Dropbox Buys E-Commerce A/B Testing Service Predictive Edge, Shuts It Down
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AcquiHire is becoming a real trend in the market. I think the key drivers are a lack of available talent willing to change companies and misaligned remuneration. The lack of talent is a common thread. Misaligned remuneration is something more interesting and likely to affect existing devs and companies more and more.
If you are in that high echelon of dev talent, you can find someone willing to offer a good salary and the promise of x% of potentially something large in the future. Or now, you can launch your own company, throw out a flashy project to demonstrate your skills, and by acquired by a Dropbox (or it's ilk). This way, you will likely get the same salary, the same promise, but a significant signing bonus upfront.
How companies are going to react to this trend will be interesting. Will signing bonuses and ongoing bonuses make a significant return?
"Dynamic Pricing" using "Machine Learning" in "Cloud computing"
That, or they found a correspondence between a detail in their offering/capabilities that matches what Dropbox wants to do.
Many thanks to you all for your feedback & support, and here's to a
new chapter!
From Our Incredible Journey (http://ourincrediblejourney.tumblr.com/): An incredible journey is:
One company buying another and closing its services down. This is a
purchase of the second company’s staff, rather than their product. An
acquihire.
If you look through the archives this is what all the incredible
journeys have in common. A company gets bought, its staff are excited
(publicly, anyway) about their new home, but sorry that the service
which brought them to the attention of their new bosses will have to be
closed. “But thanks for joining us on our incredible journey!”
This is what is galling. A company that can afford to pay millions for
some new staff but not for what those staff built. The people who used
the service, and invested their belief and time in uploading photos, or
forming friendships, or logging data, are left to find new virtual homes
while their former hosts enjoy a nice (if possibly delayed) payday.
This repeated pattern only encourages more people to create flashy
services that have no hope of being sustainable businesses in their own
right, but may survive long enough, with VC funding, to attract the
attention of a large company eager for new ideas and staff.
It’s one thing for companies to go bust, or to close their service
after failing to make it work. This is business. It’s capitalism. But
starting services only to close them a couple of years later when payday
arrives is a vicious way to treat people.It's a job. It's not a moral crusade.
Are you worried that some service you use and adore might get snatched up by Dropbox? Here's a good rule of thumb: if they're blowing the doors off the market, they're probably not going anywhere. If not: they're eventually going to get picked off by a bigger team that can make more money from the talent.
In a startup acquisition that would garner the approval of the author of the blog (and many others), the founders would, at the very least, find a way to slowly unwind the service. It wouldn't be an abrupt shutdown, leaving customers in the lurch. IT would be carefully planned.
At the very least, the founders should care enough about their users to make sure the service runs for a reasonable amount of time.
If you're complaining that someone acquhired your favorite service, you were being heavily subsidized by a venture capitalist.
Even great HN heroes like Elon Musk (who sold paypal to ebay) aren't doing stuff for charity, they are doing it for profit. Sometimes a personal crusade makes straight monetary profit less important, but most of the time it doesn't.
SaaS taken VC funding? Do not touch them if you will rely on their service because they might suddenly disappear in an acquihire and you should have expected it, ingrate. [1]
it is Sound advice, although if everyone took it to heart none of these start-ups would succeed in the first place because no one would use them because of the expectation they will be gone shortly. [1]
Poisoning the well of goodwill for future start-ups.
[1] Unless you can get a contract for X months / years of service as detailed by patio above... I cannot remember this as an option by any of the SaaSs that feature on YC. They try to be low friction "Just put your credit card details in, pay monthly and ignore the elephant." They RELY on people ignoring the above.
A business using a B2B service who wishes to have the service around N months from now has an option to achieve this. It is called "a contract." You can call up your local sales team and ask for prices. It is absolutely a thing you can buy.
If you do not get contracts which guarantee that a vendor will provide you with the services you require, anticipate that business will frequently work out in a fairly rough fashion for you.
You can also probably get your bank to do a chargeback, and they might give you all $319, because it isn't worth their time to do math.
And after they decide it's more convenient for them to shut down that website, it's kind of bizarre to think their ex-customers would want to have a personal relationship with them.
I buy and support a number of services and products where I would jump at the chance to shake the founder's hand and be their best friend! Sometimes it's about the people more than just the product. I'd buy a product site-unseen from certain people.
In other news, the guy who speaks to you on the way out of the superstore probably doesn't care whether you have a nice day or not. Also, when the CEO of that big company steps down, he may not actually be planning to spend more time with his family.
"After 43 years in business, Joe's Pizza will be shutting down after July 10th. Thanks for your patronage over the years. We'll miss you."
Modulo individual stylistic choices, this is the appropriate level of social niceties between a business and a customer. Joe's Pizza is not obligated to say that their bookkeeper embezzled $300k, they misjudged the pizza market, or Joe's heart just isn't in pizza anymore. You paid, you got your pie, and you and Joe are even.
This is the downside of the Everything-As-A-Service model: services are a commitment. Customers aren't buying a product, really, so much as they're buying a relationship with you and your team. The only way you can sell a relationship is by convincing people that you're serious about it -- that you're in it for the long haul. So if the next week you announce that you really weren't...
This actually comes up in negotiations. "We'll need a follow-up engagement in six months." "I might be available for a follow-up engagement in six months." "Can you guarantee it?" "I am amenable to selling you a guarantee." "Selling a guarantee? We don't want to pay extra. We just want to schedule an engagement six months from now, if we need one." "In that case, you can wait five months and ask to schedule an engagement. I'll generally try to slot you in, subject to my then-prevailing rates and availability."
I think you think that using a SaaS gives you a free option on service next month. This is... an unusual understanding of how business services work.
If you absolutely need continuity of service that is something you can buy. Many HNers do not understand that it is really freaking expensive. If you are paying $29 a month and don't remember signing custom language guaranteeing it you probably have not bought it.
That might be true technically, but it's certainly a common expectation among organisations that use SaaS offerings.
Moreover, it is a necessary expectation for many of those services to be commercially viable. Frequently the time and resources invested in integrating someone else's service will take a significant period to generate a net positive return and outsourcing will incur a significant degree of risk. If decision makers didn't have a good faith belief that a service they were planning to integrate would remain available for a useful period of time, approximately no-one would ever sign up in the first place.
Obviously many businesses do offer services that, according to their fine print, do not provide any such guarantee. They rely on their potential customers either not noticing or not caring enough to prevent them from buying.
(If you disagree, then if you'll forgive me for using a personal example for a moment, I invite you A/B test Appointment Reminder's current home page against a factually accurate version that does not make any claim that is undermined by the fine print in your Terms of Service. For example, instead of "Clients get a reminder call or text message prior to their appointment" in your main graphic, you could write "Clients might get a reminder call or text message prior to their appointment, or they might get it late or not at all.")
IMHO, current trends like launching MVPs and exiting via acquihires are therefore poisoning the well. Potential customers of future services will, quite rightly, be suspicious of those services' reliability and longevity, and otherwise viable businesses may fail purely because of trust issues.
In the interests of fair disclosure: My own businesses depend on very few such services, and without any exception I can immediately think of, either those services are conveniences rather than critical to business operations or their providers have given legally actionable guarantees about their intentions/exit scenarios.
If you were on one of the non-publicly-available plans, you'd get language similar to "Vendor agrees to provide services as per the attached Statement of Work for the Contract Term as specified in the attached Statement of Work." That means exactly what it and related contractual terms say. It isn't like continuity of service is something that e.g. hospital systems suddenly realized they needed in 2004. They quite literally have similar contractual guarantees written in their contract for garbage disposal.
Again, I don't really want to focus on Appointment Reminder specifically because obviously it's not as if you're running the only service in the world that does this, but it does make a good example here. Objectively, almost every major claim on the Appointment Reminder home page -- meaning the things that really matter to a prospective customer, including literally the entire benefit someone would get from signing up to use the service -- is undermined by the wording in the Terms of Service.
It may be true that if someone asks explicitly then you give them an honest answer about your situation. I've certainly no reason to doubt you do. On the other hand, does an average small business outside the start-up world actually ask? I can't imagine anyone working the reception desk at my dentist or optician is going to be sufficiently aware of the legal and business environment to consider that a service advertised as Appointment Reminder is might not actually promise to do anything of value at all.
At this point, AR is becoming a bad example, simply because by its nature it falls into the category I described as being convenient but not critical. (No slight is intended by this comment, but I imagine any business that has so many missed appointments that it would be in serious trouble without AR has bigger problems than anything we're discussing here.) However, if we were talking about a service that hosted the professional's calendar of appointments, or their CRM database, or their payment system, and these services were known to be at significant risk of disappearing overnight, how many other small businesses would really sign up to use them?
On the other hand, does an average small business outside the start-up world actually ask?
No. They don't ask for AR's continuity plan, for the same reason they don't ask for their accountant's continuity plan, or their lawyer's continuity plan, etc. Would the good doctor prefer to deal with the same accountant every year, to avoid having to re-explain every decision made in 6 years to a new accountant? Certainly. Are there accounting firms who they could purchase ongoing services with contractually guaranteed continuity from? Yes. Dr. Carter's Dental Office is welcome to call up the Big Five any time Dr. Carter gets worried about his good buddy Ralph closing up shop before tax season next year. He doesn't, partly because he prefers Ralph to the Big Five, and partly because the Big Five is way the heck out of his price range. Dr. Carter and his team of professionals are, in fact, actually in business, and they're fully capable of making decisions like this. If you're of the opinion that Appointment Reminder is the first time Dr. Carter got into a services relationship you're wildly mistaken.
(n.b. I spend about as much on accounting as a small dental practice, and have a great working relationship with my accountant. I also read my contract with him prior to signing. It has specific contractual language about termination which is effectively identical to AR's.)
Fair enough. I hope I've been clear that my purpose here is not to single out AR or direct any criticism at you personally for how you run your business. AR is hardly the only place on the Internet, or indeed in bricks 'n' mortar stores, that says one thing in big letters in its marketing and something rather different in little letters on its terms page. I'm just giving an existence proof that this happens, to counter the position that customers of SaaS businesses should have no expectation of continuity from month to month just because someone's terms of service say there are no guarantees; I consider that argument unrealistic, and therefore a weak counter to the suggestion that customers might reasonably be upset when a service they invested in integrating and may have come to depend on in practical ways was bought out and shut down because of something like an acquihire.
There is an interesting discussion to be had about the best way to deal with the inevitable conflict between giving a fair but inevitably brief and informal description in marketing and having full and legally appropriate terms for actual contracts. This is something I've talked about several times with lawyers, and we generally have a somewhat different strategy to many US companies in this respect, but then we're not in the US and the legal climate here in the UK is somewhat different as well. I do understand that as someone posting with a well-known identity you might not consider this a suitable venue for such a discussion, interesting as it might otherwise be for all concerned.
They don't ask for AR's continuity plan, for the same reason they don't ask for their accountant's continuity plan, or their lawyer's continuity plan, etc.
Sorry, but I think that is not a fair comparison. I don't know the specifics in your jurisdiction, but it is common for professional standards bodies to require basic business continuity arrangements for accountants and lawyers of any level and dealing with clients of any level, and in most places in the first world these are regulated industries where it is literally unlawful to practise without holding the relevant qualifications and complying with the relevant professional standards.
So, if Dr. Carter's favourite accountant is taken ill and unable to continue working, it should be straightforward to transfer the necessary information to another accountant and have them take over with minimal disruption. The ability to file the doctor's accounts isn't just going to disappear overnight because the principal at the accounting firm got hired in a senior position at Deloitte.
There would normally be no need for Dr. Carter to spend crazy money on a Big Four/Five accountancy firm to ensure this basic level of protection. (This is rather fortunate for everyone else in the accountancy business.) Of course larger organisations with more demanding requirements involving many hours of work from whole teams of people on both sides might want stronger guarantees from the larger services organisations they deal with, and those will usually be available from the larger services organsations, and there will usually be additional fees involved. But approximately no-one who's using the kind of SaaS offerings we often discuss on HN is operating on that scale and at significant risk of the entire company providing the service they rely on being subject to an acquihire.
So in your case, it should rather read:
"After 43 years in business, Joe's Pizza will be shutting down after July 10th because of its acquisition by Pizza Hut, which will tore down the place and puts its own pizzeria here. Be happy we got rich!"
People gets emotional with place they go to or things they use, you can think it's irrational, but it's just a fact of life.
" After 43 years in business, Joe's Pizza will be shutting down after July 10th because of its acquisition by Pizza Hut, which will tore down the place and leave nothing in here, zip, zero, nada. Be happy we got rich!
Adios amigos! "