What I Wish I Had Known Before Selling to Google
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1) Sposato was not a founder of Picnik. He was hired by the two founders, myself and Darrin Massena. 2) Sposato did not decide to sell Picnik. Naturally he was very involved in the process, but the decision was ultimately made by the board (which Sposato was not on). I can tell you that it was not an easy choice. 3) Picnik was not a "photo-sharing" site, it was a photo editing site with very limited photo sharing. 4) "One-third of our 25-person team, including my two business partners, quit right off the bat”. Both co-founders worked at Google for slightly more than a year. Sposato was there for about two years. Most of the people who left were marketing support or office management. We did lose our lead designer to Apple, but I don't recall any other product related departures in the first year.
Picnik was amazing. Great team, we had a lot of fun and millions of amazing customers. It was very rewarding to work on a product that your customers love. Selling was a tough choice. Picnik was very healthy, profitable and growing. We felt like we were able to capture much of that value in the sale price and also have the opportunity to work on a product at Google that we felt would have a huge impact.
Unfortunately for us, within our first six months Google decided to focus on Google+ and there wasn't room for any other photo product outside of Google+. I completely understood at the time why Google+ was important to Google, it just wasn't important to me. So I left. I don't know how we could have been able to predict the shift in focus to Google+ even with perfect visibility into Google. From what I gather, such a large shift in focus and investment was a unprecedented in Google before Google+.
I think Google is a great company, I have a super high opinion of the people that I met there. Perhaps this wasn't the optimal exit for the Picnik team, but it was pretty damn good.
-mike harrington
these exits practically always kill your original product, which is the ultimate fuck you to the user base that got you there to begin with.
that's why it's amazing to see companies like dropbox, box, etc to stick to their guns (so far) and not throw away everything they worked for.
the whole web startup concept seems broken. it's not about real solutions and sustainable businesses, but rather a giant get rich quick scheme. just need some suckers to fall for it.
FWIW we tried to buy Picnik back from Google once we heard that it was going to be shuttered. They wouldn't sell. It was gut wrenching to see Picnik go dark.
> Our users were constantly on our mind.
If that were true, you wouldn't have sold the company to Google, as the outcome is not out of the ordinary by any means. So though they may have been on your mind, your users were ultimately not your priority.
> It was a real and sustainable business.
Then why sell it? Which leads to:
> We felt like we could make the product better by joining with Google.
and
> Picnik continued to grow dramatically while we were at google.
Which means you prioritized growth over ensuring service and supporting your customers for the long term. This isn't bad, it's how you expand the business, but it does show your priority was not the customers you already had.
Which brings us back to the original point:
> This doesn't really apply to Picnik.
I think you're deluding yourself, not in a way that implies any sort of insanity, but more of a coping mechanism so you don't have to confront the fact that your biggest priority was money and not your users. In the end, you (really your board, which I think includes you) sold to Google, relinquishing control over the long term care of your users. That is the action, and that is what is ultimately true.
I don't think you're a bad person by any means. I would have made the same decision. Lets just be honest about outcomes. I think it's easy to be tricked in these acquisition offers, mainly because your personal outcome is ensured. You are getting lots of money, and you get the opportunity to see if you're business can get really big. The problem is, this actually puts a make or break ultimatum on your business. If you don't get the rapid growth you were hoping for, or your business doesn't align with the parent company down the road, then your business is broken (shut down by the parent) and your customers lose. So this is the gamble you face, and either way your future is positive, but you're betting with your customers, and when it doesn't work out they lose, but you don't.
By Mike's account, the unanticipated pivot to Google+ had nothing to do with being "tricked." Yes, selling your company does take the risk that the new parent company will shut down your product, but it also gives you access to resources you would not have had, which can ultimately make the product better than if you had stayed independent (thus benefiting your users). For example, Google Voice has been able to offer far more than GrandCentral's product did.
Is it a gamble? Yes, but not the simple "founders vs users" one you make it out to be.
The "tricked" comment was not that Google tricked him (and really this isn't particularly about Mike), but that it is easy to trick yourself into seeing it as a better outcome for your users than it likely will be, because it is such a good outcome for yourself.
The path of prioritizing growth is great for the founders: you get to see how big you can get your business (how many more users you can serve), and you get a big payout up front.
The path of prioritizing care of your current customers looks very different: growth will be slower, stakeholders don't get their payout, but you will not be gambling for a huge business with the contributions of your current users as stakes (he said the business was sustainable, so the startup risks are likely disappearing and life-span of the company is growing quickly).
Personally, I'm going to go with the prioritizing growth option, as the founder did, but I'm not going be dishonest (I don't see it as intentional or bad character, I think it's part of the reality distortion field of the startup scene) and say I did it thinking of my current users.
I don't think it's a founders vs. users struggle, the founders certainly do think about their current users, they just aren't prioritized. The founders certainly aren't trying to dump their current users, so they aren't against their users.
1) get acquired and risk a possible shutdown by the acquirer;
2) don't get acquired and risk a possible shutdown by worsening economics, competition, etc. (most fledgling businesses are vulnerable compared to the security of Google)
If this attitude prevails, eventually you'll likely to find you've poisoned the well such that you won't be able to find enough new users for subsequent ventures. As I mention here https://news.ycombinator.com/item?id=7130428 in the context of the end of the IPO exit, every accui-kill results in a pissed off set of ex-users less likely to try the next startup's shiny new toy.
What the heck was the reason behind that? I'm so curious. I know Google likes to headshot different products, but typically aren't they the unsuccessful ones like Google Wave?
Is it justifiable to use the service of a possibly great startup, knowing that there's a real possibility that it might be sold soon and just be a gear in some other company's product?
Note, that I don't see any reason to trust Google either. Remember wave? Remember XMPP compatible gtalk?
My conclusion has been that if/when I finally get started on my first product, I'll probably license it under AGPL, and make sure there's a realistic self-host story for users -- and then charge for the SaaS/PaaS-bit, but probably not for the client (or server side software under AGPL). Clearly it's a little more challenging -- you might end up with people competing with you for hosting -- but I can't see any other way to build customer trust. Nothing any company would say to me as a customer would make me trust them -- how could I ask anything else from my potential users?
Since people still pay for hosted email (even if many, many do run off to freemium services) -- I'd say the business model is viable -- those that can afford to pay, and know that value can be added by proper hosting -- and not having to do everything themselves -- will consider becoming a customer. And I strongly suspect those kind of customers are the best kind of customers. Especially for a start-up.
Even though I wasn't a user, the most dreadful death-by-buyout I remember is DabbleDB[1] -- compounded by the fact that the founders went to twitter -- presumably helping with the biggest non-product of our decade -- rather than allowing dabbledb to live on in any form.
Also note that having a published API/open protocol/standard isn't enough. For example, the IMAP standard clearly states that message ids aren't necessarily in chronological order. Some IMAP servers make sure that they are and/or that messages are returned in a list ordered by (message) time -- and some will return the message that was latest modified first (eg: a messaged moved into a folder). Some IMAP clients get this right (sort as the user wanted, regardless of server implementation) -- some get it wrong. A small difference (arguably client bug) that can make or break certain use cases and processes for dealing with email.
For a b2b setting -- one could reasonably offer source under a different license -- if AGPL seems too open for enforcing whatever business model one has decided on. But I suspect that AGPL would work fine in b2b settings as well. The key aspect is to offer source code and documentation in a form that offers a viable self-help scenario in the case of a bankruptcy or "death-by-acquisition".
Asking this question plays into the hands of the tech giants. Undermining the startup ecosystem ultimately benefits them even more than acquihiring.
And if it's a free product, double or triple (at a minimum) the likelihood of any of the above happening.
Well, something like that is always going to be a motivation of your investors.
The real problem is that except for rare exceptions like Facebook, our government has destroyed the IPO exit, with SarBox in 2002 being the last nail in the coffin. I think a lot of people haven't internalized this yet, that that investment model which had a fantastic 4 decade run starting with late-50's legal and/or regulatory changes, is OVER.
Silicon Valley/the Bay area really became magic during it, but the game has changed, and in such a way that it threatens the whole ecosystem. In that every acqui-kill (thanks for the term, _random_) means N more screwed users, meaning that many fewer people willing to take a chance on a startup of this nature.
In my case, there are more than a few companies like this that I've thought I'd really like to use, but the risk/reward ratio is just too marginal. Those that have gotten successful, have a business model that looks viable, and have clearly decided not to get acqui-killed, like GitHub and FastMail, sure. A company like Picnik, forget it.
Let's start with the most basic of basics, the "greater fool" principle. In that when someone makes an investment, they intend to get a return on it, perhaps interest and return of the principle for a CD or other loan, or being able to sell their stock to a "greater fool" then they.
But investments in privately held companies are famously illiquid. If you own 10% of Brand New Web Startup (BNWS), ignoring whatever contractual conditions there may be on selling your share, you can only sell it to a "qualified investor", i.e. not a widow or orphan but a person of documented wealth (and that's been tightened recently). And for these sorts of small companies finding a buyer can be extremely difficult.
This is generally true even if the company is well established, nicely profitable, and looks to have a good future. It's called the "cashing out" problem, and my father made more than a small amount of money helping founders and investors in small companies do that.
So that's the general background. One route opened up in the late '50s (this is from memory, and I don't remember exactly what the detail was, venture capital preceded this), is an Initial Public Offering, where you use an investment bank to offer a fraction of your company to the general public, as shares of stock. If this transaction is successfully completed, you and the investment bank have big bags of money, and many generic, not necessarily "qualified", investors have shares of stock in your company. And your company is now "public", it has shares traded on an exchange, those shares are liquid, and you're subject to a whole lot of law and regulations, again, to protect those widows and orphans who are now allowed to buy a part of your company.
Sarbanes-Oxley was the final nail in the coffin of going public with an IPO because it made being a public company unreasonably expensive, onerous, and legally dangerous.
Almost all companies that would have previously paid back their venture capitalists through an IPO have to use another route, and being bought by a big company is the easiest and perhaps most common method (but one that most of the time is ruinous, the history of high tech mergers and acquisitions is horrible). Our host made his money this way, selling Viaweb to Yahoo, and you can look up some of the aftermath in his essays.
This, BTW, no doubt has something to do with VCs' having flat returns for the last decade.
Jonathan Sposato - CEO
Darrin Massena - Co-founder, CTO
Mike Harrington - Co-founder, COO
Anyhow, I really like what you guys (however many) created and was sad to see it go. It was definitely more powerful than the snapseed stuff they integrated later.
One more thing, when Google bought Snapseed, I immediately thought "wow, I guess Google thought the picnik.com guys weren't that good, if they need to buy Snapseed, too". And then a while later they integrated Snapseed into Google+, too, and it does look/work much better. I do expect them to kill the Snapseed app, soon, too, and just integrate many of its features in the Photos or Gallery Android apps.
I still don't have anything in my toolkit that can compare to the simplicity and convenience of editing the browser. I've tried others but find them lacking.
Thank you for such a great product.
@dalanmiller
User pages are certainly not updated instantly. That much I am sure of.
My girlfriend and I used Picnik a lot, back then in 2011. Its photo effect filters were way better than what Instagram, Photoshop CS 5, etc. provided.
A Picnik photo app for iOS/Android would have been great. But sadly, Google shut it down. And G+ is a ghost town, only Youtube comments appear there (by accident).
I was only an employee, so the motivations for selling to a parent company could be different. Yet from my angle, it was either, A) go for another round of funding or B) find a company that would be a natural fit for our small team and product.
When such a company eventually came along, it seemed like a no-brainer deal. We can finally get the resources of the company to help us become stronger and do more interesting things with our product. They assured us they had a place for the product and believed in our mission.
Once we got absorbed, things changed. They split us up into different teams and threw product managers at us. We need all of your "startup-foo" energy and creativity to help spark a fire around everyone else they told us. You can get back to your product once you help ignite our core products first. Well, after a year of this so far, we haven't had time to work on anything related to our startup at all.
I think it was a fail for everyone except the founders and investors. All the original people seemed burned out already on projects they never signed up to work on. All the non-engineer folk have since left as they got really bad deals.
Both of the founders at least made enough from the deal to buy amazing properties in this crazy real-estate markets so I think for them they can shrug off their original baby. In the end though, the product has fallen apart from bit-rot and engineers are slowly moving on to other companies one-by-one.
Embracing them, extending their product, then extinguishing it? That sounds a bit familiar...
"My one regret was agreeing to stay on for four years."
When I sold my company I had to stay on to consult for 3 months.
3 months that was an eternity.
I can't even begin to imagine what it must be like to have to work as an employee at a company that you just sold. Just hanging around not directly tied into the outcome in any significant way just is not the same as being "the guy" in charge.
... I was surprised at how short ... most of which was just filler for ...
See there was a silver lining about being acquired twice by Google :-). Could it be re-written as "How to use Google to get FU money so that I could sit back and build the things I really wanted to build." ?
But for anyone that doesn't yet have "FU" money, where the alternative is 40+ years as a cube rat if you fail?? Worrying about team culture seems like a luxury.
My point is:
* Even with significant obligations, a startup failure is unlikely to result in your opportunities being limited for very long. Yes, you'll probably end up needing a "real" job for awhile, but (a) not necessarily for very long and (b) if you crater a startup, a normal job is probably a good move anyways.
* If the only job you can secure after killing a company is as "cube rat", consider whether your prospects as an entrepreneur are really all that much better. People like to believe that entrepreneurship is something totally different than executing a conventional career, but that's mostly a myth.
Couldn't agree more. I fell into this trap for a number of years. Once I started taking my business seriously and treating it like a job (an intense one at that), I've had far more success.
Have you ever written about this period of your life? Having a family and the time/energy/freedom to play the startup game seem so mutually exclusive to me, although I do admit that's mostly my gut speaking out of fear of aging and settling down. I'd really love to hear more about how you managed it all.
It helps not to look at it as a game. Matasano is a business, growing steadily, with a serious team and serious management. It isn't something that might pivot after some networking meetup thingy tomorrow, or if Facebook buys the wrong company next week.
I'd read a lot of 'patio11 if you're interested in this stuff too.
While we all eat shit at different tables there is no question in my mind that being an entrepreneur gives you greater flexibility and to be able to play less games that you do when you are an employee. (Or for that matter have partners).
I'm reminded of this when I do some side consulting and help people with what I am really good at. (Negotiating) I have to spend time convincing them of something that when I do the same for myself I have to convince nobody but myself. (And it's worked real well. For many years.) The amount of extra time I have to spend selling a concept (and writing emails) is a big drain.
Likewise I have a person who does some work for me on the side who holds a full time job with a big corporation doing security consulting. He does the work for me (on the side) because he enjoys the freedom he has to implement his ideas without having to convince his companies consulting clients (or his co workers) that his ideas are right. So he gets pretty much cart blanch with me to try something (and I write the check without all the red tape and effort).
This. This. A thousand times, this.
Really? That's a surprising sentiment coming from you.
Something I agree with is "someone who can play the game as an entrepreneur can also successfully play the game in a conventional career, but most 'regular' people don't play the game at all". Is this what you're talking about? Because I have to say, most of my entrepreneur friends are very different people to most of my "regular career" friends.
Pretty much this. At a cube job you work for managers, at a startup you work for VC investors.
>* Even with significant obligations, a startup failure is unlikely to result in your opportunities being limited for very long.
It depends on the obligations, I assume you mean mainly family. If you are lucky(?) you may have a spouse crazy enough to follow you down that uncertain path, but that is not the case for most people.
In what universe is that a likely outcome? For any reasonably talented person, the worst case is getting a 6 figure job at someone else's startup for a few years before you try again.
Besides you don't have eternity to keep trying to start companies, after one or two bursts you are pretty much done if you aren't already wealthy.
Back in the 90's Cisco had a fairly good reputation for actually being able to capitalize on profitable acquisitions while most of its competitors wasted money on them.
Are any of the current crop of serial acquirers actually good at capitalizing on their acquisitions? It's really hard, but those who can do it will have a sizeable advantage moving forward.
This of course totally depends on the money that is being dangled in front of you and the alternatives. Upside, downside, risk etc.
Which is why you can't generalize in terms of most business decisions.
Here is an example that perhaps people can relate to.
You have a car for sale. You are asking $20,000 for it. Through some mistake or error you end up getting a buyer willing to pay $25,000 for it. You feel like you are making out real good. So you have a reason not to put friction in the deal because you are making out like a bandit. You just hope the deal goes through. So if the buyer also wants to know if you will throw in the GPS you say "sure no problem". You aren't going to be picky and potentially kill the golden goose.
In another case you have that same $20,000 car for sale but you get offered $15,000 for it. So perhaps you are going to be picky with the details more. Like if the buyer wants you to meet him at an odd time you might say "no it has to be when it is convenient for me". Or if they say "also want the GPS" you will say "no". Or if they say "I need to get a bank loan and it will take me a week" you say "no". (With the 25k deal you take your chances, right? I would if everything else seemed legit).
The average employee is seen as a resource. Google is almost always buying talent, not products. If they want to buy your product, it's usually to shut it down so it doesn't slow down the progress of their big Google products.
The only way Google buys something and keeps it alive is if it is big enough or strategic enough to make into flagship products, but those are very rare.
It really isn't.
15 years is a long time to work someplace.
Compare that to his employees, who likely did not get FU money, and still lost the team culture of the startup.
I have seen similar things (from an outsiders view). When you sell your ideas or company to a big corporation, it will be integrated into the corporation structure somehow. And whatever promises you got before, your ideas will get under the wheels of corporation politics.
I have seen it once, where young idealists sold their ideas to a corporation and worked on the idea. Some months later, the whole idea was swallowed by a different department and thus closed down. What was left, was the workforce of the idealists and maybe some little money.
This could use some elaboration. Was Google OK with it? Did he have to give up something, such as stock options, for not staying the agreed term?
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