Question
Suppose the main value of startup A is a breakthrough technology that no one has figure out yet. It has no revenue, no customers and purely living off VC funding at the moment to keep the research effort going.
Now BigCorp B, who is also attempting to create the same breakthrough technology but hasn't being able to figure out yet, want to acquire startup A. BigCorp B requested detailed breakdown of how the technology is created from startup A and calling it a standard tech due diligence before writing a check.
From startup A's point of view, after revealing the detail to BigCorp B, BigCorp B can run away and duplicate the technology with their own engineers. Even though startup A has pending patents for protection, startup A does not have the money like BigCorp B to hire lawyers and play the litigation game.
From BigCorp B's point of view, it's natural wanting to make sure what they are really paying for before writing a big fat check.
What is the typical process of tech due diligence for a startup acquisition that protects both the buyer and the startup?
Answers: 1 public & 0 private
Tech due diligence refer to the diligence for any company who are buying or investing in your tech that your prototype is not breaching any existing patent technologies, other relevant laws etc, if it's a Big corp they will take all the necessary precaution but i strongly advise you to get provisional patent application first before accepting or approving their request, it will give you additional 12 months to work on your prototype with VC and developed your product and you can file complete application within time limit, this would be enough to save your economical interest.
For Bigcorp B after provisional application have an agreement with for confidentiality and you can mention your terms and condition and if they breach you can enforce your rights. BigcorpB have money for litigation but remember cheating you might not be good option for BigcorpB because of goodwill in market etc, But without provisional patent application don't even think about it.
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