Michael Gracie

It’s easy…just act like you are answering the questions without really answering them. You might get by doing this for a while, but sooner or later someone will call you out. People (like me) will conclude you haven’t the slightest.

Examples…

The questions: What version of PHP did you use? What AJAX libraries did you use? Were any other libraries used?
The bad answer: “nope, php and ajax”
Conclusion: You could have said you stayed at 4.x because of your host, that you pulled from script.aculo.us, and peppered in a reworked OSS plugin. Something. But you didn’t have a clue.

The question: What database and version are you using?
The bad answer: “mysql latest version”
Conclusion: Not entirely off the hook, but was that MySQL 4.1 or 5.0? A lot of leased equipment comes of the block with one or the other, but who cares eh?

The question: What web server are you using?
The bad answer: “dedicated server”
Conclusion: Now that answer WAS off the hook. Clearly, you are now in dumbass land.

I’ll stop right there. The bottom line is…I’m no tech maven, but even I know the basic platform questions to ask. Nowadays, most people do.

If someone asks you some simple due diligence questions and you don’t know the answer, it’s ok to say so. But don’t say you’ll go get the answers and then return with garbage. The inquirer has little choice but to assume you are full of it.

PS: Those answers were actually provided to me, just recently. The other party got pissed when I immediately called it a day, and actually accused me of wasting THEIR time. Nice.

There is a lot more to being acquired than hiring a lawyer and pumping out a set of long-term projections. Deals fall down for unexpected reasons, and at times for reasons expected by the suitor but not by the target.

AskTheVC has started a series on the subject, and it begins like this:

Potential acquirers are typically trustworthy and sincere in their intent when conducting due diligence, with making an acquisition the goal rather than gathering competitive intelligence. However, some may enter the process with both goals, and a few may actually have bad intentions.

Fair enough.

If you’ve done dozens of deals and are now comfortably in the plus column (meaning collection of Ferraris in the garage), you might be thinking “I just throw a break-up fee in every term sheet to solve those types of problems.” Yes, economic incentive to close a deal does work, and the latter types of acquirers AskTheVC mentions will probably get turned away pretty quick if access to the deal is “priced” accordingly. Unfortunately, the budding startup jockey or middle market owner-operator rarely has the opportunity to install breakup fees. And don’t get so comfortable with your prized lawyer’s writing skills that you begin believing a bi-lateral confidentiality agreement is all you need either.

Rather than steal any thunder about to roll over the hills, I suggest you follow these guys over the next few days - you may learn something.