Mar 26, 2018 · 28m · 20vc
20VC: How Great VCs Handle Themselves In An M&A Process, Why M&A Has Become The Primary Method of Exit & How The Best M&A Teams Operationalise Their Process with James Loftus, Corporate Development Lead @ Square
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In this episode of The 20 Minute VC, host Harry Stebbings interviews James Loftus, Corporate Development Lead at Square, exploring the inner workings of tech M&A, founder exit strategies, and corporate deal governance. James shares practical insights on how startups should engage with corporate development teams, navigate rigorous diligence, and evaluate market exit dynamics.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Harry holds 29.3% of the talking time here. How this is scored →
Harry as informed peer 2.3 Guest teaching 3.4 Guest disagreement 1.0 Harry pushing back 0.7
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 5:29 Rejecting 'bought not sold'
James directly rejects the common tech idiom, stating 'I hate that saying, because I think it's a trite way of describing the M&A world' before breaking down why it misleads founders.
Hardest push from Harry ▶ 9:06 Challenging guest on price inflationHarry pushes back on the guest's thesis about buyer diversification by asking whether having PE, strategics, and non-tech buyers actively drives up tech valuations.
Biggest teaching moment ▶ 10:40 Reframing Paul Graham's essayJames educates Harry on the realities of corporate development, explaining why Paul Graham's headline advice is flawed due to small team sizes relative to market opportunities.
Harry holds his own ▶ 6:34 Citing exit statistics and industry commentaryHarry showcases informed preparation by citing exact exit metrics from 2016 and quoting recent comments from LinkedIn's head of corp dev Emily Choi regarding M&A deceleration.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Harry as informed peer | Guest teaching | Guest disagreement | Harry pushing back | Why |
|---|---|---|---|---|---|---|
| James Loftus' Career Journey to Square | 1 | 2 | 0 | 0 | Harry opens with a broad prompt asking James about his path to becoming Corp Dev lead at Square. James provides a detailed overview of his career transition from M&A lawyer to Google, Yahoo, Andreessen Horowitz, and Square without host interference. | |
| Deconstructing the Phrase Companies Are Bought Not Sold | 4 | 5 | 3 | 1 | James explicitly rejects the popular phrase 'companies are bought not sold' as trite, breaking down the nuance between outlier acquisitions like Instagram and standard tech deals. Harry shows domain knowledge by citing 2016 exit statistics and quoting LinkedIn's Emily Choi regarding M&A slowdowns. | |
| Pricing Dynamics and M&A Exit Dominance | 4 | 5 | 2 | 2 | Harry presses James on whether multi-buyer competition inflates acquisition pricing and references Paul Graham's 'Don't Talk to Corp Dev' essay. James reframes Graham's thesis, explaining the structural bandwidth limitations of corporate development teams and why founders need proactive relationships. | |
| How Square Operationalizes Deal Sourcing Strategies | 2 | 3 | 1 | 0 | Harry prompts James on operationalizing deal sourcing and the role VCs play in M&A process dynamics. James outlines Square's top-down and bottom-up sourcing methodology while offering nuanced observations on VC advice quality. | |
| Navigating the M&A Diligence Process and Advice | 2 | 4 | 1 | 1 | Harry brings up Paul Graham's quote on diligence being a 'grueling process' and asks for practical founder advice. James acknowledges the intense operational burden acquirers place on small teams and outlines strategies to manage communication. | |
| Internal Deal Governance and Post Merger Evaluation | 2 | 4 | 0 | 1 | Harry asks about Square's internal deal governance and post-merger integration metrics. James breaks down executive approval stages and the four core framework buckets used to evaluate deal success over time. | |
| Quick Fire Questions with Guest James Loftus | 1 | 1 | 0 | 0 | A rapid-fire series of light questions covering personal reading habits, favorite books, daily challenges, and recent strategic investments. The tone is entirely friendly and collaborative. |
Statements from this episode (18)
Google completed over 120 acquisitions in three years with four lawyers
“We did over a 120 acquisitions in just over three years, and there were only four M&A lawyers.”
Loftus: The M&A adage 'companies are bought, not sold' is trite
“I hate that saying, because I think it's a trite way of describing the M&A world, and I think it really ignores almost all of the nuance.”
Loftus: Unsolicited inbound acquisition offers for startups are extremely rare
“And so I just think that it gives this view that's like, oh, just keep your head down, build a great product. And like someday an acquirer will come knocking at your door. And I think that's a really, really rare occurrence. I just don't think things happen th…”
Loftus: Big tech giants are doing fewer mid-market acquisitions under $200M
“It does feel like the large tech acquirers or the big five have at least slowed down the pace, like a number of acquisitions they're doing. Obviously you have Amazon doing something giant like Whole Foods, but it feels like the deals that are sort of the bread…”
Loftus: Startups must build relationships beyond the five big tech acquirers
“Complicates the landscape if you're a founder or a VC because you're not just relying on talking to five heads of corp dev at the five big tech companies to generate a lot of your M&A interest.”
Loftus: Tech M&A Valuations Cannot Rely on Standard Profit Models
“Pricing tech companies in particular is incredibly difficult, especially I've spent most of my career in consumer internet. You're buying a lot of companies where you're looking at talent and technology are the main drivers, and so you can't sort of build a mo…”
Loftus: M&A Has Become the Absolute Primary Method of Tech Exits
“One factor that I think has moderated prices a little bit is that M&A has become the absolute primary method of exits.”
Loftus: Big Tech Buyer Softening Has Kept Startup Acquisition Prices Moderate
“So I haven't seen a ton of price increase, but I do think that's because in my view, even though you've seen new entrants into the market, There's been softening at the other end of the market from the Google, Facebook, Apple, Amazon end.”
Loftus: Startups should ignore Paul Graham and talk to corp dev early
“And so I would say first, I disagree with the premise that the title of the blog post gives, which is that you should never talk to corporate development. I think the second premise, which is you shouldn't do that because you should be focused on building your…”
Loftus: Major tech corp dev teams are perpetually overwhelmed by deal flow
“Corporate development teams across the Silicon Valley, including at Facebook and Google, are small compared to the opportunity set that they're evaluating. There's just so many companies out there all the time to evaluate, and if you're even at Square, you kno…”
Loftus: The best VCs serve as steadying forces during M&A
“I think that the best VCs, especially in the M&A process, can act both as a balancing and a calming factor for founders. It's an incredibly difficult and challenging task for a founder to sell their company, whether it's big or small. There's just a lot going …”
Loftus: Square deploys 6 to 10 people in M&A deal processes
“I'm going to roll out, even at a small company in a square, somewhere between six and 10 people who are going to be involved in a deal process, and they're all going to be asking the CEO founder for stuff.”
Loftus: Acquirers usually do not realize they are crushing startups during diligence
“Nine times out of 10, the acquirer doesn't know that they're sort of crushing you unless you raise your hand.”
Loftus: Informing employees of M&A talks causes startup work to stop
“If you tell them that you're in acquisition talks and that they're serious, Work will stop.”
Loftus: Pre-term sheet Silicon Valley M&A deals have under 50% close rate
“By and large, and this isn't necessarily true for Square, but across Silicon Valley, once that term sheet is signed, that's a pretty high outcome rate. I wouldn't want to guess a percentage, but those deals usually close, but before you have a term sheet, befo…”
Loftus: Active acquirers should review M&A outcomes two to four times yearly
“I think the important thing is to have a systematic check back, especially if you're doing a significant amount of M&A to say, you know, somewhere between two and four times a year, we're all sitting down and we're going over the metrics on outcome for each de…”
Loftus: Tech M&A is driven by founder emotion unlike corporate M&A
“The M&A process in big corporate America is not an emotional exercise. Any emotion is really sort of manufactured as part of negotiation. People storm out of conference rooms and things all the time, but it's not the deal. Whereas like that's, Fundamentally di…”