Yammer Co-Founder David Sacks Leaves Microsoft | Hacker News Reader

Yammer Co-Founder David Sacks Leaves Microsoft

blogs.wsj.com

51 pointspetethomas18 comments

It's the final stage of the cycle: start something, get traction, get acquired, wait for the lock-in to expire, leave. Rinse, lather, repeat. :-)

Note: I'm not saying it's a bad thing. Just that I would have been _really_ surprised if he stuck around for much longer after lock-in expired. If he did, _that_ would have been news. This was, more or less, to be expected.

I have friends who are on their 3rd iteration of this cycle. :-D

Sounds like a good thing! Talented entrepreneurs and executors are few and far between, so the more we (society) have on the market (instead of holed up in some Microsoft cubicle), the better! I'm looking forward to whatever he works on next.

MSFT does not have cubicles by the way. They try to give each employee an office.

It sounds like Yammer timed the exit well and I'm sure there was some kind of two year earn out.

I wouldn't be surprised if, like many acquisitions, once acquired Yammer wasn't just another cog in the machine and being seen as a non-critical part of Microsoft is more like being a cog in the machine than like being a fast moving startup.

With all the corporate realignment, I'm not sure there is much room for any acquired leadership to really make a big impact at Microsoft, but that is more Monday morning quarterbacking than a super meaningful analysis.

It's always interesting to see how these things turn out.

The culture between Microsoft and a startup couldn't be more different. 2 years seems like a very long time. Either he was super-dedicated to pushing the dream, or (your more likely scenario) he had a 2 year lock-in.

It most likely was not an earn out. An earn out is when you're getting paid from the money the company makes after the take-over (based on some minimum performance numbers).

See:

http://www.investopedia.com/terms/e/earnout.asp

Vs for instance:

http://www.investopedia.com/terms/g/goldenhandcuffs.asp

yammer's head of engineering kris gale also left microsoft last month[1]. he was a great voice of startup/agile culture inside of microsoft. and likely a bigger loss to the company.

he also gave similar talks externally that I'd recommend[2].

[1] https://twitter.com/kgale/status/481876033746919426

[2] http://firstround.com/article/Why-Yammer-believes-the-tradit...

I wonder if there are M&A statistics about how many times acquisitions not just fail (a well known problem), but fail because the market just "cools down." --- "Microsoft has pitched Yammer’s service–kind of a Facebook FB +5.18% for the workplace–as part of its bundle of document-and-email systems. Since the purchase, however, the white-hot market for such tools has cooled, a factor contributing to a shrinking stock-market valuation for rival Jive Software JIVE -0.39%."

If one was able to predict that, then a build decision would be superior to a buy. Typically, those Corp Dev spreadsheets people work on so much when buying a company assume a certain growth rate for a number of years, and another one after that, etc. but I don't think people plan for the scenario that the "market dies" after acquisition.

It would be kind of like predicting today that Docker-style containers would be abandoned in 2 years. Or that virtual reality would never pan out (Oculus).

The problem is that when markets are hot, people see the lag as insurmountable and deciding for Build looks overwhelming.

Out of curiosity, why do you think that's a problem?

so far we dont see any ESN, be it yammer or jive becoming a mainstream application.

I think why ESNs havent been able to make a mark is because they arent designed for individuals or teams but they are designed for the enterprise. This approach of keeping an enterprise in the centre while designing the system doesnt address what an individual needs.

In my experience, individuals work for a team & not enterprise & that according to me is a fundamental reason why the likes of yammer havent been as powerful as ideally they should be.

Infact this problem was the start point for us while designing our tool teamgum - to build a reddit like community within an enterprise.

I was calling a "problem" the situation where people see the market as "too hot" and then decide they don't have time to build a solution, choosing the "easy" path of M&A.

I them see less engineering, more corp Dev driven decisions when the market is hot. If I knew the market was going to cool down, I could instead hire engineers and build a more realistic product that solves the specific problems that would survive the market transition.

Acquisitions are famous for a high failure rate, but so are companies in general. At every stage of a company's life, it faces significant existential risks. If you're lucky, the checks keep getting bigger, but the risk doesn't go away just because business is going well. Especially if business is going well...

So assume every significant business decision carries pretty significant risk and the best you can do is manage that risk better than the next guy. Companies acquire other companies for a variety of reasons, some better than others. There aren't any hard rules either--a right decision in one scenario might be exactly the wrong decision in another. The build vs buy decision is a much more complicated question than it seems at first.

All of that to say, I'd wager acquisition failure rate isn't all that far apart from general business failure rate or even the failure rate of a company doing a project internally vs buying a company.

Aside from the strategy failure case, I believe that Microsoft assumes that a large portion of the initial value will be lost in the first two years- 50% of the business is usually uninteresting to Microsoft and either shutdown or quite frequently re-sold, 50% of the employees either are not offered jobs with the transition, choose not to transition to MS, or leave quickly. Then very frequently a good chunk of the code needs to be re-written to get it working with the rest of Microsoft's stack.

This doesn't mean that an acquisition is an automatic failure, just that it needs to drive more sales to become a success- either by direct sales or complementing other products. Know how to create a $200m business? Increase Windows sales by 1%. (steveb).

And the two years later, bazinga! I hope he also made his earn out. We played with Yammer and it was literally a kind of Workbook (it almost seemed like they reused Facebook code) Pluses and minuses.

I recall someone on Bloomberg (pre-Nadella crowning) that was saying DS should be CEO

it seems like 2 years is the average time that founders stick around after acquisition.

The title seems a little misleading. The acquisition was 2 years ago.

Thanks. We took that part out.

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