Facebook Acquires Drop.io
blog.drop.io
blog.drop.io
This drop.io deal sounds a lot like the Hot Potato acquisition from a few months ago: in both cases the startups were well-funded, but didn't have much traction, and then Facebook paid 8 figures to essentially buy the main founder (Sam Lessin at drop.io, Justin Schaffer at Hot Potato), and essentially let everything else die (the sites were shut down, the technology scrapped, other employees weren't hired by facebook, etc.)
A few questions for HN:
- Is Facebook paying too much for these founders? (They're basically shelling out a $10 MM signing bonus that lets these entrepreneurs placate their investors, and then come to Facebook. (Accept the founders only get a fraction of the money, obviously). Is it worth it? What are other new Facebook executives paid in signing bonuses?)
- What do the investors think about this? (Are the investors in Hot Potato and Drop.io happy to get a modest return instead of nothing (because these companies hadn't taken off yet), or are they frustrated that these companies ended somewhat abruptly?)
- How do the employees feel? (Does it feel like success for them when the whole point of the acquisition is really just to buy their boss? Obviously they get money for their equity, so maybe that trumps any other feelings.) [Full disclosure: I actually work with one of the co-founders of Hot Potato (who didn't go to Facebook), so I know his opinions on this issue, but I'm still curious to hear others' thoughts].
- How do users feel? (Are these buyouts fair to them?)
- And lastly, Isn't there a slight paradox with the fact that these founders are being plucked at such high premiums because they're brilliant leaders, and yet, in both the cases of Hot Potato and Drop.io, these startups weren't runaway successes? In other words, doesn't the lack of clear success of these startups undermine the basic premise that the founders deserve $10 MM "signing bonuses"?
Things do occasionally turn out okay, e.g. Google allowed the EtherPad team to open-source the code after Google bought/killed it. And, although I don't personally use/like it, Dodgeball got more or less resurrected as FourSquare after Google bought/killed it.
I wouldn't be surprised if its more of a case of struggling but very smart startup, about to collapse, turns to facebook as a last resort liquidation move. Handing over to FB or Google and having them pay back some investors and shut down the service looks much better than sending out a solemn "we screwed up" email to all your users & stakeholders...
Sam helped him out and now he's repaying the favor. If it was $10M+ that's nothing when Zuck's a billionaire on paper. Additionally, it doesn't matter what the investors think as he still has complete control of the company. I don't think it's fair to compare Hot Potato and drop.io as there's a history with the founder that wasn't there before.
If I'm sitting on a runaway success, you better be damn sure that I'm going to help my genius friend (Sam's a crazy smart guy) out and bring him on whenever I can. He's only going to add value and when Facebook is expected to be worth $100 billion eventually (pure speculation right now but it's in that direction), there's nothing wrong with holding out a golden hand.
Nobody ever asked us to pay. We would have. But suddenly, bam! It's gone.
Was it a non-negotiable part of the acquisition? Or did he not even try to negotiate?
Seeing the recent development of the site and the evolution of Dropbox made it clear Drop.io wouldn't be around long term.
Drop.io obviously choked to death because it was too afraid that gesticulating its agony would be embarrassing.
Facebook's Friend Feed acquisition wasn't that long ago but it looks like a success; They got a new CTO out of the acquisition.
It's hard to build a real company if no one understands what you do. Maybe they would have had a better outcome had they hired a CEO who could create & communicate a cohesive vision.
But that's just me.
They certainly could have used more marketing as far as I've seen. I'm sad to see them go.
This was not a "win" or an "exit" by any measure.
If you haven't turned the corner after 5 months, you know you won't get out of the hole before you run out of cash.
Therefore, you sell the company and reduce your burn as much as possible to make a sale happen.
If your sale is all about talent and not the technology there is almost no due diligence required and a deal can happen quickly, in about a month.
Some tuning on that, and I'm fairly certain you could run things for less than $500,000k a month -- most files are probably uploaded, downed a few times in a week or two by a select number of people, and then forgotten.
Then again, and this is key here, I have not tried this. It's also something that could be difficult to patch into codebase if it wasn't considered early -- we're all familiar with the problem of coding ourselves into corners, especially when time is on the table.
And then this.
Their company had a positioning problem. They built a platform that did something very unique (abstracting the coolest features from XMPP into an HTTP/RESTful API) and yet the takeaway for most people is that it's "a file sharing service."
Had the Drop.io team done a better job communicating their value proposition to developers with clarity and aggressively positioning their service, I think they could have had a big following.
Though, I always wondered why drop.io got any attention. Upload thing. Get URL. Share URL? Optional paywall behind URL. Did they have other features?
Don't complain about others' successes. Learn from this that a nice interface for something simple is often enough, and go find a market where you can do the same thing, and get rich :)
(Note that I've used it to a very limited extent. But even if they have other features, my understanding was that the main value proposition was its simple, pleasant interface.)
When an upload finished, many of my friends / contractors didn't know you'd need to refresh the page to view files. I'd sometimes find two or three copies of the same file in a given drop.
My drop had an admin password, but also a manager password (which were different, but would presumably be used by the same person).
Even browsing for files to upload was more difficult than it should have been. Once a file was selected some users assumed it was being uploaded already.
These were manageable interface problems for me, but required delineated instructions to the "average user."
That way their users have a fighting chance at a smooth transition, and the technical contribution you made can continue.
On the other hand, starting with that mentality is probably bad. c.f. pg's "do something you think is good for the world"
My band lives in various areas of the country, and we share mp3 files via drop.io. We're able to comment on each riff/song, link directly to the files, get updates via RSS, and even listen to the mp3s without downloading them.
Anything else like this exist?
As an aside, an interesting difference with Tonido is they also sell a "plug-in server" for their service too: http://www.tonidoplug.com/ I assume it's based on a SheevaPlug / Marvell Plug Computer style device.
Our site was pretty much designed exactly for this use case - the free account allows for private sessions, in-song commenting and in-session discussion.
But well, Facebook will hopefully make good use of the technology and the many channels drop.io had already incorporated to extend it's group collaboration options.