Why I Sold My Startup to Google
danshapiro.com
danshapiro.com
I'd bet this acquisition happened almost entirely due to relationships and salesmanship. Most hackers who don't already know the right people (e.g. former Googlers) would have no chance of pulling this kind of thing off.
Do not try this at home folks. The only real chance of an exit for most startups is one based on actual success in the marketplace.
This is the real value of coverage in the industry press and why I think Steve Blank's fretting over people jockeying for TechCrunch articles, which I initially agreed with, is a little too idealized. Companies get a lot of mileage from being featured in startup industry press outlets. I know it doesn't get them many customers, but it puts them in position to get them. It really helps grow partnerships, boost stature at industry events and frankly increase interest in the founders' future endeavors.
For everyone else the only safe bet is to follow Steve Martin's advice and "be so good they can't ignore you"
Reddit didn't get a TechCrunch article until they were acquired.
I've known several entrepreneurs who have sunk a year or years of their lives into codebases and eternally-half-built products instead of businesses. Including myself at 20! It's actually a common affliction among game developers looking to become entrepreneurs. They have an artistic vision, no concept of hustle, and just want to put their head down until they get something amazing. It's the artistic E-myth, The Thief and the Cobbler syndrome.
It's an important message because a lot of people today are probably still in this mode of thinking. I really need to write a blog post about it.
Plenty of people have grown amazing businesses without being able to attract the attention of TechCrunch or Google's M&A guys.
We're all passionate about great products here, right? And stories where great products win despite all odds are what I want to tell my kids at night.
But I'm going to be honest, given a lone founder, I'd prefer to invest in one with great connections and ability to excite people but who is a little clueless (though passionate) about the product. I know that's heresy, but hear me out here. Entrepreneurs almost by definition go into fields where there's a huge gap between how crummy things are and how much better they can be with a little work. And we know that a startup is not going to be as able to define a market as a huge company is. And it's actually better for them not to come in with a lot of assumptions about a fully-formed product that customers "must" love.
So it's honestly pretty important to get someone out there who is going to put the work into making those relationships and selling the product. I know people should rarely concern themselves with improving on their weaknesses, but I think this is one of the few counterexamples. Product and technology wonks really need to know they need to step up their bizdev game or have a co-founder who can do it to succeed as a startup.
To bring this back around to the topic at hand, learn from Dan! He was tireless in presenting Ontela to everyone who would listen to his pitch, and got really good at communicating the best message. And he got some good practice presenting to audiences at conferences before he went into startups (Dan, forgive me for this one):
http://www.google.com/search?q=dan+shapiro+they+wanted+to+st...
Also, top-tier investors (YC, SV Angel, angels, VCs like Sequoia, A-H, Kleiner, Accel) will help you make those connections. Or getting a well connected lawyer (e.g. Ted Wang at Fenwick) to represent you.
"Sparkbuy founder Dan Shapiro doesn’t like talking to people on airplanes. But on a trip between Silicon Valley and Seattle late last year, the entrepreneur started a conversation with the guy sitting next to him, which happened to be Google’s Matt Klainer. That chance encounter, along with a previous meeting with Google Kirkland site director Scott Silver, led to the search giant’s interest in Shapiro’s new search engine for consumer electronics."
It might just be PR though.
They were a YC company. As has been previously noted, YC gives you lots of advantages.
I suspect PG (& YC) would encourage everyone to try becoming a YC company too.
Here's what actually happened:
I went on a networking trip to the valley to touch base & brainstorm with some VCs I'd met at my previous company, Ontela. On my way back, I got bumped in to first class. I hate talking to people on planes, but my rule is: if I'm in first, or I'm flying to/from SJC, I force myself. Well, this was a twofer.
The guy sitting next to me turned out to be a Googler. We exchanged some emails - I was still working on company concepts at the time - and months later, when we were featured in Techcrunch, he called me up and said he wanted to talk. He was the one who put together the internal Google team that did the deal.
The deal wouldn't have gotten done, though, without the tireless advocacy of a senior Google technical leader. I first met him maybe 4 years ago, introduced by an old friend, and we had coffee once or twice a year to keep in touch. We always talked about working together, and now we are.
Truth is, I hate "networking" as much as the next guy (although I enjoy the resulting friendships that sometimes form). But one of the key jobs of a startup CEO is creating serendipity, so it's something I force myself to do. And it usually turns out for the best.
Can anyone explain why this is the case?
Second, it doesn't have to be the case; it's just that most funds are structured this way. There are funds called evergreen funds, where the proceeds return to the fund and get reinvested.
Why does Google do that? Why not allow it to grow and gradually integrate refined pieces of technology into larger project [Google Product Search]?
Gizmo5 did that.
GMail does NOT.
That's possible.
I want to buy an inexpensive laptop with 80+ GB SSD and 4+ GB RAM. Where do I go to find that?
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Edit: thanks to sliverstorm for suggesting newegg.com It's seems to be a good replacement to SparkBuy (unlike Google Products Search).
NewEgg even looks somewhat similar to SpartBuy interface.
We're in the process of iterating to enhance our search to allow you to answer just those kinds of specifics :)
Still you have a good change of outperform Google Product Search team. They shot themselves in a foot by closing working project (SparkBuy).
I'd say in a couple of years.
And that would not really work as good.
Maybe not today, maybe not tomorrow, but soon and for the rest of our lives... well, at least for a few years.
I continue to be of mixed minds as to whether having personal wealth (or not) leads to a greater or lesser level of risk tolerance - and itchiness to exit.
Sure it's easy for those with a high net-wealth to take bigger risks but we see all the time those with nothing (or even less with nothing, ie college debt) take just a big risks because they have nothing to lose.
I wonder if willingness to take risk is essentially a bi-polar bell graph, which leaves something like $25k in the bank in that sticky middle... not enough money to risk it all but too still much to be lost.
is someone who has $25k in life savings "poor" or "wealthy"? I agree with you that its a sticky middle, but the post seemed to imply one or the other.
[1]: http://www.delicious.com/url/dd6d860947e61d97884bb3719377c7f... [2]: http://www.alexa.com/siteinfo/sparkbuy.com
It's a great concept, and I think it could fit into Google Shopping quite well. If you haven't checked out Google Shopping, you should -- they do some interesting things by aggregating reviews, doing NLP, and extracting out key terms. An example would be showing you a TV and it's ratings/sentiment analysis for several attributes like "color", "design", and whatever else is relevant for the product. With a more clever UI, they could churn out some amazing product search. I sure wish I had their data.
Tangentially related, I've been working on a similar website in my spare time. If anybody could point me in the right direction in terms of a price comparison API, and/or how to sign up for decent affiliate programs, I'd be quite grateful. Also, Google, if you'd like to hand me the keys to your product database I'd be happy to make a much more useful UI for you.
I think another consideration for a (good) founder is "what happens to my team". If I had spent 2-3y building a great team, and had normal startup equity distribution (founders had a lot relative to virtually all employees), there would be a bit of a disconnect in motivations.
Selling a company where you own 10-20% for $100mm is life changing, at least for me. Even if it means working for a really shitty acquirer (e.g. Yahoo) for 2 or even 4 years, that might be enough money to make it personally worthwhile. After all, you could kick back and emphasize "work/life balance", especially after years of startups -- maybe work on non-commercial side projects, maybe teach or take classes, do hobbies, etc., while working at a stable job. Then do your own awesome company, self funded (or VC financed on very favorable terms) in a few years.
However, for employees, it might only be $50-500k of equity payout. That still leaves an employee in the "must work for a living" category, and I personally would be a whole lot happier going to work every day for an awesome small team at an independent company, or for a great acquirer or a PE/fund style "hands off" acquirer (where the team/product stays intact), than to get a $50-100k bonus to go work for Yahoo for 2 years.
A lot of the entrepreneurs I respect the most, who have recently done M&A deals, explicitly valued "what happens to the employees and the company" pretty highly. A lot of them ended up selling to companies like Amazon which have kept operations intact at their acquisitions, vs. the Yahoo-style glue factory.
Agreed.
While I personally wouldn't mind sharing details, for obvious reasons, I can't.
I'm a little bit skeptical here, considering the following:
1) You are not working for Google founders directly. You are working for subordinates of subordinates (think bureaucracy).
2) You are not working for any of the best Google teams (Search, Ads, Gmail, Maps)
3) Your project is killed already without any working replacement.
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Edit - to all of you downvoters here: I consider the decision Dan made as quite reasonable.
He did a good job and got good reward for that.
He also shared his experience with all of us, which is very educational. I'd like to thank Dan for that.
Still, there is another side to that story which I think should be exposed too.
The site goes dark, there's a series of huge planning and strategy sessions, the project gets staffed up and there's a lot of back-end work done. Then, just about the time everyone forgets about the original company completely (not long in the startup world), Google announces a product that takes the original startup's product to a scope and scale well beyond the original. However, it may leave out features that made the product quirky or popular within certain niches. Then a bazillion people start using it and everyone takes it for granted.
Ah, sports metaphors. I consider it to be lower on the language scale than excessive swearing, in terms of limited vocabulary. At least swearing can be used to humorous or vaguely poetic effect.
If I were to fault that metaphor for anything it would be that it has become cliche at this point.
2) It's confusing to non-native speakers.
3) It's confusing to native speakers, too.
4) Baseball has nothing to do with the subject at hand.
5) It reeks of inaccurate, droning marketing-speak.
6) It cheapens the industry to resort of sports-derived metaphors.
Ah, climbing metaphors ;-)
scale: "to climb," late 14c., from L. scala, from scandere "to climb". This is also the source (perhaps via It. scala) of the noun in the musical sense.
I admit, I'm stretching a point here, but when in Rome..
How does "swing for the fences" not imply baseball?
I was stretching it, sure, but responding to someone picking a hole in someone's legitimate usage of a metaphor seemed like a great time to be a little jocular!
I'm glad he went the whole nine yards with his explanation; too bad you swallowed that one phrase hook, line, and sinker.
So he used the term correctly? What does the term even mean? Swing for the fences? So he gets to 'swing' really hard? Or does that mean he gets 'thrown' 'balls' 'softly' enough that he's able to finally 'hit' them 'far'? Is he taking steroids, or their computational or business equivalent?
You can get expensive, crappy health insurance as a startup, but for a lot of great candidates, quality health insurance is a hard requirement.
I'm not in that position, but a relative is -- minus the illness part, as far as i know. I think their rates went up over 20% last year. Although they are not a tech start up; rather, medical, and already established for some years.
My real concern is that people in the U.S. are, these days, paying "life" rates for what is essentially "term" insurance. Take an all too typical contemporary example. Someone has held one or several jobs that included health care insurance from the time they graduated, say two decades ago. During that time, they may well have paid significantly more in insurance premiums than they received in care -- as a statistical average, their demographic certainly did. (I don't care whether they employer paid some or all of the premiums; call it an indirect wage, if you will.)
Now entering the latter half of their forties, and at higher risk, they are sh-tcanned by their (latest) employer and face extended unemployment or a job that doesn't offer health care benefits.
If they were still in employer provided coverage, they'd still being paying in their X per employee per year (simplifying away the differences between diferent employer-provided plans). It might be time for the system to, on average, pay back some portion of all those accumulated premiums. Sort of a "whole life" insurance policy, from a health insurance perspective.
Instead, the "accrued benefit" (I know this is a crude analogy) has fled along with the job.
Aside from arguments about innovation and economic growth, the current health care insurance model in the U.S. is simply not coherent nor predictable with regard to providing coverage. For many, a third party -- one increasingly having wildly diverging interests -- is in control of their coverage.
Many people would be happy to pay into a pool at the kind of pricing the major employers receive. But as independents, they don't have that option.