What ever you do, do NOT be lured into thinking they are thinking about maybe a big exit for you, your interests are not aligned yet and you need to realize that. If there is any IP possible make sure you have provisional patents filed before you talk to them about anything. Even if you don't think it is patentable, force them to either buy you or risk infringing you if they go into competition with you.

Seriously, you have nothing to gain from this distraction if they aren't serious, and if they are serious they will put it in writing for you.

There is ZERO hurry with a lot of BigCo acquisitions - there are layers and layers of board approvals, analysis, opportunity costs, competitor research, etc.

There may not be any actual interest in an acquisition of people or technology, but rather a curiosity about the space - e.g. "what are smart and hungry people in X space capable of actually building?" or "what does technology Y in the wild actually look like?"

It's all fun and games for the BigCo but can absolutely kill a startup with delays and 180 degree turns on the product roadmap.

Had a similar story here, but didn't have that in place.

Very educational and made some good contacts though.

In the end there was not a deal we could live with, so we ended up with no deal. But also with 6 months of almost 100% delay for us. Total loss of focus.

For a motivated big company, cold hard cash isn't as hard to come by as you might think.

As for now, the only thing I can do is echo how absolutely crucial it is for you to have a knowledgable lawyer on your side RIGHT NOW. Get several on the phone today, and make a decision as soon as you can. If you're in the Dallas/Fort Worth area, I can make a recommendation but please, please do this.

Bottom line, make a deal that is a WIN WIN and doesn't put you at huge risk w/o some offset you consider reasonable or don't do a deal at all.

You do not have an easy road ahead, but you can at least avoid a disaster. Remember, your BATNA is continuing your startup as if you'd never been approached!

Launch and then talk. Depending on how big the company is, it'll take them most likely at least 3 months to get a deal done.

If you're seriously oriented towards an aquire-hire, an option can also be to look for an experienced corporate dev to join you as an advisor or as part of the team.

what you're doing is forcing them to negotiate as soon as possible on something specific and concrete - someone who isn't willing to negotiate isn't willing to give you any money.

Don't be lulled that it is a big and reputable company. If they are doing their own independent development, it is relatively easy for them to claim that they developed whatever it is they later develop based solely on independent efforts and it is pretty hard for you to cut past that claim, especially when the only of doing so is to sue and spend many hundreds of thousands of dollars to try to win that suit.

It should be a staged approach. The deeper they want to probe, the more they need to declare themselves.

And, by the way, make sure that the NDA is very tightly drafted to severely limit the impact of potential weasel language, e.g., pertaining to independent development efforts - thus, for instance, make sure it says that such efforts must be capable of being documented by written evidence. On this point, though, it is impossible to advise in the abstract. See a good lawyer on this. Very important.

So, a long way of saying, if you're going to talk with them in detail, make sure that you also talk to some investors at the same time (Google BATNA).

If you don't have a good lawyer to whom you could put this question, you'll probably get screwed in this negotiation.

(In MBA jargon, your "BATNA" -- Best Alternative to a Negotiated Agreement).

This is not just theory, it's dealmaking 101. You simply have no leverage to get what you want (fast closure, price, etc) unless you have an external forcing function you can credibly threaten to move forward with -- one that you must be prepared to accept if they call your bluff.

Based on circumstances -- it could be a term sheet, a public launch, a partnership with someone threatening to BigCo, etc. But figure out what it is, put a time frame on it, and make them aware of it.

Based on your questions, I'd also suggest bringing an advisor in who knows what they are doing to help you sort through what you should and should not reveal at this point. (Why would they want to review your code if it's an acquihire??)

And OF COURSE Lawyer up, with a good startup lawyer.

Another tip. If there's money on the table TAKE IT. $BIGCORP wants to buy it for $SUM which will leave you with 6 or even maybe 7 digits in your pocket? Evaluate the deal with your lawyer, then sign on the line.

Having gone through this -- a "BATNA" can shorten a deal time from months to weeks if you have the right "external forcing function"!

Reject the "joint launch" proposal. Put together a Memorandum of Understanding with a break up fee that will cover you.

If they are serious, they'll take you up on this and if nothing red flags they'll buy you.

If they aren't serious, you'll see them show their teeth pretty quickly as you are now denying them what they sought for free.

I suspect you'll see their teeth. In that case, launch your thing, get traction and force them back to the table.

I've been though this also and would be more careful about massive time sink and distraction that is not serious inquiry.

2. Reduce the number of people on the other side interacting with you. In large companies too many people jump on these types of opportunities and will burn a lot of your time. Identify one senior person from the company that you have a good gut feeling about (preferably towards the end of their career) and make one of your team work on a plan closely together with them. Let the other two work ahead on your original plan.

3. You as a startup have one agenda - you want to make it big together - remember that in large corporations each individual comes with their own agenda, most often not aligned with each other. And also remember that large corporations, especially when struggling with innovative competitors, will try to belittle smaller companies and negotiate you down.

I don't understand this statement. Doesn't that mean the "acquihired" are part of $BIGCOMPANY?

For example, let's take the TechForward V Best Buy mentioned by another commenter. TechForward had an interesting but not terribly novel idea. They shared the idea with Best Buy and Best Buy stole it and recreated it with their own mathematicians, actuaries, and programmers. Was what they did wrong? Yes. Was it stealing their code from their repository and then just deploying with the Best Buy logo on it? No, not at all. The point being that if your idea is not really novel and could easily be rebuilt by a team that is bigger, smarter, or well funded, well you are probably in trouble.

With that in mind, the more common situation is that they actually think you are very skilled and would make an interesting addition to their teams, environment, and company. If you are open to an aquihire or joint venture because as you say they "have the right resources to take [y]our product very big very fast", by all means state YOUR desire. Generally when I have asked to see a companies code during due diligence on a product that isn't even released yet, it can be thought of like an extended technical interview. I would be happy 9 times out of 10 to hear from the potential aquihire-ies "Hey, we're in this project $x amount, we'd like an exit like $y with a job at the end that gives us ABCD". It would safe them and the company a ton of time, effort, and money. But, more often than not the startup hides behind a lawyer without making THEIR demands clear (or worse, never really knowing what they want in the end), and then no one ends up very happy.

* None of this is to say you shouldn't have a lawyer, just make sure that your lawyer pushes you towards a clean outcome and not just the infinite legal loop.

The big company that acquired us didn't even ask to take a look at your code until after a deal was discussed, and intent signed, but before closing. (i.e., final due diligence... and they wanted it to scan for GPL violations, etc.). They evaluated our software/company by focusing their efforts on extensively using our software in various (stress) test scenarios prior to discussing the deal. They also asked us to add a few features on short notice to test our ability to execute.

In fact, they kept the competing implementers (read: engineers who would actually write code) away from the deep technical decisions (and they had a competing effort which they merged with us later). Most of the technical discussions were limited to the engineering director who ran the group. They took a very caution approach: they have much more to lose then us if the deal didn't went through and they did in fact end up launching the product (i.e., possibility of a failed startup suing them).

I think if it any reputable big company in the valley, they will probably follow the same protocol.

One word of caveat: you may end up working on a deal, but generally it will take a LOT of your time. So you should find out if the discussions are leading to something you want ASAP.

I will not point fingers at any specific companies since I have no interest in being sued, but I have had technologies stolen by 5 different public technology companies.

In my case, I even had patents filed. It won't save you because they'll take the customers in the mean time while you're waiting the years for your patent to be granted. If you've raised capital, your company will have long crashed and burned and the investors will have sold the patents for pennies.

Another set of worthless people to avoid are the folks from the "Labs" at any major technology company. They are in no position to make a major purchase and in the best case scenario will waste a ton of your time.

If they say that they're potentially interested in acquiring and want to do due diligence, DO NOT LET THEM SEE UNDER THE KIMONO. They can back out of a deal at any moment, and if nothing else, even if they are interested in acquisition, they'll use their knowledge as leverage to force you into worse price/terms.

No second thoughts after the 4th time?

Also, NDAs are almost unenforceable. If you don't trust the people across the table, don't share sensitive information.

Demo'ed their tech to "big co" in the hopes of partnership/acquisition.. nothing came of it then 6 months later Big Co. released their own version of the exact same thing...

Be careful.

Worth noting one other point. Investors. They are unlikely to support "go to war" strategies with strategic buyers.

They may need realtionships with that company for other resons (supplier or customer of another investment, potential future exits, recruiting, etc).

So its really best to win by not needing to fight.

Most of the "force them to do an NDA/MOU/make intentions clear" comments seem unlikely to work. Those comments assume that BigCo knows its intentions. Big Companies take a long time to reach decisions, so you have to give them time. Big companies have a lot of steps to reach internal consensus, and sometimes might take weeks just to get the right people in a room to make a decision, so trying to speed up their process could be like a "marry me or break-up" ultimatum too early in a relationship-- unlikely to result in what either party wants. The legitimate exception to that is if you're taking a big funding round or have external interest from another company. Overplaying that usually backfires though. The best approach is to share what you're willing to and stay engaged while limiting the amount of time the big company can take from your team. If they're taking forever to get to a decision, don't rush to have meetings: that limits your disruption while giving them more time to get to a decision. Don't hold up your roadmap unless they're committing to something or can give you a deadline of when they can commit.

Also, big companies typically won't use any NDA other than their own or sign a Memorandum of Understanding until well past the "seeing if there's room to do something together" stage.

Being too paranoid can make you seem like you're hiding something or just unpleasant to deal with and could kill a deal, but some paranoia is worthwhile. The key is being paranoid about the right things.

You should obviously talk to a lawyer to understand the protection the existing NDA gives you, but there's really no purpose in getting a stronger NDA until they've made up their mind what they're doing (because until then, they won't sign one anyway). Unless you've come up with something dramatically new in your architecture (as in you don't use Map-Reduce because you invented something much better), sharing the architecture can be a good way of building some trust and helping them understand how they might integrate without giving too much away. I don't see a big company doing things like changing their architecture or algorithms because they found a better way to do things-- there's just too much inertia to changing those fundamental things in a product if they're close to market, and they'll be sensitive to IP issues too. You should be more worried about them learning from your knowledge about effective customer/selling tactics or about them sizing you out as competition (which would focus on features instead of technology). You usually wouldn't protect yourself against that much in an NDA, so you need to be smart about sharing enough to impress them without giving them too much.

It's usually a bad idea to let them look at code at all until they have an agreement in place about their intentions (that's when the LOI or MOU comes in). They should be making a big effort to protect their own people from IP pollution at that point. If they're wanting to look at code and don't have formal agreements in place, you should wonder if you're really dealing with the corporate part of the company or just some random product team that isn't going through the process they should (which could innocently be because they don't know what process they should be following).

One good way to judge how serious they are is who you're dealing with. If you're just dealing with engineers or junior PMs, it isn't serious at all. If there are more than 2 levels of PMs involved, then they're probably really considering doing something.

Similarly, you can try to tell what direction they're leaning for the relationship. If the titles of the people leading the discussions are Business Development or Solutions, they're probably leaning towards a commercial arrangement, if there's Corporate Strategy or Corporate Development involved, they might be looking at M&A. Don't draw conclusions about the likelihood of M&A from the Corp Strategy or Corp Dev titles though-- it only tells you that's the direction they're looking at it, not how serious they are.

Rather than trying to force an agreement, you can test how much visibility the effort has by trying to get a meeting with a senior executive (someone who runs a product area or BU) and see if they make it happen.

Trust your gut, your asking the question because you have doubts as to their intent. So make them spell out their intent clearly. If they walk away, you know they never had a genuine intent, other than to steamroll you and pay you as little as possible, if anything.

You need to find someone (or some people) who have been in a similar situation before and had a successful outcome. If you don't know anyone like this then ask for an introduction to someone you don't know. It's a small world. If you work at it you get get to someone knowledgeable.

Then you need to give them much more detail than you gave in this post because the specifics are going to matter a lot. It's perfectly understandable that you didn't want to get into the weeds with a public post but without the details it is literally impossible to give quality advice.

This is when you need a patent.

I'd finish the product, launch, then talk. Your value isn't going down between now and then, and this is just a distraction.

Just say 'see you on launch day, bring a check".

Background story - we sold our 2 person company (Big Brother) to BigCo (Quest Software)... little did I know that our free product was killing the sales of their $50K a pop product... ohhhh... so that's why they were so interested....

If you have any confidence in what you are doing then stick with it and don't be distracted by BigCo.

If they have something else in mind, openly ask them what is it that they want to explore with your company & see if it works & even if it doesn't works, launch your product anyway.

Best of luck for your launch.

Make the Big Company qualify themselves to back to you. "Why would we want to do something together?" "How exactly does your operation/platform work?". "What exactly are your plans for our stuff?" Get a deal done before technical due diligence. Here's a solid read on Prizing by Oren Klaff > http://pitchanything.com/book/

(Somewhat) happy ending: he sued and won.

Do you want to get bought? Then start thinking about a fair price of your company. And start about an incredibly big number you would be happy to retire with. If you can find a result in between these numbers you will probably be doing not too badly. If you don't get close to either number, then you might change to the next goal.

Do you want to grow bigger to sell out bigger? Then look for a cooperation but keep your independence as much as possible. That includes keeping your company value secret (which is often more likely your market research than your source code).

Do you want to change the world? Well then try to find out what and how much they are willing to do. If they don't care about the cause, say "bye".

Do you just want to experiment, learn new stuff, keep your freedom? Then have a look about how much of that is left when they integrate you. You can't find out about this in a meeting room discussing with them, because they'll promise you anything in that regard. Look how the other people work in that corp. Are they creative, smart, free-loving animals, or are they cubicle workers who love to blame everything that happens around them on middle management? That's what you can expect after 1-2 years of integration.

Do you maybe actually hate the undefined future and hours of unlimited work of a start-up? This might be the best chance for you to get out. Getting integrated means you might end up in middle management with a decent pay and some savings from the sale in your bank account. That's way, way better than anybody can hope coming directly from university.

And one last tip, because I personally always struggled with knowing what I wanted when I was younger: Define a random goal. Choose one from them, maybe even using a dice. Doesn't matter. A bad specific goal can be changed when you finally know you hate it. A lot of unspecified goals get you nowhere.