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257 pointsdanielpal58 comments

The genius here was Bill Nguyen turning a failing company and a pittance $11mm offer from one failing company (Nokia) into an $80-160mm buyout from a real company (Apple), essentially though hustle alone.

But it's zero-sum genius. I can respect him for being good at playing a specific game, but it's not a game I want to play myself.

And he almost did it again - if he "exited" at the peak of Color.

When was Color's peak exactly? When they raised money? Because after that, it was mostly failures after failures.

And before that, too. I'm still struggling to see what, if anything, Color did to enhance anybody's life.

Oh, I don't know. I recall a good half an hour of gleeful Schadenfreude in the office when we all tried out Color for the first (and last) time.

I'm not saying that a fleeting moment of entertainment in the lives of a few jaded technology folk was a good return on that investment, mind!

I struggle to even respect it. He ripped them off; the world would be better off without his "hustle".

"Ripped them off"? These acquirers didn't have the resources and faculty to make their own decisions? You "rip off" helpless people. These aren't helpless people.

He ripped nobody off, he sold a company in the exact way you're supposed to sell a company or for that matter the exact way you sell anything with a limited supply. Heck thats how you sell a house.

Step 1. Find interested parties, Step 2. Get Bids. Step 3. Allow other interested parties to counter.

Thats it there's no scam here. Its not even genius its company selling 101. Everyone involved had the opportunity to do their due diligence. Instagram did the exact same thing turning a $500M Twitter offer into a $1B offer from Facebook.

In my mind what you call "company selling 101" is just a legal, high level form of profiteering.

It's an auction. Profiteering (price gouging) applies to commodities, which already have a market price.

Not even really zero-sum, because selling it to the person valuing it the most (to whom it is most useful) does create value.

But it's not as satisfying as making something that never existed before.

commodities, which already have a market price

Balls. Go to a commodity exchange and you know how you find the price? The last price paid at auction.

Sometimes the negotiation is disguised, using an order book or dealer system.

But sometimes they even explicitly run a call auction.

All Wall Street is is a continuous auction house.

All Supply/Demand is is a continuous auction.

Ripped off? Apple won what was effectively a sealed-bid auction: they paid a lot of money to beat Google (and Nokia, which was probably less of a big deal). They paid a lot of money for a real service to beat off real bids from real competitors, and to do so immediately. The fact they didn't realize how low Nokia and Google's initial offers were is down to Nguyen not being stupid enough to tell them.

If anyone got "ripped off" it was the venture capitalists who later threw $41 million at the "Facebook-killer" being developed by one of the few people in the Valley that had barely used Facebook. But again, they were sophisticated specialists who knew how to evaluate risk and do due diligence, so if they were so mesmerised by Bill's confidence in his ability (and his team's track record) they wanted to take a premature punt that size in an already-crowded space it's their own fault.

Lala was the best music streaming service at the time and I am pretty sure whoever bought it was going to benefit immensely. (I'm pretty sure it's the source for the iTunes match technology.)

I don't know for sure personally, but I don't doubt that.

What he did wasn't wrong. It was just exploiting a hugely inefficient market. I think engineers would rather build stuff and make things more efficient when they see something like that -- salespeople would like to exploit it (and in the process make the market more efficient). It is more an aesthetic choice than anything else.

Sales 101 - the price is whatever someone is willing to pay for it at one point in time ... no more, no less. Selling real estate is exactly the same.

This is how business people get paid the big bucks.

All your startup's engineering work = $11 million

A month of CEO hustling = $149 million

I might be wrong. But, I think the then CEO was actually one of the current YC partners, Geoff Ralston.

Bill Nguyen was on the board I think.

And thus the shakey underpinnings of a marketplace that overvalues certain companies come about.

Fascinating story.

Fast Company did a piece on Bill Nguyen about 18 months ago: (http://www.fastcompany.com/1784823/bill-nguyen-boy-bubble) and included an infographic on his track record:

http://infographics.fastcompany.com/magazine/160/bill-nguyen...

For a bunch of companies that have widely been considered failures in terms of product and number of users, he has had some unbelievable exits and financial successes.

How are those acquisitions doing now?

Keep in mind most acquisitions for product integration kinda fail, well at least most of the acquisitions I hear off. The company I work for is small printing co, they made a small acquisition (sub $2M or $3M)a few years back, I doubt they got more than $500k in revenue from it.

The point of this post is to talk about Bill's hustling when selling Lala, which is a very interesting story.

The author should have left the last word out to make a much more powerful story about Lala rather than changing the focus of the article to Apple's "genius," especially since there was no genius involved on Apple's part. Just good luck for Apple, and horrible luck for the Color team.

I disagree. I thought the last paragraph was great. Life is never a single event. Round 1 to Lala and their engineers. Round 2 to Apple. There'll be Round 3's!

I agree, the last paragraph is great. My issue is with the last word. A better ending might've been something along the lines of "Paying twice cost less than paying once," and left out characterizing this fortuitous win as a "genius" strategy.

English isn't my first language and I really have a hard time grasping the meaning, the subtelty, of the end of the article.

Does the author say: "Apple bought some employes for a high price ($80M). Later, those employees left Apple for another venture. But when leaving, those employees also left some kind of shares/bonus or something very valuable they obtained by being acquired earlier. They were acquired again later (color) for a much lesser price so in the end they "lost" some money/shares/opportunity".

Have I got that right ?

The Lala acquisition was worth a total of $160M. $80M up front, and $80M as an earn out (over time). When they left Apple early to do Color, they lost a huge chunk of that $80M (earn out money) because they left early before receiving it (vesting) which in the end was worth a lot more due to increase in stock value. Apple bought Color (and those same engineers returned to work at Apple) for a lot less than what they would have paid in the earn out had the engineers stayed and not leave for Color in the first place.

Thanks a lot for taking the time to write it down for me! Much appreciated :)

This makes much better sense to me now.

The title of this is a little misleading as I don't really discuss anything about Apple acquiring Color. I just link to the rumor articles.

thanks for adding that - i read through it three times trying to find a link to page 2 or something. :)

I miss Lala, at least the final streaming iteration. It had iTunes Match for FREE years ago. You would upload your library to Lala, they would decide what they already had and just let you stream that, then anything they didn't have would get uploaded. It was iTunes in the cloud. Their webapp was phenomenal, especially by 2009 standards.

I had big expectations for Lala after Apple bought them. I thought they might actually get a true iTunes in the cloud built.

+1 to this. I am on Rdio now for $10/mo, and I easily would have paid Lala the same monthly fee for their service.

I assume they were in bad shape because they had to pay every time someone streamed a song, and not enough of their users wound up paying them for streaming access. Too many loss leaders.

What I liked about LaLa is that you didn't have a monthly fee, and browser-only purchases were dirt cheap, $0.10 for most songs if I remember correctly. I don't listen to enough music to make Radio or Spotify worth it for me, but I could buy a couple of albums to listen in the browser for 2 or 3 dollars every now and then.

This is what MP3.com offered in 1999. The only difference was the legal agreements so the record companies wouldn't sue on dubious grounds.

Looks like the post has disappeared from Aubrey's blog.

Google Cache of his original post: http://webcache.googleusercontent.com/search?q=cache:blog.au...

Gizmodo also has his post mirrored: http://gizmodo.com/5977076/the-amazing-story-of-how-bill-ngu...

Google was worried, they moved fast.

This is what I'm unsure about: how much of google's worries was a result of Lala being a worthwhile company and how much of it was a result of Bill's propping it up? Let's remove Bill for a minute. Let's say Mr. No-name-CEO reaches out to his contact at Google and presents the deal for Lala. My gut would be that Google guy would likely simply pass on the deal because he doesn't perceive Lala to be much of a competitive threat or a great product, not to mention the little traction they may have had was a result of Google's partnership(which I'm assuming they could easily opt out of). What am I missing? What made google worried, lala inc. or lala inc. with a salesman CEO with an acquisition offer?

Mr. Nguyen appears to be a hotshot startup salesman. Much like the proverbial car salesman, he can pump up something, sell it to a sucker, and pocket the commission.

He was relieved of day to day activities by the board about a month or more before the Apple acquisition...was that acquisition really his doing?

I do not understood the tale :(

Why it was genius?

Those employees were given options at Apple ($80M worth) that were probably lost once they left the company to work at Color. Then Apple ended up getting them back on the cheap. So instead of $160M, Apple ended up paying $80M + $7M.

Also remember the Stock has gone more than tripled. SO $80 in cash and $80 in stock that would be really worth about 200M today. Now they bought the same team again with 7M of todays priced.

Doesn't the notion of this being genius imply that Apple "let them get away" the first time because they knew they'd be able to acquire their next company for less? Or am I missing something?

Its a very sycophantic article that gives Apple far too much credit. No "genius" strategy was involved it was just fortunate (for Apple) that they could acquire the remnants of Color for such a low price.

I don't understand.

They bought Lala. The sought-after employees left even after being offered a $80M golden leash.

They were bought again with Color. What stops these employees from leaving again, with a much less lucrative golden leash this time around?

Nothing stops them from leaving again. My previous comment was just taking issue with the article describing the move as "genius"

Seems to be a common trend with pro-Apple articles. Earlier I read one that credited Metro-style design to Retina displays.

agreed. I don't believe those who left were unhappy, rather they thought that they had more upside by going to Color. Obviously, it didn't pan out. "Genius?" No, just luck for Apple, less so for the employees.

What remains to be seen though is if what any of those employees produce for Apple is worth anything near either price.

I guess it's a matter of perspective.

One could also say that it was an employee retention disaster. Apple could not keep their key engineers happy even after offering millions to stay.

After realizing the full extent of the engineers' value after the fact, Apple had to buy a company that had no viable product just to get the engineers back.

The other way to look at it was that Apple saved $73M+ ($160M-87M) at the cost of losing 20+ good employees for a few years.

What did Apple even end up paying for though?

The engineers behind the technological marvel that was Color?

Fascinating story but how is Apple genius here? Was it Apple's all along to acquire Lala, let Lala's engineers go before they exercised their options, somehow made Color a failure, then bought the all the engineers back on the cheap? The real genius (or at least real good biz person) in this story is Bill Nguyen, Apple just did what makes sense for them, it just happens that two of their acquisitions are Bill's companies.

No mention of the Color in the article, I guess but that was a great story.

This is how the Finance people in NYC interview for a job. Give them a number and they'll shop it around and start a competition. :)

The piece was removed for some reason?

Why is this top link?

Because 70 people voted it up.

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