[cperciva]

And sometimes, despite a complete lack of interest in being acquired, people spend time having such discussions simply because they don't understand what the conversation is about.

I was contacted by someone I highly respected a couple of years ago, who spent half an hour half an hour telling me that he thought I was doing great things with Tarsnap, and everybody at his office thought I was amazing and wished they could work more closely with me... and it was only after hanging up the phone that I realized that he was probably trying to find out if I was interested in selling the company.

[jmtame]

I used to have that curiosity to want to know why competitors were reaching out. I've seen the pattern enough times that I just know, so I have no interest anymore.

You seem to support my point with your story. You said you thought they were interested in buying you at the end of it. Are there other reasons you've encountered, where competitors wanted to talk and there was another purpose behind it?

[jsnell]

It all depends on how strictly you define "competition". Things might be different in your segment, but my experience is that there is often a lot of room for mutually beneficial cooperation even between fairly direct competitors.

At one startup we sold access to our kick-ass CMS to another web design shop on a per-project basis. They got better tech and won more bids, we got to amortize our R&D costs over more projects. I doubt we ever lost even a single customer to them. There were tens of competitors just in our city, and they were targeting slightly more upscale customers anyway. Pure win/win.

When I sold consulting and support for an open source compiler, of course I talked with the guys doing the same for a competing compiler for the same language. Even though both our main customer was the same company. (Who slightly dysfunctionally were using both compilers for different projects). Why not?

Right now I work for a telecoms system supplier. It's always completely unclear what the overlap between our system and another supplier's is. So it's totally worthwhile to talk to them and figure things out. You never know what the outcome will be. They really could be a direct competitor. They could pat us on the back and say "that's so cute, we started out that way a decade ago". We could be complementary enough to cooperate of RFPs. They could want to license the technology and integrate it to their system. Or, yes, they could want to buy the company. It would be insane not to talk with these people just on the fear of wasting half an hour because you don't want to be acquired.

[jmtame]

At one startup we sold access to our kick-ass CMS to another web design shop on a per-project basis.

In that case, it's beneficial to you and I see that as an objectively good thing. I would do the same thing. In my case, OkCupid is a product I've tried and I am entitled to my own opinions about it, even if they are negative. What we're doing isn't complimentary in the same way. I know they don't want to help us out because I've done enough research on IAC to understand it's not in their corporate DNA to want to work with their competitors. Their mission is to buy or shut competitors down.

Some early stage startup founders genuinely want to help other founders out because they're both in the same boat. In this case, I'm referring specifically to a media mogul who has an agenda of keeping competitors out of his space. He fears the Internet because it is a way to bypass middlemen. He knows that artists may eventually go out and promote themselves, but he wants them to be perpetually stuck on Ticketmaster. He doesn't care about innovating, he's only out for the money.

It would be insane not to talk with these people just on the fear of wasting half an hour because you don't want to be acquired.

I'm giving up half of my day to meet with anyone in SF. It doesn't sound like much to most people, but it's a lot for an early stage startup. The pattern is also that they don't want to just meet once, they want to stay in touch and keep meeting. That adds up over time.

[jsnell]

Sure, you do what's best for you. But I'm objecting to the blanket generalization.

There are plenty of positive outcomes other than an acquisition offer from talking to a competitor. My anecdotal data is that those other outcomes are much more common than acquisition offers. Yours appears to be the opposite. It might be due to the different kinds of businesses. It might be geographical. Or something else. It seems much better for people to not start applying your rule of thumb until they figure out which camp their business falls into.

[jmtame]

It's not a blanket generalization, I think that's the misunderstanding here. I should clarify that my advice is targeted at early stage startup founders. I don't think it applies to small businesses or lifestyle businesses. I don't think it applies in your case because you weren't working on an early stage startup.

I've always had more of an interest in patterns at startups, particularly early stage. I wrote a book on this because of my interest, and the founders echoed the same sentiment with the pattern of competitors wanting to acqui-hire by talking early on. More info on my profile if you're interested.

[cperciva]

This wasn't really a competitor. I'm not going to name them since, despite not promising any sort of confidentiality, I don't think it's fair to "out" companies like that; but I think it was far more a matter of secure backups filling a gap in their service offerings.