Google keeps ex-Googlers close by investing in their startups | Hacker News Reader

Google keeps ex-Googlers close by investing in their startups

recode.net

47 pointssubpar13 comments

I think this kind of thing is good for the industry. It may be a good way to avoid the innovator's dilemma.

Big companies often can't take risks developing a new business or product line internally. These startups take on the risk, and get the reward if they succeed -- just like any other startups. The acquiring company gets to innovate without taking risk, which the board of directors might be leery of taking on. It's a win-win for everyone. More innovation happens than would have happened otherwise.

Cisco and Adobe have been known for doing this.

I'm not sure why anyone would object to this. Even if one wants the tech industry to be a perfect meritocracy, one must recognize that even in a meritocracy, people make use of personal connections to get ahead, because connections can be earned through merit. Not all connections are just accidents of birth or other circumstances. If someone gets a job at Google through merit, and succeeds through merit, it is entirely reasonable and just for Google to enter into a spin-in arrangement with him or her.

>These startups take on the risk, and get the reward if they succeed

i see a reward, yet i don't see a risk in such situation.

>I'm not sure why anyone would object to this.

may be because of such a tilted board? why for example some people object when somebody is cheating on an exam?

The risk is the risk of failure. They won't get spun back in if they fail. They will go out of business, like any other startup.

I don't see how this is anything like cheating on an exam. The founders of spin-in startups are good at what they do -- if they weren't, they wouldn't get such an arrangement in the first place, and even if they did, they wouldn't be acquired if they failed.

Meritocracy is not undermined when people with merit are identified and elevated -- in fact, that's the raison d'etre of meritocracy.

it would be in the black and white world. In the real world an additional easy financing and/or acquihire later makes a failure less so.

again, you describe an ideal world where abuse of any situation by the meritocratic ideal people taking ideal decisions just don't happen, the world where conflict of interest policies, etc... just wouldn't be necessary. In that world i would wanted to live and would agree with you 110%.

So what? Lots of startups that deserve to fail and don't have this kind of arrangement also manage to get more financing, or get acquired or acquihired. That kind of thing is not unique to spin-ins.

I also never claimed the world was a perfect meritocracy. I was saying that if it was, this kind of thing would not undermine it. It seems that we agree on that point. I brought it up in anticipation of counter-arguments that spin-ins subvert meritocracy.

Cisco's former CEO John Chambers, made famous a concept called the "spin-in".

The concept is similar to employee's leaving to start their own company but their former employer funds the endeavor and often has a right of first refusal for a sale.

http://www.businessinsider.com/why-cisco-showered-three-men-...

This acquisition driven R&D worked well for Cisco, it doesn't always, see former Canadian company Nortel for the down side of acquisition driven growth.

As a side note, check out John Chambers some time. Common wisdom is that the CEO of a tech company should be a technologist. He is the exception to this rule. He was an amazing CEO who didn't have a strong technical background. In my opinion, one of the more impressive tech CEO's of the 90's and 2000's.

http://www.mckinsey.com/industries/high-tech/our-insights/ci...

Jack Ma from Alibaba is another great. example of a successful CEO without a technical background. An early exec there wrote a book profiling the company's early growth, great anecdotes on Ma in there: https://www.amazon.com/Alibabas-World-Remarkable-Changing-Bu....

Spin-ins can be a great idea, and have proved to be very successful for Cisco. However it appears that the article explicitly states:

> the search giant does not have special rights in the terms, like first dibs on an acquisition

Which to me makes it a very different arrangement.

It seems a really smart move to me. At the stage they are investing, the quality of the people and their reputation is more important than the idea itself as a success predictor. Ex-Googlers have on average a good reputation and they know how they were performing. So it makes a lot of sense to put a small amount in convertible notes early on that could easily result in a lot of money down the road.

And if the idea doesn't work out, well, they are closer to them than any other company, much more easy to hire them with all the economical advantages of re-hiring someone you like and trust. I think that, from an economical point of view, there are few downsides and a lot of upsides...

Larry Ellison does this too. Netsuite (Nelson) and Salesforce (Benioff) are seen as two major cloud computing titans.

Both were Ellison proteges who were given enough money to safely work on growing the new generation of the same business.

Heaven forbid?

Many other VC firms want to invest in ex-Googlers and their startups, especially one with previous success. It seems reasonable that they'd continue to invest in people they have high confidence in.

"Keep your friends close, and your enemies closer."

> It’s unlikely Google is deploying these funds to dig back into social media or generate massive returns. Instead, these deals seem mostly about Google’s ongoing attempt to keep familiar engineers close to the company fold.

It kind of looks like an expensive way to keep the expertise of these employees available and friendly to Google.

Reply on news.ycombinator.com