When it comes to finding a corporate buyer for your startups, entrepreneurs should be leery of giving away too many rights to their intellectual property and should be realistic in their expectations of growth as well as valuation according to a panel of four corporate development executives who spoke at a Texchange event on Thursday night.

The Austin chapter of Texchange hosted Lou Bifano, vice president of business development at IBM's Tivoli Software division, Carlos Kokron, director of strategic investments at Intel Capital, Paul Reidy, director of Intellectual Property for Freescale Semiconductor and Lou Steen, vice president of marketing and corporate development for Tokyo Electron.

All the panelists warned entrepreneurs in the audience that their optimism should be tempered by realism when it comes to making projections about revenue growth and sales. Reidy called it a deal breaker when a company came in with delusions of revenue grandeur and even Kokron at Intel cautioned those seeking investment against it. The other place where entrepreneurs can stymie a deal is when a close look at their intellectual property reveals that a potential competitor has licenses or rights to the IP. Reidy was particularly insistent that companies carefully consider the agreements it signs within the semiconductor industry, because Freescale isn't interested in buying something only to enrich a competitor.

While most had the same basic advice to share, each company looked at its relationship with startups differently. Freescale's plans for acquisitions, venture capital investments and intellectual property were chronicled in this story from The Deal and remain essentially the same according to Reidy. Tokyo Electron has only made four acquisitions in the last 10 years and only half of those went well said Steen. As such the semiconductor equipment maker spends more of its time and effort working with universities to commercialize technology, but is considering doing some strategic venture investing. Steen said 15% of TEL's sales come from technology taken out of universities.

Also in the chip world Intel Capital's strategy is fairly well known and for an update check out this story from the Deal. IBM's Tivoli unit, like IBM itself, is happy to make acquisitions and Bifano said he relies on bankers, IBM's venture capital group, cold calls and meeting with entrepreneurs to find deals worth doing. He says Tivoli has averaged about two deals a year for the last 10 years since it was acquired by IBM.

For the entrepreneurs in the audience, the main questions were how founders of companies could expect to be treated (answer, it depends, but tell the acquirer the truth and prepare a second line management team in case you want to take your millions and hit the beach) and how the dealmakers themselves were judged inside their firms. As expected the answers varied, but Reidy quipped. "As you can imagine, a successful deal has many owners, an unsuccessful deal, none." — Stacey Higginbotham

Go to Freescale story from The Deal
Go to Intel Capital story from The Deal

Join Corporate Dealmaker's LinkedIn forum