The Exchanges

Q But why wouldn't you do any of that through just a standard sales process, like, to get that information? Like, why, like, what is the, I mean, I guess I'm still quite not getting why really, I'm really pushing hard on this, is why engage corporate development? Like, tell me more about why you guys make that case.

A You know, they're typically not the customer, you know, so these are, these are companies that are strategically important to you, that, um, you're, they're, they're not necessarily your customer, so you wouldn't necessarily engage with other parts of the organization. And then secondly, I think for what you're trying to achieve. So if it's, I think a byproduct is information. Sometimes that's the goal. Um, but you know, whether it's a partnership, whether it's an investment, whether it's a, you know, an acquisition, and that could be an acquisition two years down the road that you're just developing a relationship for. It's again, to my earlier point, creating options for yourself. This would naturally be the team to do it with. It wouldn't be a, uh, You know, this, these types of opportunities wouldn't fall out of a sales motion.

AI assessment note: “these types of opportunities wouldn't fall out of a sales motion.”

Q But why wouldn't you do any of that through just a standard sales process, like, to get that information? Like, why, like, what is the, I mean, I guess I'm still quite not getting why really, I'm really pushing hard on this, is why engage corporate development? Like, tell me more about why you guys make that case.

A You know, they're typically not the customer, you know, so these are, these are companies that are strategically important to you, that, um, you're, they're, they're not necessarily your customer, so you wouldn't necessarily engage with other parts of the organization. And then secondly, I think for what you're trying to achieve. So if it's, I think a byproduct is information. Sometimes that's the goal. Um, but you know, whether it's a partnership, whether it's an investment, whether it's a, you know, an acquisition, and that could be an acquisition two years down the road that you're just developing a relationship for. It's again, to my earlier point, creating options for yourself. This would naturally be the team to do it with. It wouldn't be a, uh, You know, this, these types of opportunities wouldn't fall out of a sales motion.

AI assessment note: “these types of opportunities wouldn't fall out of a sales motion.”

Q So what are some of the other flag, uh, red flags to look for in this, in these conversations?

A I mean, I think lastly, when it comes to a, when it comes to a term sheet, um, you know, there, I think there's a lot of, uh, a lot of different issues that, um, you know, points of indemnification are always high on the list. So companies will always want you to indemnify them against all things, you know, everything that the, that they can think of and with unlimited caps on it. And that, that's certainly, uh, one thing to, to be very cautious of. Another is how How the company is going to, to be, uh, um, incorporated post acquisition. So how's it going to be integrated? So, I mean, that's, what's the role of the senior management team? How much, uh, authority and discretion are they going to have over decision making? What are the budgets? And that gets into a whole nother, uh, set of issues on the structure of, uh, if it is an acquisition, what is the structure of that acquisition? So if there are earnouts involved, do you have control over those earnouts? Um, uh, again, you know, it's, it's, uh, Bring your advisors in for, for a lot of this because they, these are, these are too complicated to go through and, you know, at a very high and general level.

AI assessment note: “points of indemnification are always high on the list”

Q So what's the advantage of having that sort of optimal number? Like why not one if the whole purpose is to, I mean, besides building the relationships, obviously to avoid wasting time, because that is the number one priority for a founder is not to have that time sink. Why that, why that number of even having multiple?

A It absolutely is. So it's, um, cause that one might not be the best fit and you won't know that until you know the second and the third. Um, and again, you know, we're not advocating, you know, wasting a lot of time, but if, if you're going to make the decision to do it with one, it does make sense to do it with multiple schools. And I'd say the other thing that I would say is that it depends on life stage. And we always make the comparison of Coke versus Pepsi. So if you are a, if you're a, um, uh, a startup and you are going to do whether it's an investment or strategic partnership with Pepsi, well, Coke's never going to talk to you again. So you have to make the decision that you're at the stage of your life, or maybe you're not in the type of industry where you have that competitive dynamic, but we certainly see it in storage. So, you know, between HP and Dell and EMC, et cetera, where, you know, if you have to be, uh, where, where they rely more on you than you do on them. So it's not going to preclude you from doing similar deals with their competitors.

AI assessment note: “cause that one might not be the best fit and you won't know that”

Q So what's the advantage of having that sort of optimal number? Like why not one if the whole purpose is to, I mean, besides building the relationships, obviously to avoid wasting time, because that is the number one priority for a founder is not to have that time sink. Why that, why that number of even having multiple?

A It absolutely is. So it's, um, cause that one might not be the best fit and you won't know that until you know the second and the third. Um, and again, you know, we're not advocating, you know, wasting a lot of time, but if, if you're going to make the decision to do it with one, it does make sense to do it with multiple schools. And I'd say the other thing that I would say is that it depends on life stage. And we always make the comparison of Coke versus Pepsi. So if you are a, if you're a, um, uh, a startup and you are going to do whether it's an investment or strategic partnership with Pepsi, well, Coke's never going to talk to you again. So you have to make the decision that you're at the stage of your life, or maybe you're not in the type of industry where you have that competitive dynamic, but we certainly see it in storage. So, you know, between HP and Dell and EMC, et cetera, where, you know, if you have to be, uh, where, where they rely more on you than you do on them. So it's not going to preclude you from doing similar deals with their competitors.

AI assessment note: “cause that one might not be the best fit and you won't know that”

Q How can founders kind of get around that dilemma? And I mean, besides engaging the number of people, like how do they know who to engage when?

A Yeah. So it's, it's, it's making sure you're at the stage. So you're not at, it's typically not at the series A and B stage. And we get that question a lot as it comes to strategic investors. So should we include a strategic in our A round? Should we include our strategic in a B round? Generally the answer is no. Um, there has to be a very good reason. And it depends on what industry they're in and who that strategic is. Um, because It's just the fear of conflicting you out of an opportunity down the road that we want to avoid. And so generally, uh, the answer is later stage and every situation is different. So you don't know exactly when that is, but it's usually not at the formative stages. You have to be at, you know, at the type of scale out in market with the, you know, the right scale of customers where it's not going to preclude you one way or the other.

AI assessment note: “generally, uh, the answer is later stage and every situation is different.”