I have been telling startup founders for a while about the dangers of the corp dev guys. Paul Graham says it with a clarity however that gets to the heart of why conversations with corporate development arms of big companies are so deadly:
“Distractions are the thing you can least afford in a startup, and conversations with corp dev are the worst sort of distraction, because as well as consuming your attention they undermine your morale. One of the tricks to surviving a grueling process is not to stop and think how tired you are, instead you get into a sort of flow. Imagine what it would do to you if at mile 20 of a marathon, someone ran up beside you and said, “You must feel really tired. Would you like to stop and take a rest?” Conversations with corp dev are like that but worse, because the suggestion of stopping gets combined in your mind with the imaginary high price you think they’ll offer.”
The distractions are a real killer. But if you do happen to get suckered in, much worse things can happen other than the mere distraction of time being wasted on non-productive activities. Actually, I think the value of corporate development to one’s startup is better reflected using the following visualization:
The best you can hope for is a bit of wasted time. The worst is that they steal your IP, fund a competitive offering, hire away your talent, low ball an acquisition offer, bad mouth you to investors, poison your culture…well I can go on. Whereas VC’s that do this get blacklisted by startups and other investors (albeit quietly), there is no punishment or means to fight back against the over-sized corporate giant. So even if you are wronged, well that is just life and your corporate dev contact simply moves on to their next target and/or victim to suck the blood out of.
There are a few instances when engaging with corporate development might be beneficial. But the fact is that in order for anything good to arise, you have to be able to punch back, and that takes a company that is much larger in size and maturity than the typical early stage startup. At a bare minimum, you want to be at the stage where the business is actually quite strong and you probably have your own in-house legal counsel. Remember, you got to have enough fire power to punch back if the conversations start to go sideways, and they almost always do.
The moral of the story is that startup founders, do not let startup founders talk to corporate development people. Just say no to corporate dev.
Image credit: CC by Jeremy hunsinger