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Comment by tptacek | Hacker News Reader

Not really. Most startups simply fail. Only a small fraction of them make a good enough name for themselves that the team has value. And the ones that accept those deals tend overwhelmingly to be companies that would have failed anyways. Startups all start with a confidence liability; this is just a fact of life.

It's even worse if you're selling to enterprises, and was worse long before anyone ever thought of the term "acquihire". You can trounce your competitors on every axis, come in at half the price, charge a flat-rate site license instead of a metered seat license, and buy the purchasing team 52-day aged ribeyes every week for 6 months and still lose if you're the one who looks like you might be out of business 2 years from now.

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Very fair points and it is worth reminding people that most startups fail (usually with a whimper that no-one hears). I wish the team well and thank them. I might never have started a blog if not for Posterous.

However, teams and products that do manage to make a name for themselves potentially end up leaving more unhappy people in their wake when they're 'acquihired'. It's not quite 'fail fast' from the point of view of the users who've been around for a while. (NB I'm not suggesting that the Posterous team could/should have done anything differently.)

Edit: FWIW each acquihire-type story nudges me slightly more to consider open-source alternatives, even if they involve some pain to set up/manage. Purely to feel a little more insulated from scenarios like this.

"nudges me slightly more to consider open-source alternatives"

Right. While it was certainly unfortunate that Posterous was acquihired the impact from a saas/paas closing would be magnitudes more disruptive.

Everyone comes across as a winner and doing well with no chance of going under until it happens. Imagine building something using mailgun,appfog, engine yard or (pick whatever you want) and then having to scramble (even over the course of several months) to try and replace the functionality.

If these events drive people towards open source, Godspeed! <3 opensource. One other really nice benefit is a lot of these companies themselves further the open source community (see twitter bootstrap, patches to rails by various startups, etc)

It's still another data point that gets in people's heads IMO (it's in mine FWIW).

A good analogy might be the crappy customer service provided by AT&T, Comcast and [insert most utility cos] over the past 20 years. Most consumers now expect poor service and I'd wager that has, to some degree, had an influence on purchasing decisions.

I totally understand where you're coming from, but I suspect that what's happening here is that team acquisitions provide vivid examples (and, in particular, long agonizing will-they won't-they suspenses about killing off the service) that create an easy narrative for something that is always happening all the time anyways.

It just is risky to do business with startups.

"...long agonizing will-they won't-they suspenses about killing off the service"

I think this is the main differentiating point between 'failing' and 'acquihires' (from a user's perspective).

If a company is simply shutting down, there's some sympathy for the team and it's known that the service will stop. With a talent acquisition, nobody really knows what's going to happen to the service (maybe even the founders don't know) and that extra level of uncertainty is off-putting. [1]

Eventually, that extra level of uncertainty transfers over to the List Of Reasons Not to Work With Startups(TM).

[1] This is also true of straight acquisitions but there's a reasonable expectation that the acquirer is purchasing the product as well as the team.

It definitely makes for a more wrenching story, but it's hard for me to see how failing outright is somehow better than selling the team and keeping the service alive for 6-9 more months.

Perhaps it's because acquired companies tend to be more useful and more popular than companies that fail. So the cumulative disruption is greater for the acquihires than for the failures.

Or in other words, I would sacrifice many many startups to get EtherPad back again.

true one

Hard to believe that a team that knows it will be able to be acquihired won't be phoning it in and slacking off. Same as people do when they have taken finals and know that grades don't matter anymore. If you know failure is at the end and not some big prize and do over you will naturally try harder.

Not trying to suggest either is better. Just thinking through why people (including me) might react to them differently.

You don't "do business with startups". You do business with other businesses, and expect them to be serious about their propositions.

You can't will away the extra risks carried by immature businesses. This isn't a moral issue. Some companies mature and stabilize around viable businesses; most don't.

if you're talkinga bout a b2b transaction, no. your business negotiates your terms well with the startup to ensure you're innovating but not going to be significantly impacted if the startup goes under.

In semiconductor startups, you sometimes need to secure "second source" agreements with a bigger business (that could be your eventual acquirer ) that assures they'll takeover manufacture your existing silicon if they go down.

In our case we had a second-source partner until our acquisition that had "rebadged" parts available. It was annoying, but it's sometimes the only way for a startup to sell to big multi-million dollar customers.

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