Acquisition condolences
37signals.com
37signals.com
Ron Conway said it best in response to Arrington's "Dip shit companies" comment. Ultimately it's up to the founders. The founders have put the blood sweat and tears into the company. It is the founder's life, their equity and their company. If they decide to cash out, then good for them. If they decide to stick it out and work towards an IPO, good for them. The founder is the gladiator in the arena, fighting for their company and their lives. Who are we to publicly criticize and belittle them.
Being a founder is hard enough as it is without other founders publicly criticizing their decisions while waiting for the delivery of their custom Pagani Zonda[1].
ref: [1] : http://www.autoblog.com/2010/09/07/pagani-zonda-hh-commissio...
It's a footnote reminder that acquisitions, no matter how well intentioned or promising, often result in promising products gradually being starved of attention and resources as the fickle nature of the acquirer shifts to other matters. Condolences to the users as the product is left to wither in "maintenance mode", or mothballed entirely with the sourcecode & IP archived in a drawer somewhere.
It's interesting to contemplate what the del.icio.us and Lala's of the world may have become had they been able to go it alone, and conversely what would have happened to the Facebook or Twitter's had they been acquired in the first few years.
The trouble with 37signals and posts like this is their tone. It's shrill, nose held aloft, almost scoldy. It's guaranteed to polarize.
I'm sure it's great for traffic, and thus builds their brand, but it doesn't generate the constructive conversation it could.
edit: What's more, come on, "condolence?" Selling a business you built from the ground up is a career-defining move.
This advice is worthless.
Everything is possible in business. Get acquired and snuffed out, get acquired and blow up, don't get acquired and run a healthy business, don't get acquired and fade out. Get sued and go out of business tomorrow.
Nobody has any idea how the founders and employees at Doppler feel. I respect my fellow professionals enough to congratulate them for their successes however they manifest, and to trust them to seek new opportunities if their current ones fail.
The acquired founders and employees are oppressed and we should offer them condolences? People would kill to have these problems.
This is rather one-sided, but as always from 37signals great linkbait.
And GM still sells very large numbers of vehicles, if Skoda could be turned around I don't see any reason why the same could not happen to GM.
Human beings create. We have new ideas daily. When some of them die, it's okay. And it's okay if someone made a LOT of money from the deal.
People will cry. That's fine, meanwhile the people who just got bought will go on to create more, interesting, new ideas.
Here's the deal:
You build value in a startup. A company comes along and sees that value, decides it's worth some cash to advance some internal mission. Company offers you something that feels like a good deal.
Boom: sold. Right?
Who better than the people who built the company can judge the quality of these offers?
Moreover, let's say stodgy old company absorbs an awesome startup and puts their tech forever in the basement (a la Nokia here, or Microsoft with Danger). So what? It's not as though these bright minded founders simply evaporate into the atmosphere, forever lost to the future of human civilization. Now these guys are smarter, more experienced, and hopefully even better capitalized than when they started. If they're truly so bright, off to build a new idea they will go.
And if not, no big deal either, the world got what it could from them. Who's to say their idea/technology isn't in better hands now, held by a company with perhaps steadier revenues or a more mature infrastructure for distributing or selling the product?
There's value in independence. There's value in seeing things through with the long view. Absolutely no disagreement there.
But as long as you're not running an elaborate scam, how you make your money, who acquires your company and what they do with it afterward is none of my business. I hope you got a great deal and that you're in great shape for your next stab at the next big thing. (edit: if you end up making a dominant yet shitty product, though, I reserve the right to pine for the next big disruption.)
Don't get me wrong, I'd take the money and run most likely. But I'd feel bad if my product got buried and forgot about.
You may feel bad for what happens after but you have to think that it's not on your hands anymore, you sold...
The customers almost certainly could, but nobody ever asks them.
Checking for stuff like this is mergers & acquisitions 101. I would be very surprised if these megacorps aren't thinking about this stuff when they buy.
I believe this self-righteous attitude regarding acquisitions comes from being a bootstrapped startup. When you bootstrap your company starts with a valuation of zero. The only way to increase your company's valuation is to start making a profit. For the bootstrapped guys an acquisition offer means that your company has grown to the point where competitors feel threatened. When you are in this position the only reason to sell is if your company is no longer growing (why sell now when your company will be worth more next year?). That is a tragic situation.
The founders who raise money start with an expected valuation greater than zero. Usually these guys can sell well before they ever meet the expected valuation. I mean shit, the startup SocialThing! sold to AOL for $7 million while they were in private beta. In other situations these companies fail to meet the expected valuation and have to sell in order to protect the reputation of the investors and founders. For example Slide sold to Google for $183 million. My company Quiz Monster (bootstrapped) is a competitor to Slide, has a larger userbase, and is worth $1.5 million at best.
TL;DR: Bootstrapped companies have to work harder than venture backed companies in order to receive acquisition offers and thus feel very self-righteous.
I say cut the crap, though. If bootstrapping is the better way, awesome – 37signals will enjoy the bathtubs full of money they get at the end of the rainbow, etc.
Life is too short to spend your time with a chip on your shoulder. Or, at least to write like you have one.
That's the problem. 37 Signals says it's the better way, but not obviously better for the founders. You won't get rich, but the world will be better off for having a better company.
Says who ?
Some estimates peg 37Signals as being profitable to the tune of $6 million per year. Divided equally between the 12 employees that's $500k each. Not bad for a year's work.
For more see: http://blog.jedchristiansen.com/2008/12/04/estimating-37sign...
This is just my understanding of their argument, though. Better to grow a company slowly and keep running it, than to grow a company and get bought. They think you should be in the game to keep running the company, not get rich. Getting rich while running the company is also possible, but that's a nice side-effect as far as they're concerned.
Not if getting lots of attention is important to your business.
False. Valuation is not based on a point-in-time analysis of your current revenue run rate or total size of your userbase, it tends to rely much more on first and second derivatives, such as how fast you are growing revenue.
There is a point in a company's lifetime when, if you stop growing as fast (even though your revenues are still growing), you may be worth less while making more money.
Also, there is a lot of risk in running a startup. The landscape can shift under anybody, and evaporate value in a heartbeat.
If a deal is above your target threshold, and you find that is fairly or over values your company, an acquisition can be something you seriously consider, even while you're still growing.
This assumes that the acquirers have the company's best interests at heart, which I don't believe is always true. No one ever got promoted for putting the brakes on a bad acquisition deal ( * ). On the other hand, making a big splash by buying up other companies can often lead to big bonuses for those involved which do not take into account the long term (lack of) value that these deals often bring.
( * ) Citation needed, blah, blah, blah.
They also finally redesigned the photo pages to display them larger than 400px wide. It's no longer lower-res than Facebook, but it's still much slower since they don't prefetch images.
The acquirer is mainly adding the ability to scale up, either through financial stability or other resources. In the case of Flickr and Yahoo, this is a relationship with its ups and downs, but Yahoo contributed a login system, search technology, millions of customers, data centers, and so on. Except for the search stuff, none of this is really a feature.
The acquirer also extends the startup's lifetime, so they can think about taking a year or more to add a feature.
For most startups, acquisition represents getting off the treadmill of adding features they can't sustain so their customers will continue to like them. Then they spend a year or more just catching up with their own success, while also integrating with the acquirer's infrastructure.
Sounds like: "You poor thing, running a company by yourself so you decided to sell? Better luck next time, sucker"
37s built a good company. Congrats guys. Now quit shitting on other people's corn flakes. Deal?
Don't get me wrong; I love creating and I am really looking forward to working on my start-up full time, but you know what I love even more? My family and my friends. If I had an opportunity to comfortably spend every day with them, I wouldn't think twice.
you call it work, many others call it their hobby. they just happen to do it full time and get paid for it.
I would argue, though, that I can still see my startups as a hobby/lifestyle even though I would I be more than happy to retire early with fu money. Primarily because I would still want to start build my own products even without the lure of getting rich quickly.
This shows that building something with no profits in the hopes of getting "acquired" is not a sustainable model.
Cases like this might eventually convince big companies that acquiring startups is not that valuable after all; specially the startups that have no business model other than hoping to get acquired.
This is specially true if you (as a big company) think you're acquiring the talent (the guys who built the startup). The truth is, they will inevitable leave, because working in big companies sucks.
Building something valuable without a business model other than hoping to get acquired sounds like a scam against big companies. Basically the business model is to sell the product once for a huge sum of money, and the guy who buys the product (the big company) doesn't get anything out of it; hence the scam.
The second point is, your product (as a startup) is now dead. Doesn't that make you sad? Wouldn't you be more satisfied if users loved you and you were making money and still doing what you love?
I just don't understand the flak founders get when they sell. Tell others is bad to sell without knowing the dynamics of the company and founders is not the way to do it.
People have different expectations from life and their work. One thing is growing a business and having no problems with money and feeling good about it and having no plans to sell, other is building a business and trying to make a living off of it. If you get a good offer and meets your expectations is reasonably that you would sell.
Ultimately is up to the founders to know what to do with their product and we have nothing to do with their decision because we aren't part of the business.
If the product goes to the basement after being acquired that gives the rest of us an opportunity to build another better than the one who was acquired. The founders have done their job and it's time to move on and think about a new idea.
If someone ever wants to buy my company for $20 mil, and I walk away with even half that, I will be a very, very happy man.
But he underestimates the benefits of money. Even if "mojito island" is a mirage, having enough money so that you don't have to work again is extremely valuable. You can take long breaks, tour the world, or pursue endeavors that may not necessarily be profitable, such as art, philanthropy, or politics. If you choose, you also have the means to start a new company from a position of comfort and control.
And besides, people often simply get tired of working on the same company and want a change of pace.
So all in all, I would recommend the following: Only complain about the way an investor treats your company if they deceived you. Otherwise, just accept that it's not your toy anymore and you got paid for it.
OK, bad day for Nokia. Dopplr's fault? Nope.
The users? Sure. But it's a free service. Like the recent quote says, the users are the product. (http://www.metafilter.com/95152/Userdriven-discontent, top comment.)
DHH's hating the players when he should hate the game.
But how is this encouraging startups to provide something useful to society? It's just encouraging them to target products at larger companies, not to actual customers.