Deal Structure Drives Acquisitions

Shaan Puri shares his experience about how deal structure in acquisitions can dramatically impact outcomes, contrasting it with the relatively straightforward nature of venture investing. His insights come from his successful investment in Shepherd and other deal negotiations throughout the year.

Key Points:

• Deal Structure vs Venture Investing:

  • Venture deals are simple - typically just safe notes or priced rounds
  • Acquisition deals have much more room for creative structuring
  • Structure can make the difference between "a good deal, an incredible deal, or a terrible deal"

• Example of Creative Deal Structure (Shepherd Deal):

  • Put very little money down initially
  • Company lent the money to buy the stake
  • Value has grown over $30M in less than a year
  • Win-win outcome for both parties

• Learning Process:

  • Negotiated multiple deals throughout the year
  • Learned importance of saying no to deals with wrong structure
  • Structure matters more than initially expected
  • Can create unfair advantages through proper structuring

• Key Takeaway:

  • In acquisitions, how you structure the deal can be more important than the initial price
  • Good structure can create alignment and reduce risk
  • Bad structure can turn a seemingly good deal into a poor investment

The insight demonstrates how deal structure in acquisitions offers more creative opportunities for value creation compared to the standardized approach in venture investing.