By Amit Paka From Techcrunch

Editor’s note: Amit Paka is a co-founder at Parable, a visual storytelling platform for iOS. Previously, he founded Flockish (bought by StubHub-eBay), led product for mobile payments at PayPal and held product & engineering roles at Microsoft.

Silicon Valley is ground zero in the fight for technology talent and market share, and acquisitions are a great way to fuel that growth. Small acquisitions can help fill a business need quickly and are easier to close than big deals.

Flockish, my previous startup, was purchased by StubHub (owned by eBay) in an asset structure. I joined the company as part of this deal. Parable, my current startup, had similar interest from Facebook, although this one did not pan out. You may find your startup considering an acquisition proposal, and in this post, focusing on seed-stage startups, I address four things that matter most.

Deal Structure

Corporate development teams at both eBay and Facebook offered us three alternatives, each with its own merits.

Job offer with ‘wind down’ bonus. Typical acqui-hire scenario with incentive to shutter your startup product.

Job offer with asset purchase. The acquiring company wants to hold on to the intellectual property but not the liability from the incorporated entity. Companies might take this route over a merger to avoid equity purchase restrictions e.g. eBay required board approval for any equity purchase, which can be unwarranted for small deals like Flockish. If you have investors, this option might not be the best exit for them.

Merger. This is the traditional acquisition route where equity in the startup’s incorporated entity is purchased. Convertible debt might convert to stock of acquiring company.

Team

In acqui-hire scenarios, team matters the most. Companies want the best parts of the team if not the entire high-performing unit. Have conversations with your team about who is open to joining full-time and how the equity would pay out. It’s wise to have a cap table in place to avoid ownership challenges.

Legal Due Diligence

For good reason, companies shy away from any legal risk in a deal: Litigation takes time and money. Startups love to make a dollar go farther with unpaid help and contractors. You must have all these entities sign software assignment documents so that the startup owns the IP for their work. eBay ensured Flockish trademarks were filed and IP contracts were in place, which helped facilitate the process.

Technical Due Diligence

It’s always best to expedite time to market with open source components. However, keep an eye on the license terms. Apache and MIT licenses are the best – don’t forget to cite those works in your product. It’s critical to be aware of certain GNU GPL license restrictions that could make your product derivative work; companies have little incentive to purchase such a product.

Take care of these details and your startup will be better prepared for any acquisition prospects that come your way.

For more on this story go to: http://techcrunch.com/2014/11/28/preparing-for-an-acquisition/?ncid=rss&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+Techcrunch+%28TechCrunch%29