Pre-Seed Startups and Big Companies

We often see pre-seed and seed startups approached by Big Companies. These Big Companies say they are interested in investing or partnering on product development. (Note: the game changes when your startup is Post Series A or there is a set partner program from Big Companies.)

These interactions are confusing for first-time founders. We advise this:

Big Companies who want to talk are presumed evil unless proven otherwise. They may be caring people individually, but as a group, they'll steal your learnings and leave your carcass for dead.

This is pretty strongly worded, but accurate in my experience. These interactions are almost all downside for the startups:

  • Big Company realizes they can copy your innovation. While the communications hardly ever start out with the intent to steal your learnings, the individual motivations of the employees at Big Company are to progress Big Company's needs. So, as a group, they will see it as an ordinary course of business.
  • Time is wasted by Big Company and progress stalls by startup. Most "corporate innovation" departments spent lots of time talking and looking at external change. A startup can quickly find themselves deluged by requests from a half-dozen people inside of a Big Company.
  • The Startup sells too early, for too little. Until a startup has traction, it is doubtful a Big Company will want to buy it for any real premium. If an offer is made, it's almost always a lowball offer. Who's got time for that?

    So, we encourage our pre-seed companies just to play hard to get. Big Company will still want to talk to post-Series A when you have a team of fifteen to take the load off your shoulders.

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