Google paid $380M to buy Bebop, Diane Greene donating her $148M share | Hacker News Reader

Google paid $380M to buy Bebop, Diane Greene donating her $148M share

venturebeat.com

84 pointschermanowicz58 comments

What exactly is/did Bebop make/do?

Its kind of hard from their website to figure out what they do.

Indeed it's very unclear, though some little bits from a previous announcement[1]: "bebop is a new development platform that makes it easy to build and maintain enterprise applications."

I guess it was vague on purpose[2]: "[bebop] had not publicly said anything about its technology, operating in so-called stealth mode."

[1]: http://googlecloudplatform.blogspot.tw/2015/11/investing-in-...

[2]: http://www.nytimes.com/2015/11/20/technology/google-picks-di...

So a company with zero customers, brand, or other non-reproducible assets is worth almost $400m..? I'd be asking questions about this if I was a Google shareholder...

What was acquihired was the cream of the cream from a company that created a whopping $50B+ market at its peak. At its core you have ~30 distributed computing legends and a pretty neat leaders at the top.

I found a few bits and pieces searching around. The most specific thing was a few bullet points from the resume of a person that did an internship at Bebop:

• Implemented modular front-end components & architecture to enable rapid app development on the bebop platform

• Designed an intelligent peoples directory by surfacing relationships within an enterprise by analyzing the bebop entity dataset

So, some sort of cloud RAD tool.

I'm posting from a throwaway because I have fairly intimate knowledge of Bebop.

The reality is that they built and rebuilt several "enterprise" applications and pieces of technology. At one point it was a API based database, and then an application, and the latest iteration was an ATS built on top of their proprietary database. No one at their company could tell me what they actually did because there wasn't an aligned vision from their management. Alas, they had senior people formerly from VMWare and Diane Green at the helm. The company existed for roughly 2 years and wasn't able to actually produce customer working software from what I could tell. The acquisition was a straight up acquihire to get senior enterprise software folks on board to help build Google's presence there.

What is "an ATS"? Applicant tracking system? Above top secret?

Can you share roughly how many employees would have come in the aquihire? $380M is a big number.

Interesting that Diane is donating her $148MM - why pay that much to acquire her if it's going to be just donated?

Not that there is anything wrong with that, it's just curious.

I think she is already wealthy enough from the VMW IPO (if not even before that). At this time, she's probably more concerned with her long term legacy, so putting this money into a charity account (DAF) is probably the best decision. The money gets to be invested tax free, and she still has the full option of what to do with it later when she's got more time and/or opportunities.

Isn't this exactly what the Zucks are doing with they wealth?

Or if she really wanted to be charitable distribute her shares to the rank and file employees before the sale via an EBT (assuming the USA has such a thing)

That would have been epic PR - but considering they may all land jobs at Google - I doubt these guys are suffering financially themselves

The USA is not like the EU where TUPE applies and every one moves over to the acquiring company.

And should not all the employees share in the windfall equally (sorry if thats a bit socialist for HN)

An ATS is typically an Applicant Tracking System.

I applaud Diane for her generous donation, but what about the investors and employees who basically got a huge payday from their rich uncle Google? It's hard to feel like this is not a rigged system.

As someone with almost 15 years experience developing and managing developers of enterprise applications (internally, within a large IT organization), I can say somewhat authoritatively that no one wants clicky-draggy app builders. No one wants Oracles or SAPs, either, but there is a relatively inexpensive, logical middle ground.

The kinds of Bebopy things that have succeeded (I guess, not knowing any financial details) are usually in the high-6, low-7 figures to license, and then you still need to build out your dev & support teams (thinking of things like PEGA Systems, for example). The other option includes things like the various BPMN platforms & front ends, but that only handles workflow apps. This is why companies like Capriza & similar have been successful: they screen scrape & leverage public APIs to let devs easily build mobile UIs on top of legacy enterprise cruft. The cruft still exists, but it's hidden. Win-win (except for the cost-containing CIO).

This was a long winded way of saying Google could have done a much better job of smartly hiring senior enterprise software folks.

Good question - I was wondering the same. A quick Google took me to their site, which did a wonderful job of telling me pretty much nothing:

"We build products based on how people work. We are focused on redesigning workplace tools so that everyone can be productive and communicate with ease."

So... they make/do what now? How does a company like that get bought out for so much?

Is the "donor-advised fund" mentioned here similar to a "charitable remainder trust?" If so, this may just be a very astute tax planning strategy.

My thought exactly. A $148M tax write off is pretty substantial

Not really, because you get none of the money back.

However, you can take the charitable tax deduction this year, instead of future years when you plan on giving money to charity. Also, the capital gains/dividends/interest that the DAF earns isn't taxed, so if you plan on giving to charities in the future, this is one way of increasing that amount.

From what I've known, top engineers from VMware had moved to Bebop and recruiting was purely based on their previous performance and contacts with founding team at VMware.

Much of this discussion revolves around the perfectly legal tax avoidance mechanism utilized by Greene. Missing, though, is what exactly that revelation means. Are we advocating the removal of such mechanisms? Calling for an addition tax? Is there a bill I can advocate my senator to vote for? I do find such schemes interesting in their own right, but I can't quite shake the tone of indignation present in the discussion -- indignation that seems to lead nowhere.

I mostly agree, but there is a justice issue when the tax code has loopholes that are only accessible to people with clever tax attorneys.

To contrast, if I got an extra $5K in my bonus, I couldn't give it to my friend to help pay for the adoption expenses she has be racking up. If it were a donation of $50 million, I could form a targeted charity and write the whole thing off on my taxes.

What to do about it? Probably simplify the tax code. Complicated laws, especially tax laws, are just not fair.

(downvoted to -1 points yet again, even though it had 4 points)

46 days ago, on the original thread[1] announcing the acquisition, I wrote the following comment, which proceeded to get downvoted to the bottom.

"Did Diane's bebop even launch? I can't find their website. It is kind of frustrating that everybody involved (employees, investors) in bebop are getting a payday, without really putting in much work, or verifying their ideas. Just leaves a sour taste in my mouth (old boys network) as a two-time failed entrepreneur."

1. https://news.ycombinator.com/item?id=10597896

Is it just me, or is this deal somewhat shady? It just seems like acquiring the startup of one of your board members is one of those things you shouldn't do, for the sake of appearances if nothing else.

When Ralph Yarro was using pumped-up SCOX shares to acquire his side businesses, people were rightly suspicious, and lawsuits followed. Of course SCOX != GOOG in any way, but the activity seems analogous.

Except for the charity donation

Two things wrt the donation.

First, she gets a massive tax receipt to use against other income. I don't know how it works in the US, but in Canada you can use charitable tax receipts to lower taxable income in future years if you don't want to use the whole thing in the year in which you made the donation.

Second, she donated to a donor advised fund, or DAF. A DAF is a charitable entity that is sort of like a bank account: you put your money in, get the tax receipt, your money manager invests the capital, and you can allocate some portion of the money (the amount depends on the financial institution's policies) to actual 501c3's (I.e charities doing charitable work).

DAFs are just another instrument offered by the Fildelities of the world to increase assets under management.

The most common reason people give to DAFs is so they can get a tax receipt for the current year and defer the decision about which charities to support until later.

Plus giving stock to charity is the most tax-efficient way to give. She gets the tax receipt for $148m regardless if the stock goes down after the donation. And if it goes up, she has more to give to charities.

I've Had a long term contract to build an online donor advised fund, so my head has been in this space for 8y or so.

> I don't know how it works in the US, but in Canada you can use charitable tax receipts to lower taxable income in future years if you don't want to use the whole thing in the year in which you made the donation.

I don't know how this can be a tax-dodge of any significance. Surely you can only offset your tax by the amount you donated anyway so it makes no difference to you in the end.

This is a good overview of how the money might be used to influence, and not be a purely altruistic gesture: http://newint.org/features/2012/04/01/bill-gates-charitable-...

You can donate to a "charity" that employs your friends and family, not society at large.

I can create a Betterness Foundation, and donate all my income to it, and you can do, and the Foundation can spend its resources bettering the neighborhood where you and I happen to live, but no one else lives there. This is a scam loophole to avoid Federal taxes that are intended to benefit society at large.

It's not quite that simple. The IRS didn't just fall off the turnip truck.

Yes, there's a large chance that if Mr. X sets up a DAF, you might see people with the last name X doing various work for the DAF etc. Same if Mr. X ran a for-profit business. But there are rules and regs and you can't just blatantly self-deal and loot your foundation; see https://www.irs.gov/irm/part7/irm_07-027-020.html

The truly naive shenanigans don't work and there actually is scrutiny of foundations. Plus, foundations have to distribute 5% of their assets annually, which has actually been sort of a problem lately with low fixed-income returns.

If you want to know the "scam," others above have described quite adequately the two main lines: the tax write-off and the ability to influence what charities benefit. The scam is not that you can set up a "Mr. X's landscaping and Champagne pouring foundation" to privatize all the benefits.

(I mention this not to chastise parent, but because left without any additional color, parent comment could make a reader not versed in how nonprofit stuff works overly cynical.)

I think you understate the extent to which one can use a tax-deductible non-profit organization to benefit oneself. For example selective private schools are all (at least in my area) not-for-profit organizations to which contributions are tax-deductible. So you "give" to these organizations and essentially pay for private school from pre-tax income. There are even country clubs that are non-profits. I think the only thing that really prevents these organizations from being formed are if they have documented written policies of racial discrimination, in which case the IRS will go after them eventually.

When you donate shares, you offset your tax by the amount you donated pre-tax. The charity pays the capital gains tax, once they sell the shares. You receive a write-off equal to the market value of your shares when you donated it.

So, in this case, it seems like a pretty significant tax-dodge -- on the order of $30MM.

You donate your $100M of highly over inflated stock. You know that by the time you could really sell the stock (i.e. various restrictions in the grant terms), you'd get nothing close to $100M. Let's say you expect it to drop to $20M in 24mo.

You just locked in the 'donation' tax write off amount at the peak value of the stock ($100M), but it can sit in your DAF for 2 years until you finally sell it for $20M (an give it to an actual charity). Going forward, you've got $100M your can deduct from your future taxes/income, that was only really worth $20M. You have effectively captured the value of the over inflated stock in the form of not paying any more taxes for a long time going forward.

This is how the rich get out of paying taxes. ;)

Excellent explanation. What a smart technique.

The really smart thing would be to donate[1] it to a "charity" you create and fully control (that your kids will inherit, etc) so it's effectively a tax-free bank account.

1. http://www.nytimes.com/2015/12/02/technology/mark-zuckerberg...

Another doge is you deduct the full value of stock and avoid capital gains. So, you reduce your income more than your net income you would have gotten selling your stock.

AKA Let's say you get 75$ after state and federal capital gains on 100$ in stock ~(25% Tax). You deduct 100$ from your taxes not 75$ and you can deduct that 100$ from earned income which is taxed at ~40% federal + 13.3% state call it ~50$ in tax savings. Net result you donated 100$ to an organization of your choice at the cost to you of (75$-50$) ~= 25$. And don't forget you can call a lot of things charity's.

http://www.fidelitycharitable.org/giving-strategies/tax-esta...

This is exactly right. Funding a DAF is great and all, but it is also a tool of influence. The headline is "gives it all to charity" which sounds great but remember that there are many groups that are 503(c) organizations which you might not consider actual charities. And they often have other "influencers" on their boards. So you want to deal with X you find some charity in common with X and you offer to have your DAF provide a generous donation. Externally a donation to a charity is recorded, internally someone has a new "friend." And the weird thing is that the person you are influencing feels good about the fact that they feel they helped get more support for some charitable cause they champion.

Very interesting.. Can you create a 503(c) down the road that you work for and pays you a fat salary, then fund it from your own DAF?

Well if you're going that road you create an LLC that contracts with the 503(c) that provides a service. But once you start creating shell companies to hide the source and destination of funds it starts to smell like money laundering and that generates more interest than its worth.

I'm pretty sure you can't carry forward donations.

There is no profit like non profit!

What she's doing with the proceeds is really irrelevant.

Give a large chunk to your employees?

The more interesting conflict (since she donated her windfall to charity) to me is that she's on the Board of Directors for Intuit, makers of Quickbase.

From what little information I can glean, Bebop would be a direct competitor to that product.

Well, Intuit is planning to sell Quickbase, so that conflict will disappear. Although if true, it's interesting that it was there in the first place.

http://fortune.com/2015/08/20/intuit-quicken-sale-turbotax/

And what did the people who've actually done the work get?

Only founders get rich, don't you know?

They get to work at Google now. /s

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