
What happens after Yahoo acquires you - JacobAldridge
http://37signals.com/svn/posts/2777-what-happens-after-yahoo-acquires-you
======
SandB0x
I once witnessed the moment when the messenger from the new management team
comes over to explain to the brilliant engineers who built the company up from
nothing about these "timesheets" they need to fill in, and how it's "really
not a big deal". You could feel something dying over the course of the
conversation. It was one of the most uncomfortable things I've ever seen, and
I'm sure it's far worse if you are one of the original engineers.

Is it something every acquired company has to go through? Is there a right way
to do this?

~~~
edw519
_Is there a right way to do this?_

Yes.

a. Make it a fully owned subsidiary.

b. Don't fuck with it.

~~~
hartror
Do you have some examples of where that has worked in the medium - long term?
(i.e longer than the 2-3 year mark most of these founders have bailed out at)

I am guessing it can work but founders/entrepreneurs aren't necessarily the
best managers and are likely to get bored and be looking for their next
startup. As a new owner of a company it seems to make sense to transition the
senior management to people who are more suited to managing and running a
company rather than those who like building a company.

This goes two fold for those companies who have primarily technical founders
who are _almost_ always unsuited for the roles in senior management.

~~~
tptacek
Sure: IMDB, Audible, and Zappos.

Also, the issue isn't that the founders leave; it's that the energy does.
Founders are always going to leave.

~~~
hartror
But isn't that the issue? The energy tends to come from the founders so how do
you reliably transition away from the founders, whether it is without full
company integration or not?

~~~
tomkarlo
Regardless of whether you get acquired or not, if you build a company that
won't persist without your individual presence, the process is still
incomplete. (And what you really have is a vehicle for your individual
talent.) Any company that's supposed to last more than a few years must be
build so that it can handle key people leaving, because that's what people
always do in the long term, one way or the other.

~~~
Vivtek
This reminds me of some quoted wisdom I heard back in the 80's about
management styles and Star Trek: the difference between Picard and Kirk is
that when Picard was away or taken over by an alien or what have you, the
bridge crew could cope with the situation, while Kirk's absence meant that the
Enterprise was utterly helpless.

If your team can't fight Romulans when you're down on the planet, you've
failed as a manager, was the moral of the story.

------
bigbang
There are 2 companies which Yahoo! acquired:

1) Overture. If you look at the financial reports, nearly 50% of Yahoo's
revenue is from search. They acquired Overture for ~1B

2) They acquired RocketMail (essentially Yahoo! mail). Most people I know,
when they think of Yahoo, they think of Yahoo! mail.

So, while its easy to say they messed up many acquisitions (esp the infamous
3B offer for Broadcast.com), the 2 acquisitions they made is what keeps them
"in the game" today. You win some acquisitions, you lose some. Just like
investing, if you make few smart ones, it can easily pay off and create more
value than the money spent on many failed ones. Same with Google - Youtube was
handled very well, but many acquisitions are essentially just shut down or
never integrated into other products(Dodgeball,Jaiku etc)

~~~
contol-m
Actually Broadcast.com was a 5.7B deal, believe it or not.

------
wheels
Hmm, for some reason they forgot to include:

 _You sell your company for $50 million in Yahoo stock, which over the course
of your two year tenure at Yahoo will see a tenfold increase in value up to
$500 million and your team will use that wealth to go on to create a
disruptive seed-stage funding group called Y Combinator._

Must have been an oversight. I can't imagine 37signals only telling half of
these stories to make it better fit with their mantras.

~~~
jackowayed
Wow, did their stock actually 10x between when they got there and when they
sold it?

~~~
wheels
I have no idea when the YC founders actually sold their Yahoo stock, but when
Viaweb was bought, in an all stock deal, at the beginning of June 1998, YHOO
was trading at $7/share. Two years later, around the time they left, it was at
$70/share. I presume that both since the stock was skyrocketing and that
because they had a vesting schedule that they still had a chunk of it when it
hit that price.

[http://finance.yahoo.com/echarts?s=YHOO+Interactive#chart1:s...](http://finance.yahoo.com/echarts?s=YHOO+Interactive#chart1:symbol=yhoo;range=19960411,20110222;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=on)

------
gamble
This article is mistitled. It should read 'What happens after _anyone_
acquires you'.

These anecdotes will sound familiar to many people who have been through an
acquisition. Acquisitions are not something any company is naturally good at,
and they inherently threaten the bureaucracy of the acquirer. Despite good
intentions, the corporate immune system usually kills off the interloper
before it becomes established. Not to mention that the founders and best
employees usually bail within a couple of years.

~~~
ChuckMcM
Perhaps 'anyone but Cisco'. There is a company that has more successfully than
most integrated a number of companies into its structucture. Perhaps the most
amazing (for me at least) is Linksys, which I predicted would result in an
epic failure and yet their market share, and competitiveness has recovered
after the post acquisition noise.

I'd love to hear a Cisco Exec's opinion on their secret.

~~~
orky56
I used to work for Cisco at Linksys and this is far from truth. Although
Linksys operated pretty much as their own division, Cisco EOLed a lot of
successful Linksys products in the SMB market since they might compete with
Cisco's. Also, Linksys had and still has a stronger brand presence among
consumers which Cisco resented a bit. This led to a rather long brand
transition that made things pretty difficult at Linksys' end. Lastly when
Linksys needed the deep pockets of Cisco for breaking into new consumer
product markets, Cisco was always hesitant despite successful market research
and product development on Linksys' end.

Relatively, it's been better than most acquisitions but things are definitely
not that rosy.

~~~
gamble
Interesting to hear from an insider. Cisco is very good at getting the media
to write about how skilled they are with acquisitions. Do you think it's more
marketing than reality?

~~~
orky56
Sad to say but they are better than most when it comes to acquisitions. I
think that's more due to the fact that their acquisitions are usually
strategically related to what they want to do.

The big exception has been Flip. Although they are a great company, their
limelight was too short for a company like Cisco to get recurring growth over
a long period with this push into the consumer space.

------
mscarborough
I can't speak to the examples from 2005 or 2007 (or any others really), but I
was part of the Associated Content acquisition process and am an engineer with
Yahoo now.

For our group it has been a good thing and we are happy where we are. Our
group's culture is the same, we are engaged in the larger company strategy,
and are excited about the upcoming year. We have had a couple integration
points take longer than expected but that's what happens when you go from 50
people to a company of thousands.

YMMV I guess.

------
joshu
When Delicious was acquired, we desperately needed inverted indexes, which
yahoo (eventually, slowly, painfully) did actually provide.

I do find the "there's no business model" talk in the comments pretty
annoying. Of course we had one.

------
kenjackson
So why does Yahoo buy these properties? While I'm sure we'd all like to think
the decision makers at Yahoo since day 1 were all idiots who like to spend
millions of dollars on companies and then let them die, but is there actually
a rational reason?

Were they trying to keep them out of the hands of Google? Did they do it
purely for the eyeballs and thought with no additional spending they'd get
their money back out of the property in X months?

I just find it hard to believe they'd do the same thing over and over again
for no reason, but to lose money.

~~~
kscaldef
The article ignores the stories that turn out differently. For example, I
noticed whereonearth in the list of acquisitions. I happen to know that their
technology was nearly immediately used to start making money for Yahoo
(because I integrated it into parts of the ad serving systems). It also was
probably behind the "platform technology that enabled things like geolocation
open API" that Upcoming enjoyed.

The time cutoff also leaves out the Overture, Inktomi, Altavista trio which
made a ton of money for Yahoo, let them build a search engine on par with
Google, and fueled significant growth of the company.

Finally, the article also ignores the fact than many, many internally
developed products (of any internet company) have a lifespan of under 5 years.

~~~
neilk
I am quoted in this article and I totally agree with you.

It has to do with the nature of the acquisition. As you say, WhereOnEarth was
killer technology, easy to integrate into everything that Yahoo did.

The "Class of 2005" startups that Yahoo acquired were not about technology,
they were about having a different relationship with the users and creating
common resources (photo library, tagged URLs, event information...).

That's a much more problematic kind of innovation for a company like Yahoo. It
was alien to how Yahoo worked, and for many groups it was even a kind of
threat.

------
davidw
The founders get to cash out is what I'm seeing. That's pretty nice, and may
allow some of them to go on to better things.

For instance, I think YC is far cooler than Viaweb.

------
JacobAldridge
At the risk of preaching to the choir, here's some more input from another
Yahoo acquiree - pg on 'What Happened to Yahoo' (Aug '10)
<http://www.paulgraham.com/yahoo.html>

~~~
mscarborough
Sigh.

I work for Yahoo, after 6 years of ('failed') startup work. I respect YC and
pg immensely.

However, linking to this article that is written in 2010 that references the
mid-1990s (except for a single mention of Facebook in 2007) seems a bit weak.

It doesn't bother me that HN folks dismiss Yahoo as a company, so much as it
does that HN folks ignore Yahoo engineering. Hadoop, WOEID, Pipes, etc.

For me as an engineer that has worked for a few startups and companies that
hoped to be acquired, working for Yahoo is great because we are exposed to a
lot of engineering work that is optimized for large scale. I'm sure Google and
others are doing a great job of this as well, but why is it an either/or
situation?

~~~
jfager
I don't think anyone who would care ignores Hadoop. It and Yahoo's involvement
with it are very well known and credited.

WOEID seems pretty niche. I don't work with geo much, so I don't understand
right away why I would want to use a WOEID over a simple lat/long. Who else
uses WOEIDs, for instance?

Pipes would be approximately a billion times more interesting if it didn't
have the commercial use restrictions and had a version I could get some kind
of SLA for. If Yahoo is so proud of Pipes, why won't you let people build
businesses on it? And why did you only post 2 blog updates about it in 2010?

------
markszcz
So what I’m getting out of this is that if your passionate about your company
and its doing well, think twice before you decide to get bought out because
its possible that life might not be better/greener for your company once your
assimilated.

Reminds me of Brew Masters when the owner of Dogfish Head, Sam Calagione,
mentioned that he had an offer to sell off his company for a nice amount but
in the end he would still obsess about the fate of his company, and the name
he built up for it, that it wasnt worth selling.

------
randall
So what do we do? Obviously this sucks, but how do we build a company and get
investors liquidity without Sarbanes-Oxley-riddled IPOs or Yahoo-level-
incompetent acquisitions?

Do we just keep being regular companies? Is there an alternative? How do we
build things that matter (and require outside investment) and end in real
change instead of just getting rich?

~~~
paulbaumgart
Apparently the very creative people at Goldman Sachs have some ideas.

------
vegashacker
I'm surprised this is a common scenario. I would think, due to the
pervasiveness of the sunk-cost fallacy, that companies would stand behind
their aquisitions to a fault even--just cause they spent so much money on
them.

~~~
jfm3
A buyer might think they're buying your users, or your technology. In either
case, the possibility that these things can become devalued if not further
invested in might (wrongly) never enter the thinking. If you don't change
anything, how could the value of a user or a technology depreciate? (This is
obviously wrong, I'm just trying to paint a possible line of reasoning.)

------
neworbit
An awful lot of acquisitions end up this way, though. Consider the firms
acquired by Amazon or Google or Microsoft. People remember IMDB and Alexa;
Android and Youtube; Hotmail and Bungie... past that not so much.

------
zavulon
The article missed a pretty significant counterpoint, which I'm surprised
wasn't mentioned here so far: Viaweb. As Yahoo Stores, it went to become a de-
facto leader in online stores, which it's still is to this day.

------
ojbyrne
I think, once you're in the VC system, you have to compare an acquisition to
what happens if you go through more funding rounds and lose control over your
company that way. Many of the same symptoms.

------
roel_v
I've just joined Flickr but I'm finding it awkward in some places, and the
'community' (at least that of extension/tool developers) seems to have died in
2008 or so. The upload tools are atrocious, no reliable way to download stuff
for backups, the UI is unpolished and doesn't seem to get updated much.

So, where do I go for online photo hosting / backup? Picasa / Web Albums isn't
better, plus it's very desktop focused. Are there any modern offerings that
can step into Flickr's shoes?

~~~
rbanffy
I use Shotwell to upload to Flickr and Picasa. So far, I am very happy with
it.

It also keeps my photos happily organized.

------
jfm3
It's all true, and Yahoo is probably one of the _better_ companies that could
acquire you.

------
bengebre
It kinda makes you long for the days where the exit was a speculative IPO. At
least some of the resources went to founders that way and they often retained
a sizable chunk of equity (i.e. control of the product).

Related (Why Ten Million Dollar IPOs Matter):
[http://www.urgentspeed.com/applied_disruption/2010/04/why-
te...](http://www.urgentspeed.com/applied_disruption/2010/04/why-ten-million-
dollar-ipos-matter.html)

------
ChuckMcM
They forgot MusicMatch in 2007, there was a company that was on track to be
iTunes became, except it ended up not going there.

------
ajhit406
I think google has done a much better job of targeting services they know they
can integrate into their core. Yahoo has really just had a bunch of different
silos operating (for the most part) on their own.

When the founders lose their ability to control the product and their economic
incentives, then they're really fked.

Facebook has integrated their acquisitions' technology in some cases, but it
seems they're mostly in it for talent acquisitions. They've done a good job so
far in retaining (they're still pre-IPO) but we'll see what happens when they
get old and some new hotness appears at school (might take 10 yrs)

Scorecards:

[http://en.wikipedia.org/wiki/List_of_Yahoo!-owned_sites_and_...](http://en.wikipedia.org/wiki/List_of_Yahoo!-owned_sites_and_services)

<http://en.wikipedia.org/wiki/List_of_acquisitions_by_Google>

------
omeega
If you're an employee it sucks.

If you're the initial owner you'll be happy to let Yahoo buy your product for
multi-millions of dollars, and you'll be even happier to leave the company as
quick as possible to start up your next app.

Its a pattern: sell, get out ASAP, start next project, (allude to what could
have been).

------
renofwon
New companies get acquired. Old philosophies stay the same.

"But today it seems like the old is doing the plowing. Let’s stop that. Let’s
build great companies that are here to fight, here to win, and here to stay
until the next generation after us comes along and kicks all our asses. And
again and again and again. That’s how better happens."

[http://37signals.com/svn/posts/1927-the-next-generation-
bend...](http://37signals.com/svn/posts/1927-the-next-generation-bends-over)

That quote is from nearly two years ago, but it's just as relevant today.

------
Jgrubb
You know what this whole article sounds exactly like to me? This sounds
exactly like the major label record system of yore. Replace the instances of
"internal executive champion" with "A&R guy" and "web service" with "band".

God knows how many absolutely awesome bands were signed to major labels over
the decades by A&R that "got it" only to be left high and dry when that person
was fired or moved somewhere else internally. Very little new under the sun, I
suppose.

Great read.

------
kamdar
But Yahoo acquired these commpanies for cheap rate. I think other than flickr
none of them had good model. Upcoming was aquired for only 1M? If it doesn't
match the expectation, Yahoo will definitly won't sink millions more in it!
Google aquired Youtube for more than 1.5 billion dollars so they paid
attention. Someone should also research in to Google or Microsoft's small
aquisitions.

------
carlhu
This is a very thorough analysis by 37signals. I wonder if they are being
vetted by Yahoo, and decided to do some due diligence on the fate of prior
acquisitions?

------
gojomo
Denial, Anger, Bargaining, Depression, Acceptance.

------
cletus
You seriously weigh up how much the earn out is _really_ worth to you.

------
earl
Ouch. That's a pretty damning list Matt compiled.

------
mkramlich
summary: hear about goose laying golden eggs; buy that goose; then kill it,
forget about it or let it starve to death

------
reubenyeah
Do you start a startup incubator?

