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Comment by meritt | Hacker News Reader

Sure, Amazon does it all the time to small startups. They fly you into Seattle, setup a fancy meeting with strategy teams and M&A, make you run through a pitch deck, explain every aspect of your business. They take diligent notes until they fully understand your inner workings, they tell you thanks, you'll hear from us soon.

And nothing happens, 6 months later AWS launches your exact product.

Founders need to be extremely careful when talking to potential acquirers. Dollar signs cloud your vision and you need to understand why they're talking to you. It may be genuine interest or it may be deceit in order to gain a competitive edge.

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This is not an example. This is an explanation of how it could happen.

Can you share an actual case? Such as, a startup that went through this.

Amazon’s flash sale site, my habit, was launched this way.

Source: I worked for a flash sale company they did this to.

What is/was the site?

Having been involved in the other side of these types of transactions usually the large company is actually interested in making the purchase because buying a successful product is easier than building your own even if you're something as big as Amazon. however often during Discovery you find out major problems with the company that you want to acquire that make it become pointless to actually do it. usually by the time something like this happens and a large company is looking to make an acquisition there already a good portion of the route down figuring out what they would have done in the first place. the Delta on building a flashlight over Amazon's general retail presence isn't that huge so in a lot of cases they would be looking to acquire interesting pieces of tack or the customer base as a way to bootstrap their version. If during due diligence that showed to not be feasible then the deal wouldn't go through. They're also very likely to be talking to several companies in a similar area.

I'm not saying it doesn't happen but I'm just explaining what happens on the other side.

I've also seen some areas where we used a technical due diligence team so that there was no IP crossover and it turns out that the company that we wanted to acquire was either way too difficult to onboard due to the way that they built their systems or they just wanted way more money then we were willing to pay because our use of their systems was different than their grand vision and they were pricing on their grand vision. also in one of those cases we were playing the two companies off of each other for price and then decided not to build a product at all.

And sometimes like the atom bomb all it takes is a due-diligence person saying there isn't much here for everyone else to realize that it's actually quite easy to build but it was very expensive and difficult to prove that you could build it in the first place. See Groupon for example of the explosion of daily deal websites after Groupon proved that they could "make money" off of it.

I thought Woot.com was an early player in that space.

It would be unlikely that anyone would/could share public details about such a thing given the NDA (and potentially LOI) terms that are signed prior to something like this happening. It happens though.

Yeah. A small company I used to work for had a phase where Amazon contacted us and wanted to potentially partner up. CEO went and spoke at Amazon and they got to see our goodies and then nothing came of it.

I think that their intention was to duplicate what we were doing if they got on the other side and thought it was valuable.

Turns out the company was/is floating on investor money like so many startup ponzi schemes. I suspect Amazon just didn't think it was worth it.

Lulu.com - book self publishing. Discussions between Amazon & Lulu led to the reproduction of every use case over the following 24 months. I worked at Lulu.

Yes (sort of - I can’t share the name because this was a friend’s startup and I don’t want to gossip explicitly) but this exact thing happened:

Amazon went through an acquisition process and on the day of closing, as everyone was in the room and documents were being signed, Amazon reps came back from a break in the meetings and said “Oh sorry for the delay — we’ve actually got an internal team working on this already. Our mistake. We’ll still do the deal because there’s some value here, but we’re going to lower the price by 20%. Take it or leave it.”

(They did the deal, but man, f-that.)

Why don't companies go in with something akin to an NDA saying you can't use any of this information to directly compete with us for x years? Seems like this would be standard if it's common practice to steal businesses while feigning interesting in acquisition.

Maybe they do, but they can't afford the litigation. Like "you can beat the rap, but not the ride."

Two things:

1) Good luck getting $BIGCORP to sign that.

2) If you get #1 done, good luck enforcing it.

The typical construct for a big company to use is they get a technical expert from a completely different part of the company that has basically no stake in the group that is evaluating the acquisition to do the technical due diligence. This is where you see all of the secret sauce. Usually they picked someone that I won't have a problem saying no to anyone actually asking them for information.

However the real protection is in the details in the amount of work that actually has to happen to copy a company. I've done technical due diligence work before and I really wouldn't be able to replicate what I saw in a 6 hour code review of 30000 lines of code any faster than I could just coat it from scratch. the most part you're doing basically the same thing you would do on a security audit of code which is looking for intellectual property theft or the overall quality of the code and things like did one person maintain the entire thing or was it actually a team effort which helps you decide who you want to acquire from the company. generally the whole point of these deep investigations is to mitigate risk for the purchasing company not to steal ip.

At the end of one of those investigations you basically say yes it's risky no it's not this is who worked on it this is who didn't this is my estimate for how long it would take to pull into our code base or move over power systems or here is a flexible I think that could basis versus how much technical debt I think there is. but really all they want out of you is is this a risk to buy this company or does it seem straightforward. Then you go back to your completely unrelated arm of the company and do your actual job.

There's an early episode of Silicon Valley where they go through something similar.

I believe that's also not one but two episodes of Silicon Valley. The second time they believe they've figured out how to avoid it happening to them again.

Silicon Valley,while hilarious,has tons of invaluable business lessons.I think I could probably even say it's one of the best series about business. It covers absolutely every aspect of building, growing, maintaining and ultimately selling a business.

Mercifully, I've avoided any conversations like the Season 1 finale, but I think we all laughed because we recall some absolutely ridiculous rabbit hole we went down at some point. Once in a while you learn something surprising (which just reinforces the behavior), but mostly you just feel foolish. Especially if you get caught doing it.

Could that mean that if you upload your code to AWS they can steal your software design? I think yes.

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