is another interesting area that we're watching -- how to make the Web more personally relevant to you.
Michael Brown
Facebook 
Manager, Corporate Development 
Maybe 15 acquisitions. They will be a mix of talent acquisitions, where we're looking for people to run important parts of our product who have a really strong vision. I'll give you some examples. Maybe it's social commerce, maybe it's HTML5 stuff that we're interested in for mobile. Maybe it's around local, so that when someone walks into a store we can identify that they are there without any hardware, so it's a software-based system to either check someone in if they're using Facebook Places, or you can send them a coupon, or a deal, or something. So those are a couple of examples. If you can see where we are innovating as a company, those are probably the areas where we're likely to acquire because we're hungry for new ideas and leadership. As for who else will get involved, we're on a mission and we're just so focused on what we're doing and we have so many ideas and so much yet to do, that’s all we're thinking about. There is a saying in the company: We're 1% finished. And I really believe that because there's so much of the Facebook story which is still to be written, right? Our business model isn't totally clear. What verticals we are going into, if any, isn't clear; what our platform becomes isn't clear. So it's a really wacky and fascinating place to be because there's so much that we don't know yet and so we're just focused on that. And we wish all the other companies all the best.
Amin Zoufonoun
Google 
Director, Corporate Development 
I would also add that it just doesn't necessarily work that way when we set out to do X number of deals. They're very opportunistic and based on if it falls into those various reasons why we do deals. Given that we're probably the king of the wacky companies, sorry to dethrone you, Mike. We have crazy cars that drive around that you've seen or heard about, and we're in mobile and social and email and communication and search. Personally, I can't speak for Google. I don't necessarily always find the information I need on Google.com, so I think even search is in the 2nd or 3rd inning. Advertising is still evolving, mobile's evolving, cloud computing's evolving. We tend to be in all these areas, including robotics and green tech and all kinds of other things. So, I think we're going to be busy as our CEO's implied.
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asked at live event
Give us an overview of the M&A process at your company. What happens when you are acquiring a start up, what teams are involved, how long does it take? How does it work at your company? see video
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Amin Zoufonoun
Google 
Director, Corporate Development 
So the process is not standard by any means. I would say that depends on the particular start-up, why we're looking at it and who is looking at it within Google. So the average time we quote is a couple of months, or a month. It could be a month. Actually, the bigger deals tend to go much quicker and smaller deals tend to take longer and we can talk about why that is. Generally, we get to know the team, we get to know the technology, we get to know whatever we can before we go to our executives and seek approval for the deal and get consensus from the various teams. And then what happens is, you as a start up would see a much bigger team of professionals than I think most people expect. It includes my team, which leads an integration team, a finance team, a legal team, HR for getting people offers and getting them Google badges and to conduct due diligence and get the deal through. So that's a typical process for the most part.
Elad Gil
Twitter (sold Mixer Labs) 
Director 
[Question: Representing the founder under M&A since your company was acquired, how does Corp. Dev. work at Twitter?] Twitter has made a number of acquisitions and there was a Corp. Dev. team. Jessica Verrilli works on it and it's under Kevin Thau, who runs Corp Dev and B.D. And there have been a number of acquisitions. I think very early on in Twitter's history, they bought Summize, which was a search engine then. That was when Twitter was about 15 people. And so as a small company they have evolved and it was a pretty large proportion of the company and culture. We were the first acquisition since then, I believe, and they have made a number of other ones including Tweetie, Dabble DB and a few others.
Michael Brown
Facebook 
Manager, Corporate Development 
Some US President once said that plans are meaningless or useless. Planning is everything. And so for us, the people who build the products are probably more important than the products themselves. And so our diligence is really going to focus on the small number of people who brought that product to life to make sure that we're excited about them. And that they have good technical jobs and lot of vision. And so, I would kind of double undermine the valuation of the small people in your company as being the most important step in that process. Then after that it's very smooth.
Taylor Barada
Yahoo 
Senior Director, Corporate Development 
For us it's similar. We are very focused on cultural fit and alignment of vision. I think Yahoo over the last 15 years or so has developed its own culture and sense of what it's trying to do. And at times we've muddled our external articulation of that, but I think internally, it matters that people want to be there and that they think they can do more together with us than just going off and seeing it as an exit and a check. So I think very early on we're trying to get a feel for if we have a shared vision.
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asked at live event
What are some of the most common reasons deals fall apart? How can start ups avoid pitfalls that could cause a deal to derail? see video
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Amin Zoufonoun
Google 
Director, Corporate Development 
In our case, the few that have were because we had some key assumptions regarding why we were doing the deal. So, if we're doing the deal based on the strength of the technology to do X, Y, and Z, and we go in and actually do diligence and see that it's snake oil? That could fall apart. Or if you’re considering a team that you think is strong at doing X, Y, Z, and you go through the interviews and find out that's not the case, it could fall apart. But if you're acquiring a small technology, and that's why you're doing it, whether their balance sheet showed $200k in debt, and in diligence you somehow find out it's $300k, at least for a company like Google, is not going to be dispositive of whether do the deal.
Taylor Barada
Yahoo 
Senior Director, Corporate Development 
By the time you get to a term sheet, so much work has been front loaded that it's extraordinarily rare for something to fall apart. I think when things fall apart before that oftentimes it's people trying to be too cute or cagey. At some point, you lose that trust. You are not selling us a used car, right? We're trying to put something together. It is an acquisition, but it is fundamentally a partnership trying to get started. And it’s not just with the deal lead or that you guys would have to build that trust; it's also with the business sponsor, the technology lead and all that stuff. And the things that lead things of course are when people aren't forthcoming. You know, it's a lot better to say, Look, I've got a great team, this guy's great, this guy is doing OK, he’s serving a purpose now and I think he has some upside. But realistically, if you call it like it is then you develop creditability. We have all seen a lot, whether it is technology or people or market risk or whatever. You should absolutely position yourself in the best light that you would want us to perceive you in. And that's fine, and we're comfortable with that. But you should also do that with a full set of facts. Perhaps the worst thing you could possibly do is try to duck and dive, and think that we're not going to find something. Because by the time we're done with diligence, we’ll have found pretty much everything. It's better to just get it off there early and then we'll work through it together and see if we can get something done.
Elad Gil
Twitter (sold Mixer Labs) 
Director 
I have seen it happen more recently with a large private company. A friend of mine was one of their first acquisitions and in this case, there was of a lot of ambiguity in the term sheet and I think it was just a lack of savvy on both sides which led to a lot of heartbreak and issues later on in the process. So that's one thing. The second thing is, we're talking about the deal falling apart, but I think another thing to consider is your company falling apart during the process, because it's a huge distraction. As a founder, you are trying to run a business, and you're trying to go through this process against some well-armed professionals -- sorry, with, not against. Hand in hand. I am just joking with that, of course. I think there are a lot of things that can be really disruptive, including having your employees interviewed by the company. That can go a bunch of different ways. One is if the company doesn't want to bring someone on board, for one reason or another. In our case that didn't happen, but I've seen it happen. Or, alternatively, the people on the team can get really excited: "I’m going to Facebook, Yahoo or Google," or whatever it is. And that can be extremely disruptive. People get extremely distracted, and instead of executing on the business, which is really what you should be doing, people’s minds start to wonder. So that means, as your going through the diligent process, I think you really need to choose the right time for your teams to be exposed to the other company. And it's tricky timing because you don't want your team to get enormously distracted in case the deal falls apart. It's a really fine line and a something to balance. That's why I was for getting quick deal cycles, if you can pull it off.
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asked at live event
How common is it for an acquisition to start out as some sort partnership or strategic joint venture? What percentage of the time is there a preexisting business relationship? see video
Click on a photo to learn more about each panelist
Michael Brown
Facebook 
Manager, Corporate Development 
With some companies we're talking to now -- and for at least one acquisition we've made -- we had some sort of previous business arrangement. With little companies, because we're bigger, we feel like if we do a partnership, we are going to make them big and successful, which is good. It's great that companies become big and successful when working with us, but if it then puts us in a position where we could become held hostage to that company, or we can't control our destiny, or things may not go the way we anticipate in the future, it can become challenging. So we try to cut that off at the pass and say, Listen, it's probably better for our interests to try to acquire this company now so that we can build value together, rather than have more of an arms length relationship where in the future, if there's conflict, it's going to be more challenging for both sides. There are some circumstances where that happens and it makes more sense to acquire now rather than partner with the company so that they grow. Then you have to think about what to do down the road.
Taylor Barada
Yahoo 
Senior Director, Corporate Development 
We have these meetings during which you're trying to sort through what could we do together, and then sometimes you say, Wait a second. This really only makes sense if we are going to do the acquisition. In terms of the other side of the question, for the people who are existing partners and then leading to acquisitions, you're sort of pulling a number out of thin air. Maybe 50% of the time there's some sort of business relationship already in place.
Amin Zoufonoun
Google 
Director, Corporate Development 
I would say that almost all of the deals that we do tend to be, at least from our standpoint, very broadly viewed. If an acquisition makes the most sense, then that’s the route we go.
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asked at live event
How do you establish a valuation for an early stage company in the absence of Comps. with early revenue or perhaps even pre-revenue? see video
Click on a photo to learn more about each panelist
Taylor Barada
Yahoo 
Senior Director, Corporate Development 
The other thing to do is to twist the question a bit. I think we fundamentally view an M&A transaction as a collaborative beginning to a relationship that we are going to have. With two deals we've done this year, the Citizen Sports and the Dapper deal, the leadership team in both of those has come in and taken bigger roles beyond just the business they were running pretty quickly. And frankly, we're looking to get a feel for when that can happen and when they can do it. So, in order to put together a deal, my assumption is, yes, companies are bought, not sold, and I definitely understand that. But on the flip side, I can't make anyone sell who doesn't want to sell, and I can’t make them take a price, so I don't even try. I think we focus very much on trying to pay a fair price for a business that we both believe we can make bigger together. So one of the rules that we have is, we won't put an offer out without seeing the cap table and understanding the dynamics of what you're facing. Frankly, sometimes that helps you a lot because we realize that, due to the natures of the venture world, sometimes we need to stretch a little bit more just to keep all the stakeholders happy. And it's one of those things where within a realm of reason, sometimes you can do those things. It's in everyone's interest to get the facts on the table and understand what the real dynamics are that are going on in the boardroom when you’re having these discussions.
Amin Zoufonoun
Google 
Director, Corporate Development 
We have a magnetic dart board. But seriously, for a private company that is small and with a small team, maybe unproven technology, and no revenue yet, it's difficult. We have one luxury which is: we're a comp. maker in the Valley so we can look back at our previous deals. We also use advisers and lawyers who give us an idea of the other deals that are happening in the Valley so we have a pretty good idea of what is happening in the market and through our VC network in terms of valuation. But again, for those types of situations, where you can't do a DCF and you can't do traditional comp. analysis in a public market, it is really a negotiated valuation. You look at what you did in the past that had similar size, similar build time, and a similar size team. You consider who the VCs are, what kind of returns they expect, and how much money has gone into the company. And then you do your best to come up with something that's a win-win and reflects the market, and then it's negotiated.
Michael Brown
Facebook 
Manager, Corporate Development 
I think Elad's point is really good. I think he's right. I'll just add one additional piece: One thing that goes into our consideration is managing the esprit de corps of the Facebook engineering team. I think this was mentioned a little bit, but we can't just spread extra frosting all over these new engineers that are coming in because for folks who have joined us through the front door it's pretty frustrating. It's kind of a shady thing to do, when you look at the guy to your right, or the woman to your left, and you say, Wait a minute, why did this person get a significantly better deal than I did? We face that and we take it seriously. I was in an engineering meeting recently with directors talking about buying a company for about $20 million dollars of Facebook stock, and we got a significant amount of push back from some of the engineering directors. They said, Well, wait a minute. Do we really value these people that much? Because we can take 10 superstar engineers from Google -- just kidding -- that we really admire and we could provide each of those 10 superstars with a $2 million dollar bonus, right? People take those alternatives very seriously, in terms of how we're using our company's money. I think our engineers will listen if we hire someone who is a reputed superstar, and someone will say, Yeah, OK, I get it. That person maybe got paid better than I did because they're a superstar and I am just a normal star, or whatever. And I think that doesn't disrupt the spirit of the company that much. But managing an engineering culture, and scaling it where you are trying to keep hundreds, or maybe someday Facebook will have thousands of engineers. Certainly, these companies do because they're bigger and successful. It's hard to manage those competing interests. I am the deal guy so I want to do lots of deals because doing deals is fun, and buying companies is fun, and it's very exciting. But at the same time we need to manage the engineering culture because ultimately those people have to work together, hopefully for years to come.
Elad Gil
Twitter (sold Mixer Labs) 
Director 
I think valuations can be misleading. I have been helping people who have been doing this, especially on the smaller side, let’s say 5 to 10 million dollar acquisitions. Certain things can actually cause really big movements in the value that the entrepreneur ends up with. The first is the lockup period, or the vesting schedule. If you're not going to stick around, let’s say you have a three-year vest and you leave after a year, you just left two thirds of the value on the table. As an entrepreneur, you may have gotten some of that up front, but fundamentally you need to take that into account. So a 10 million dollar acquisition where you own 30 or 40% of the company because you haven't raised a lot of money could be worth one million dollars to you instead of three or four million dollars or whatever multiple on top of that. The second is dividending out cash or not. If you have in the bank a million dollars in cash that you raised, and somebody is buying you for five million dollars and you don't dividend out the cash, you just subsidized the acquisition by a million dollars. So you just reduced the deal value by 20%. The third is the upside of the currency. Some companies are going to have multiples in terms of where they are today, especially certain private companies. And some aren't, so that also impacts the upside that you have. So I think that, ultimately, straight valuations are a little bit misleading and you should really take into account all these different factors when you're considering selling a very early stage company.
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asked at live event
What about the diligence period? What should founders try to push for here and what impacts this time period from the standpoint of Corp Dev? see video
Click on a photo to learn more about each panelist
Elad Gil
Twitter (sold Mixer Labs) 
Director 
I would encourage negotiating as short a diligence period as possible. That does two things: One is that it streamlines the process in terms of ensuring that there are fewer wiggles and waggles around the road. As you're negotiating, fewer last minute things can come up. But second, it also gives you a shorter window so that if things don't work out with that acquirer, and you are really set on doing an acquisition, you don’t become extremely stale as a company.
Amin Zoufonoun
Google 
Director, Corporate Development 
It depends because you could front-load a lot of these things. So if it's a purely team acquisition, you would probably want to see resumes, right? You probably want to see some kind of review of the skill of the team, the makeup of the team, and you'd probably want to see that before you actually make a go/no-go decision as the corporate acquirer. But again, if it is a secret sauce which is ancillary, if it checks out somewhere down the process, but you anticipate that process taking 30, 45, or 60 days, what have you. There's a range, and it depends on the size of the company and the complexity. I was just going to add diligence is a two way street. What we find is the smaller companies that are not VC funded, for example, tend not to have their books in order. They tend not to have somebody who can run the business and deal with the disruption.
Taylor Barada
Yahoo 
Senior Director, Corporate Development 
We ask for what we think is enough time to get something done. We also have auto renewal clauses in there so we don't have to stop and renegotiate, and sometimes people have questions about that. I'm not aware of us ever having gone through a signed term sheet and not closing a deal. I am sure that someday it will happen because you'll find some gnarly, bad thing that will make you walk away. But in general, as these guys have said, we don't take it lightly. If you put a term sheet out there, it's because you're trying to get something done. And then from that point forward, you truly are partners in terms of getting all the information out there, working through the process, getting everyone bought off, and getting it done. And the biggest gating factor is that start ups are going through this for the first time, and often times they have been running their business as they should and don't have everything in a file cabinet ready to show us to prove that everything is in order. So it often takes longer then they imagined to get it all in order. So what I often do is talk about milestones and I basically say on the day that we present this, we'll give you our super-duper diligence list that has all the stuff that we're going to need. If you can get a fully populated data room inside of X date, I will commit to you that I will drive our forces harder than they've ever been driven to hit whatever that date is. So it's one of those things where you have to develop a trust factor to get a deal done. And it's a two-way street, so then if they miss that deadline, it's not that I'm not going to keep trying to move fast, but it's just that we're all on the same page around what's holding it up. And we'll work together to get it over the finish line.
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asked at live event
What's the right timing to consider an exit? Let's say you've proven the business model and you what to know whether to raise more money or talk to acquirers. In the case of Mixer Labs, why did you exit as early as you did? What signals do you look for? see video
Click on a photo to learn more about each panelist
Taylor Barada
Yahoo 
Senior Director, Corporate Development 
I was on a panel with these guys in the summer and I said there was no time too early. Feel free to reach out to us at any point. And we did get quite a few people reaching out there very early. But, that said, it's really sort of true. You don't need a big agenda. You should have a general sense of the different parts of our business and how you might fit in. But if you think there's a realistic way that it might fit in, feel free to reach out and then we can get a conversation going. It doesn't need to be: Hey, I'm ready to sell. And all those kinds of things. I think if you have something to show, meaning a product in market that's gaining traction and that gives people more to talk about. But other than that, I think it's perfectly fine to have an early dialogue. It takes time to get to know people across the company and to set that stage. Again, the theme of this night is thinking about your exit and I think there are usually a few places that are going to be a home. And as I said earlier, we focus a lot on fit, and frankly, you should too because you are going to be working there for years afterwards except in really extreme instances. The more time you have to get to know people without the pressure of trying to get the deal done will make you more confident when you get to the point of looking at different options. The one that feels right ... you can be sure is not just emotion of the moment, but that it’s had time to settle. So I think it’s good to go ahead to get started, and to know a bunch of people. Not just the Corp. Dev. people in the business.
Elad Gil
Twitter (sold Mixer Labs) 
Director 
Sure. There were four considerations. The first one was the changing dynamics of the market place. Geolocation was heating up as a market and the direction we were heading in was a direction that we thought some very large companies may enter. We thought Google may supplement what they were doing with local. Twitter at the time was thinking about providing geolocation as a broad based thing for its ecosystem. And so we saw these large players with very large ecosystems considering the space. It didn’t mean they were going to move in that direction, but it was one consideration. Second, we thought it was a great place where our technology could actually have enormous impact. There is this massive developer community that we had the potential to access. Third, we thought that there was upside because Twitter was a company that we felt could have a lot of multiples in terms of the valuation that it was at at the time, and I think that's actually proving true right now with some of the rumors that are going around in the marketplace about them. And since I said four, I have to come up with a fourth now. I really like Ev, so there you have it.
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asked at live event
Can we talk about the diligence and information? For example, worries about your becoming a competitor. You know, what information is disclosed in the process and when? see video
Click on a photo to learn more about each panelist
Amin Zoufonoun
Google 
Director, Corporate Development 
Absolutely. That's a good question. And as paranoid as start ups and entrepreneurs are with respect to their confidential information, as they should be, we, as a big company who pride ourselves on doing things "right and good" and "not evil," are very paranoid. And I think I can speak for most of the companies up here about actually being tainted with third party confidential information. So we are very careful to only receive just enough to make decisions to get to the next step. It's a kind of pyramid process: as you get deeper, you sign a term sheet, and you're close to a merger agreement, we would exchange a deeper kind of confidential information. So we don't want to know your secret sauce before we get to that stage, actually. We get a good idea of things and we try to agree on what the deal terms would look like. Once we sign a term sheet and go through the process of diligence, and we get closer to a definitive agreement, you would typically see us do things like code reviews and such.
Taylor Barada
Yahoo 
Senior Director, Corporate Development 
My working assumption is, in theory, our engineers could go do anything if you give them enough time, so I'm not talking to any company that we don't already assume gives us a speed to market advantage or provides something really unique. So they can just take that off the table and not worry about it. I think that the true secret sauce stuff that comes out in the code review can taint you, and that comes extraordinarily late in the process. We even use third parties for code scans and things like that so we truly aren’t tainted.
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