Do talk to Corp Dev

I've read Paul Graham's "essays" for years, and usually agree with him, but for some reason in the last month I've disagreed with two of them.   The most recent one he has titled "Don't Talk To Corp Dev" and although the title is slightly misleading, I think it's silly and, well...wrong.

I think what Paul actually means is "don't get sucked in by corp dev" which is a much different thing than "don't talk to them".  He's concerned about the economy of attention you have while running a startup, which I do totally agree with.  And I too have seen companies sucked in too deep by corp dev discussions, and a few companies killed when transactions didn't go through (for legitimate reasons) and the company had no working capital with which to operate after the process.

That said, my advice to startups I advise is "Get to know Corp Dev folks as early as possible" - and I say this for a number of reasons:

1)  Corp dev folks are connected to everyone, and they move around a lot.   If you strike a good relationship with them, they are good people to know.  For instance, the two people I did the FeedBurner deal with at Google now run corp dev at Facebook and Groupon, and I still talk to other corp dev folks from other companies we dealt with that we didn't end up selling to 7 years later.

2) Raising money and selling your company aren't that much different.  In both cases you acually are selling your company - in one case usually about 30% of it, and in the other case 100% of it.   When the time comes to raise a round, I believe it actually benefits you to test the waters for all possibilities, as more demand is more demand, and that's what drives up your stock price and thus valuation. It also allows you to play "if you aren't a seller, then you're a buyer" with your existing investors when appropriate.

3) If you don't sell your company now, you might at some point in the future.  Actually you don't want to ever sell your company, you want it to be bought.  A subtle difference in words with a huge difference in price.  There are certain companies that are really killing it, really strategic for the acquirer, or just great businesses that get acquired.   Even in those cases, my experience is that there is still a "human" component to many acquisitions.   The relationship you have with the acquirer matters.  Not only with corp dev, but also with other internal "champions".  The point being, you never know when these things will heat up, and I think it's better to have already forged relationships with the right people when the time is right.

Okay, so to sum up:  Network with corp dev; don't get sucked in unless you really think it's the best possibility for your company and you can quickly get to a term sheet (or not).