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Comment by frozenport | Hacker News Reader

>> buy young firms that might challenge them

This is not the worst outcome for a startup

It might be a nice payday for the founders but it's terrible for the business environment. It's basically a bribe to stop operating in that sector. Sure, it beats out Microsoft churning out the Teams to your Slack/Loop to your Notion, then rolling it into 365 and eating your enterprise market share alive without so much as a consolation prize, but as a user any time a great product hits the market, no matter how much I like it I have to worry if I can trust the company to be around for the long haul and stick to their offering.

The entire “business” of startups is to get acquired. Few expect to go public.

I think we might more accurately say; the entire “business” of some investors is to get companies acquired. That's not the same motive as seen from inside the startup. And indeed, it's only some investors. I believe there are plenty who are in it for the long game, or are far more strategic in terms of ROI.

Once the startup takes investor funding, it’s irrelevant what those inside the startup want.

That being said, we all go to work to exchange labor for money. It’s naive for employees to see working for any for profit company as anything more than just a financial transaction.

Investors know that the chances of a startup to go public and then be profitable enough to have long term stock gains is infinitesimally small.

Can you name one startup that has been really successful - ie throwing off crazy profits and margins since Facebook?

Investors aren’t interested in “lifestyle businesses”.

> Once the startup takes investor funding, it’s irrelevant what those inside the startup want.

It really depends on the ownership structure, and that will depend on leverage at the time of fundraising. YC companies are unlikely to give up control until Series B (but like all things your mileage may vary).

I don't know what the contractual structure entails, but I thought this recent post from R Bronson [1] is an exemplar of strategic investment in "good cause" projects without a nose for short term ROI, planned acquisition or any 'controlling' investor behaviours.

[1] https://news.ycombinator.com/item?id=31598978

If you don’t have leverage when raising money the opportunities to lose control are endless.

> what if in addition to privacy policy and terms documents, each online property has an acquisition term

> It might be a nice payday for the founders but it's terrible for the business environment.

At the founding stage we tend to choose from highly quantised "types" of company, usually from a boilerplate legal template; limited liability, independent trading company, partnership, charity, non-profit and suchlike. I am no expert in company law, but as far as I know, at least in the UK, "Articles of Incorporation" (the charter of the company) can be almost anything that's legal.

Hence I've long been of the opinion that founders should build-in "non-acquisition" clauses, making it impossible for predators to simply scoop up a promising company, perhaps for some fixed period like 10 or 20 years. That would solve some of the issues under discussion here. It would also change the ecology and motivations within which companies are created, grown and invested in.

>Hence I've long been of the opinion that founders should build-in "non-acquisition" clauses, making it impossible for predators to simply scoop up a promising company

This sounds good and all, and I would be tempted to do it, but a non-acquisition clause does not prevent the big companies from cloning you either.

>as a user any time a great product hits the market, no matter how much I like it I have to worry if I can trust the company to be around for the long haul and stick to their offering.

I still get upset about what Google did to Sparrow. I'm extremely gun shy when trying things these days. I don't want to like new products or get used to their features, because I don't trust they will be along for the long-haul.

This can be an issue even without acquisitions, as companies can simply go out of business. With the current business model of "take on debt until acquired or SPAC", it doesn't give me much confidence in the long-term prospects of many new tech companies. The first thing I always look for is how they are making money. If they don't have an answer to that question, I generally stay away.

But a bad outcome for the economy overall. In the medical industry this is extreme. The startup scene is basically a feeder pipeline for the big guys. Nobody even tries to start a self sustaining business.

I wonder if this can be viewed as (yet another?) example of companies externalizing the negatives. Pollution is the classic example, both during manufacture and at the end of the lifecycle. In this case, it would be financial risk. Founders bootstrap a start-up, either with their own money or outside investors, and these folks carry all the risk. The established players can safely wait until the startup either fails or succeeds, and buy into a sure thing in the latter case.

I think it is simply a consequence of technology enabling instant global communications and decreasing marginal costs precipitously giving bigger players an enormous advantage.

I'm not sure about that. An acquisition is a risky thing for a company to do as well. It's never a sure thing and correctly pricing the acquisition or predicting if the company will be successful with the acquisition is also not guaranteed or easy.

For some highly regulated industries, it's hard to bring small products to market. In banking, there are tiered regulations based on your size (in the U.S.) so there's more overhead for large companies

We made them an offer they couldn't refuse.

Yeah I didn't get what that meant in the Godfather movie, but I got it when I read the book (which is amazing, so so good, not as good as the movie but still).

It's not an offer if it can't be refused, it's just theft.

> it's just theft.

and extortion.

Yes, both.

Yeah but is it good for competition?

No but it is not exactly tough for the startup :)

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