Poll: Would you sell your startup for 5x to Google so they can kill it? | Hacker News Reader

Poll: Would you sell your startup for 5x to Google so they can kill it?

27 pointsknes55 comments

Why would you say yes or no?

Because the "I am a visionary that will change the world" is a game better played by people whose mortgage is paid off and who have enough savings to pay for their kids' college education.

Also, having a successful exit (and success in this case is measured by the return to your investors, not whether the product survived the acquisition) does wonders for your startup career.

Exactly.

Until you have financial freedom, the goal is financial freedom.

Yes, of course.

Ever hear a movie described as "the kind of movie you get to make after winning an Oscar"?[1]

There are some movies - special movies - that are the kind of movies directors get to make only after they've made a successful movie.

Start-ups seem a lot like that.

[1] That was Todd McCarthy, writing for Variety, about the Coen brothers's movie A Serious Man.

Are startups like that? Most of the companies I think of as special in tech were their founders' first startups, not subsequent ones started after a significant cash-out of an earlier one.

That is largely because a.) cash-outs of early startups are often not all that significant and b.) you don't here about those cash-outs.

Microsoft was Bill Gates's second startup with Paul Allen (the first was Traf-O-Data), plus they'd done several consulting projects as teenagers. Apple was the second startup for Steve & Steve; the first was selling blue boxes, and it made enough to finance the Apple I. Facebook was Mark Zuckerburg's third; his second was the Synapse Media Player, which reportedly got a $2M buyout offer from Microsoft.

Generally, you can't plan to be Larry Page, Sergey Brin, Mark Zuckerberg, Bill Gates, etc. Those are the guys who got it right the first time, but there are other models.

Elon Musk is a prominent example of how this alternative pattern works. He founded Zip2 (relatively unknown), then PayPal, then Tesla, and most recently SpaceX.

Evan Williams follows the same pattern. First PyraLabs (again, relatively unknown), then Blogger, then Twitter, now Medium.

In each case like the aforementioned two, you see a relatively small acquisition, followed by an explosion of ability and ambition.

This is the entire foundation of the "PayPal Mafia" - serial entrepreneurs who start out small (or relatively so) and then start serially disrupting greater markets.

Elon Musk is a good counterexample, yeah. That reminds me of one other ex-PayPal person: Russell Simmons founded Yelp after PayPal (though he wasn't a PayPal founder, just an early employee).

I mostly think of the PayPal Mafia as subsequently investors rather than founders, though. Spot-checking another 10 or so of the PayPal alumni, most seem to have gone the angel/VC route post-PayPal, rather than starting new businesses themselves.

> Mark Zuckerberg, Bill Gates, etc. Those are the guys who got it right the first time

See the sister comment for history on that. They are not known for their first startup

Yes, for several reasons. I'll assume this is my first startup, and I started out at the bottum rung in the tech world, with no prior connections.

1. Most startups (by an incredible supermajority) fail. An acquisition can save you from that, especially if you're one of those startups that generates no revenue but is extremely popular.

2. Not only do most fail, they don't generally fail spectacularly. They die, slowly and steadily, in a death march that saps the founders of their confidence and has been documented several times to lead to severe depression[1].

3. I need to pay the bills. I want to be financially independent and capable of supporting the family and lifestyle I'd like currently and down the line.

4. If I want to be a visionary who changes the world and Disrupts The Man, I'll take Elon Musk's advice[2] and cash out this smaller company so I can go on to do bigger and better things. I'll be more equipped with personal assets, better connections and superior coding skills and business savvy the next time around from the get go. This way, I can tackle a bigger market.

5. With all the foregoing in mind, when I go for the big market with a second or third startup, I may have the fuck you money to resist acquisitions and see my dream through to completion.

Here's a story: Elon Musk spent $100 million of his personal fortune making sure SpaceX didn't die. He didn't have that money because SpaceX is his first venture. Nor was Tesla, nor even PayPal. Elon Musk's first project, Zip2, was acquired in 1999 for $300 million[3]. No one remembers it, but it was Elon Musk's first baby. He made himself financially independent and sold his first idea, then went on to do bigger and better things that would change the world without an acquisition.

[1]: http://www.businessinsider.com/jody-sherman-ecomom-2013-4

[2]: http://venturebeat.com/2011/09/15/elon-musk-disrupt/

[3]: http://news.cnet.com/Compaq-buys-Zip2/2100-1023_3-221675.htm...

I answered your question seriously, although the phrasing of the question seems like a snarky, implicit criticism of Google and the way it handles acquisitions.

My company failed, a long slow death, after 8 years. I was barely able to pay myself during the latter few years, but I had employees and cofounders that I felt obligated towards... and then company debt I needed to work off. While we have shut it down now and I have a full time job, I feel dead inside, and I am having a rough go at being functional. I hide it from my family, and am finding it hard to be productive. I'll just stare at the screen instead of working. I don't know what to do to jump start myself again. I feel so empty and like I am fake. It has been two years. I haven't said this to anyone before now. But I believe you are right about the slow company death, and while I don't believe I am severely depressed, I do feel a bit like Frodo at the end of LoTR, but without a Grey Haven sanctuary to sail off towards.

(Sorry for the rambling and the thread hijack)

>>> I feel so empty and like I am fake. It has been two years. I haven't said this to anyone before now.

When I last felt like that, I did the same thing. I said nothing to anyone for about 18 months. Eventually, I did talk to someone over a few drinks one night - not someone particularly close to me, just a friend. They didn't say anything profound, they weren't hugely supportive, they didn't offer a new perspective or anything from their own experience. But that outpouring of my feelings was, I recognise now, the first step of the healing process for me - a little like lancing a boil. Kind of silly, but that's the human psyche for you. I can't guarantee that it'll work for you, but it worked for me. Think about trying it?

Thanks, I may try that.

That's rough, I'm sorry. But thank you for sharing. If you ever want to talk to a techie about it, you can email me in confidence.

Thanks

lol Frodo... i came up with this idea for power but i quickly became overwhelmed so i only told a few people... its more fun watching Elon Musk talk out of his ass about renewable energy...

https://sites.google.com/site/verticalwindfarm/

shhh!

5x valuation? Whose valuation? Obviously it is not 5x the valuation from Google who is going to kill it?

Assuming 5x valuation is 5x what I think it is worth: of course I would sell (I like to think of myself as rational).

That's how I interpreted the question (which basically makes it a no-brainer).

Almost a no-brainer. It depends on how many x you think you can add to that valuation in whatever amount of time you are okay with adding it.

Like my sibling post says, my valuation by definition includes the present value of the expected future growth and revenues, in which case you obviously take the 5x offer.

No, because that should adjust your expected value.

It could be 5x of the valuation set at the last funding round, but I agree it's unclear what the OP meant.

Keep in mind, if you can do your startup as OSS, it changes the game.

For example, look at Monty and MySQL. He sold to Sun, he didn't like the direction they (now Oracle) took it, so he forked his original codebase, and kept developing it in a new company.

There may be contractual reasons why this is difficult, but there are huge advantages to releasing your code if you can.

That's a bit of a tricky situation though:

* Part of how the original Mysql made money was by saying "ah, this is GPL'ed code, but if you'd like to include it in a proprietary work, we can sell you a license for that, since we own the copyright to the whole thing". He can't do that again.

* I'm not sure how often you can burn your bridges like that and have people happy about it.

Magnitude matters.

If my valuation is 50k, maybe not. If my valuation is 1m+, probably would.

So does financial circumstances. Someone who already has a previous startup under their belt, or even a couple mil saved from a previous successful career, will be much less likely to sell out for the cash than someone who's been living paycheck-to-paycheck their whole life.

Interesting how everyone is falling for this logical fallacy of a question.

There are 2 modes in which Google buys a company.

1. For the product. This is the case that might entail 5x valuation and in this mode the intent is never to "kill" it. That would be stupid.

Obviously, it doesn't always work out and the product might end up dead but it's never the intent of neither party at the time of acquisition.

2. For the people i.e. acu-hire. In that case the startup is effectively dead anyway and the founders and investors know it. Google won't pay 5x in that case, both parties know that the product will be shut down (but it would be anyway at some point) and the team simply gets a lucrative (?) job offer.

There is never a case where Google pays 5x for a product they intend to immediately "kill".

I think another critical factor is, if you don't sell off, will Google ultimately supplant your relevance and kill your market in the long run. If so, it might be better to benefit from their investment than just be another forgotten casualty. How original is your idea? How easy is it to replicate? How common sense is your business model and if novel enough, is it protected and do you have the legal resources to defend it?

Let's assume a few things:

1) The base valuation is high enough to be significant.

2) It's not a passion project.

3) I have other ideas.

4) The IP stays with the company.

5) The employees get taken care of.

As long as 1, 2 and 3 are true, it's worth getting the money to start the next thing. I include #4 because it's kind of a copout to assume you can start over with a forked code base. Then it's not a real choice. #5 is included because what goes around comes around. If the founder takes the money and runs, but everyone else gets screwed, it'll be much harder to start the next business.

#2 and #3 are really the critical pieces. It's the difference between "This is special" and "This is one idea of many." Microsoft, Google and Facebook all would've answered "No" to a similar question. In all 3 cases it was the founder's first company, so they weren't playing with the House's money.

Very good question!

Maybe, but it's hard to say. As somebody else said, it would depend on the valuation. Right now, we're pre-revenue, so any valuation would presumably be pretty small, so even at 5x, the overall price would be fairly small. It probably wouldn't be worth it to sell at this point, even if the opportunity existed.

Now if the company were valued at, say, $10,000,000 and they offered us $50,000,000, that would be awfully hard to say "no" to.

Edit: Voted "yes" since there is at least a hypothetical scenario where the answer would be yes.

The only owners who would say no are the ones who started a company because it was the only way to make their product come to life. They treat the product and the company that forms around it like their baby.

Most owners are entrepreneurs or businessmen or visionaries who are in it because they enjoy(ed) the process and would gladly start over with a new project with a huge slush fund to fall back on or escape the stress and responsibility of the start-up world all together.

I voted yes, although it's a qualified yes. If we had a large and passionate user base AND positive cash flow I would attempt to go without selling.

If we had only so many users or we couldn't find a way to reasonably monetize our product, I'd completely feel comfortable leaving Page and Brin holding the bag.

I had to say no as our startup is a platform for our customers to actually run their businesses! They have trusted us with their livelihood and if I thought that an acquirer would shut it down I definitely wouldn't sell.

In a heartbeat - and then I'd go and build something even cooler with the money.

Doesn't matter what the financial situation is. Are they acquiring you because your product stinks but you and your team is awesome? Then what are they paying money for? Why would anyone pay 5x to shut it down?

Plenty of acquisitions follow that logic. If you have a large profitable business and a small competitor comes forward with a new business model that might someday be highly disruptive of yours then you try and quantify that risk and compare that potential future loss against the cost of acquiring that small competitor now.

Whether you kill the new product after acquisition or integrate it or keep working on it in house is just another business decision. If the old model is much more profitable per user than the new then it may make good sense to buy and shut down a few upstarts just to extend the lifetime of your highly profitable existing business.

I don't know anyone who considers this kind of thing as their primary exit strategy but in my experience it's common for founders to consider that "threaten a big corps market enough that they acquire you to shut it down" is at least a possibility.

I think it's fairly obvious that a lot of what get presented as an "acqui-hire" is actually mostly based on this evaluation of the market. But it's bad PR to admit you are attempting to create/protect a "monopoly".

This question reminds me of the Simpsons, where Bill Gates and his thugs "bought out" Homer Simpson's computer company.

"Alright, 'BUY HIM OUT' boys!". A minute later only debris remains...

Yes, because otherwise they would create their own version of it, backed by more/better engineers, more resources, and more visibility, which would slowly crush your own product.

Sure it's heartbreaking to see your labor of love dismantled before your eyes, but with your new bankroll you can now support your family, attempt another startup with your own resources, or live the life of a playboy multimillionaire ;)

This depends. Am I profitable (by this I mean able to take money out after reinvesting in the company), pay my bills, live a moderately nice lifestyle, and have the company continue growing without Google? Then maybe not. If I am not profitable? In my current financial situation, yes. In a situation where I already have a decent amount of money, maybe not.

I think it depends on a lot of different things, including how over/undervalued YOU think your startup is by other people than Google, and irrespective of financials how excited you are about the idea.

The question might be easier to answer if it was: "Would you sell your CURRENT startup TODAY for 5x what INVESTORS think it's worth (to Google so they can kill it)?"

If I had a startup, then yes. I would then take the money and go live out my days in a very tropical locale.

It's other people's startups I would not sell off. Facebook bought Beluga and we haven't had any good group messaging since they killed it. GroupMe, Facebook Messenger, all suck. Google Hangout is good, but doesn't quite do the same thing.

I did sell it for the "mental freedom" that comes with it. There is more that you can do in your next venture.

The short answer is yes. But, its possible I'd not be interested in selling if growth was fast enough that in 1-2 years the company would be worth 10x what it is worth at the time of the offer. So, is 1-2 years of my time worth that? It depends on how enjoyable the work is.

Because I could always just pull a Tan ;) and do the same thing again, in CA.

It depends on exactly the situation but heading towards no:

Why am I building this business if I don't think it will increase above its current value?

Why does Google value it so highly? What does Google see that requires them to shut us down?

If I feel this is not my bestest ever idea and I can come up with better ideas in future, I will sell it for sure. Have done it twice before, not with google although, for the same reason.

My company isn't really a startup (it turned ten years old one week ago). However I'd happily sell it for 5x its worth, because I could immediately retire :)

if google is interested then someone else is likely to be and may not kill it, too.

Yes, of course.

Unless money wasn't the goal, and power was the goal. Then it really depends ...

Wow, those results are telling.

I certainly would consider it.

5x you say? I'm over it.

Am I bored with it?

Yes, C.R.E.A.M.

really depends on sooo many factors...

It's sad what Google has become and that we have to ask this question. Sure other companies in history have done the same to squeeze out their competitors but Google takes it to a whole new level because of their massive bankroll and cozy relationship with the current administration. Why innovate when you can just crush your competitor?

Reply on news.ycombinator.com