Agreeing to no-fundraising and exclusivity clauses during a long due diligence process really puts your head in their vise. And once it's there, people within the acquirer will start saying, Hey, we could built this ourselves! Let's run the clock out and kill the competition.
I mean, it puts you in the situation that you either sell to that company or you go out of business. They could offer you a fraction of the amounts they were talking about before you signed, and you'd have no alternative.
Hell, even asking you to agree to such unbalanced terms seems like a sign they're planning to pull a fast one on you and they don't intend to negotiate in good faith.
What kind of chump would agree to shoot themselves in the foot like that, unless they'd exhausted every alternative?
> Treat investors as saying no till they unequivocally say yes, in the form of a definite offer with no contingencies.
>I mentioned earlier that investors prefer to wait if they can. What's particularly dangerous for founders is the way they wait. Essentially, they lead you on. They seem like they're about to invest right up till the moment they say no.
> When you talk to investors your m.o. should be breadth-first search, weighted by expected value. You should always talk to investors in parallel rather than serially.
If Otto had done the many investors in parallel thing they might still be launching.
And they were succeeding. That was not their problem. And the average penny pinching Joe wasn't their target at first anyway.
You'd be surprised what people buy, and how many buy it, for way more than $700. Even smartphone covers.
Were they? Source? How big was their beta? What was their revenue? Beta users will bias toward early adopters, and often not represent the mainstream market necessary to make a company profitable.
EDIT: I just read that they had ZERO revenue. So they certainly weren't succeeding.
The CEOs excuses make near zero sense.
They couldn’t raise money because VCs realizes their product was too expensive and uncompetitive in the market. Their acquisition opportunity was a last ditch attempt to save the company.
> If you're doing really badly, meaning the company is about to die, you may as well talk to them, because you have nothing to lose.