The corporate DNA in most large companies is such that getting to signed paper can often be a lengthy business development process. Early stage companies have agility built into their DNA. Reconciling these two extremes can be extremely challenging. The pay-off can be significant, and as I previously blogged, may help to bring in money to the company at key inflection points in a company’s development.
Two deals that I have been involved with highlight both ends of this spectrum. In 2000, I negotiated a deal with Microsoft for Netware to Active Directory migration tools. Notwithstanding the 2+ years building relationships, creating mindshare and credibility internally, once the decision was made by Microsoft to ship “their own” tools, it took a matter of weeks to get to signature. Obviously, this deal didn’t come out of the blue, as the groundwork we had been laying was critical, but the deal itself was virtually frictionless.
The second is probably more representative of what it takes to get a deal done. While at MeshNetworks I began the dance with Motorola in Feb. 2003. Mesh had done a good job of building visibility and mindshare as a company with an emerging, potentially disruptive technology. Motorola Ventures, its internal VC group, identified Mesh as “interesting” from an investment and potentially from a strategic perspective. What began as a nominal equity investment with an optional second tranche in the mid-seven figure range slowly began heating up.
In March, we began a technical due diligence and validation process with Motorola’s emerging technology group, which was a great thing, as they floated above the product groups that are nose down trying to get existing products out the door. Supporting this effort consumed hundreds of person hours, in addition to travel costs. Throughout this process, we needed to continually justify to ourselves, to our Board and investors that this was worth doing.
By summer, we had come through most of the technical evaluations and began to push for a commercial discussion. Some posturing around deal terms began, which required a real gut-check to convince ourselves that this remained worth doing. In late September, we got down to more substantive discussions and by late November, had a non-binding MOU. Getting from there to signature took a further 4 ½ months of page turns in rooms full of Motorola Legal and business folks, but finally on April 9, 2004 we had a deal.
This process brought us much closer to Motorola, during which time they had an in-depth look at us. It also gave us the chance to better understand how Motorola was structured, and more importantly, where there was strategic alignment across the portfolio. On December 21, 2004, 750 days after we began to dance and nine months after the licensing deal, we closed an M&A deal with Motorola.
Was it worth it? Absolutely.
That’s my .02
martin.suter (at) iplicensing.net