

Exits and Assholes - toast76
http://blog.downie.com.au/578870

======
ChuckMcM
Its worth considering the source of the emotion here. Everyone sees an exit
differently, whether it is your customer, your co-founder, your peers, or even
your mother-in-law.

Customers can fall in love with a product, evangelize it, and use it, and then
have it vanish in an 'exit.' That certainly feels like betrayal. Not
surprisingly when someone you care about dies you can find yourself mad at
them for dying. But if you don't know the circumstances you cannot judge
accurately.

One of the saddest things I see are companies that create a wonderful service
but it costs $10/user on a month to month basis to run and their service is
either free or much much less than that per user subscription. You can go to
your users and say "Uh, we actually need much more money from you to keep
going." But that too leaves them feeling betrayed or 'bait and switched.'

Acqui-hire exits are rarely "big" exits for anyone. They are face saving
exits. And everyone involved puts on a happy face not to make the customers
feel bad in a sort of 'so long sucka!' kind of way but in order to maintain
the fiction for polite conversation. These folks feel bad about it too but it
is even more awkward when they are looking sad when the 'press' is all happy
times.

Perhaps a more honest approach might be to upload what assets you have to
'github' and say "hey this costs $X to run and we can't afford it." or "This
is a great idea that about 382 people really like and over a million have
looked at and never logged in again." But sometimes even the wee bit of IP
that is left over in the source repositories might be sold to a patent troll
or something to cover some of the investor's losses.

Feeling sad, betrayed, and angry are all honest emotions to have around the
shutdown of a product you care about. The founders might have those same
thoughts in spite of what the press release says.

------
SurfScore
I think there is some validity to this, but a lot of it is, for lack of a
better word, inconsiderate. Not all startups will IPO, even the successful
ones. Founders are left with a choice; sell the company and be rewarded for
the 40 years of work they just crammed into 4, or stay on the current path,
stabilize, and just exist as a private business (or fail, some startups aren't
built to last).

I don't like the complete loathing some people have towards founders that want
to "get rich." I'm completely against people whose end-all be-all is building
for a quick flip, but the reality of the world is that money solves a LOT of
problems. It helps you pursue your dreams, it lets you travel. After 4 years,
maybe you're just sick of working on your startup and need a vacation!

Money lets you pursue your dreams, and sometimes your dreams change. Not
because you've given up on them, but because you've changed as a person.
People shouldn't be faulted to that.

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throwaway420
I think it's important to distinguish between different contexts. There's a
difference in what can reasonably be expected from a free service and a paid
service. Some startups that get bought up and get shut down have been free
services.

However, if you provide a service that people pay actual money for that's
shutting down, I think you owe them some warning and options to export their
data to the best of your ability. If the service is being shut down
completely, you should also ideally work to find them a comparable service.

In closing, I don't begrudge people for wanting to exit out of startup for
millions. For every startup you read about on TechCrunch where the owners get
bought out by Yahoo or Microsoft for X million dollars, you have probably
hundreds of entrepreneurs that work 80 hour weeks for months/years trying to
survive on savings/minimal income who don't make it and end up failing.
They're not assholes for taking a reward and running. The reward should be
great because the risk and sacrifice is also excessive.

~~~
michaelochurch
_For every startup you read about on TechCrunch where the owners get bought
out by Yahoo or Microsoft for X million dollars, you have probably hundreds of
entrepreneurs that work 80 hour weeks for months/years trying to survive on
savings/minimal income who don't make it and end up failing. They're not
assholes for taking a reward and running. The reward should be great because
the risk and sacrifice is also excessive._

Different pools. The people who get funded by VC-istan are not risk-takers.
They're people with gold-plated resumes and connections before 35, which means
they never made mistakes-- because you can't get that far by that age if you
make a misstep-- which means they aren't risk-takers. They didn't have to live
off of savings, and as far as TechCrunch and acquirers are concerned, they
don't exist.

Yes, those "hundreds of entrepreneurs" deserve a lot of credit. They have
cojones, and a lot of them actually fail (not acqui-fail, but actually fail).
However, their stories have no bearing on the risk in VC-istan, because they
live outside of it.

In VC-istan, Real Founders (people with the credibility to raise money without
a 5-sigma success already in hand) don't take much risk. They get full salary
from the go, and as long as they don't bite the hand, they get EIR sinecures
afterward if nothing else works out. "Risk" is just an excuse to give less
well-connected employees tiny equity slices because "the business is already
de-risked" (when that's not even close to being true).

~~~
beat
Really? I think the "gold-plated resumes" are off taking dull, mainstream
management jobs and settling for upper middle class. And connections are
ALWAYS made by hard work, if they're of any real value at all. Most rich
people are self-made, and if you want to get their support (ie angel
investors), they have to really believe you're one of them - that you'll earn
your riches, not be born into it.

The very mentality it takes to be a good founder, to really go for broke with
a startup, is at odds with the gold-plated resume. Gates and Zuckerburg
dropped out of Harvard. They didn't get those delicious "Harvard connections",
because Harvard simply wasn't good enough for their ambitions and talent.

~~~
michaelochurch
_And connections are ALWAYS made by hard work, if they're of any real value at
all._

Here's your gold coin. May I cross the bridge?

------
snprbob86
1) You're (incorrectly) assuming that everybody who sells their company set
out with "a view to exit". That is, quite honestly, bullshit.

2) Not everyone who is given the choice of a small exit is also given the
choice of a follow on round of funding. If you're not making enough revenue
and unable to strike a deal with a financier, you are going to have to shut
down your product whether or not you strike a deal with an acquirer.

3) Your post has eliminated a "soft landing" from your startups' possible
exits. If you wind up in the situation described by #2, you'll look like quite
the hypocrite if you do anything other than die.

4) "I'm sure your investor's wallets think of your exit as a success" -- You'd
likely be wrong about that. Your investors probably would rather you fail
swinging for the fences.

------
dmourati
"Fuck you and your shitty startup."

Yea, that pretty much sums it up. Now, please take your own advice.

~~~
bigtones
I agree, this guy is an absolute tool. What a waste of a minute of my life.

------
prawn
I always figured that this was one of those decisions that's easy to fault
from the outside and find frustration with but feels so different to
experience in person.

I had to clean out some Posterous blogs recently and was very disappointed
when it was announced as being shut down, but had I been approached to sell a
service like that, I don't know exactly how I would've reacted and prioritised
things going forward.

------
onan_barbarian
Wow. I can't tell whether this is a parody of a stupid response to exits, or
actually sincere. When I first read it I thought "wow, neat parody of the
overly entitled rageout". Now I'm not sure.

~~~
onan_barbarian
To expand: most of the startups that exit like this don't usually have the
alternative of continuing to exist and make money indefinitely. Either they
_are_ failing as a business (in which case, the amount of support that they
are going to give their users is going to fall to zero anyhow) or their
investors _did_ expect a big return in a few years.

I also can't help but wonder whether the somewhat frenzied tone of this
profanity-laced rant is remotely appropriate for the CEO of a company with
investors of its own. If someone makes a good offer for Bugherd that doesn't
guarantee its continued existence in its current form, are the investors meant
to look to this as Downie's Official Position Statement on the matter?

~~~
toast76
An exit which results in shutting down the product means we would need to feel
the cash is greater than the business opportunity. Our team (investors
included) believe in the vision of the business (and the data supports that
belief), and it's almost certain that no acqui-hire could exceed that
expectation. If it were, then I'd be the first to put myself in the "fail"
category.

~~~
onan_barbarian
What makes you think that the end results of the exit will be obvious ahead of
the exit? Do you honestly think the acquirer will put this on a contract?

There are a lot of gray areas here. There's a continuum between "disgraceful
acquihire" and "honorable technology purchase". The acquirer may screw half
your customers and please the other half. You may find that the exponential
growth curve that you plotted based on your data from year 1-2 actually finds
its way to a frustrating asymptote in years 5-6 and some of your investors
want to see a return on their money - perhaps more than they want to ensure
the happiness of each and every last customer of yours.

Perhaps your employees may start to feel the same way, especially after N
years - fire-breathing startup guys may happily trade stickers with profanity
on them (oh, my) for better salaries, ability to move around within a large
organization stocked with some interesting people (remember that some of the
BigCOs being discussed here are placed like Google and Facebook, it's not like
they're going to some ginormous bank to code COBOL), etc - even if they have
to do the odd PowerPoint from time to time.

Inability to predict this sort of thing is usually a good reason not to
indulge in profanity-laced public rants about something that factors into
outcomes for your investors and team. Unless you're actually specifically
aiming to burn your ships behind you, in which case, I salute your bravery.

------
tylerlh
The misdirected anger in this post makes any potentially valid points very
difficult to agree with. Are you really that upset ?

------
traeblain
I like the post. I'm always concerned that then next product I like will get
bought and shut down. I don't fault the founders for wanting to make money,
but do see the type of "sale for IP/Team" jobs as a failure not a startup
success.

One think on HN that I always see are comments like: "If the service is
supported by advertisers, you aren't the customer." What I like about this
post is that it hits home again where, "If the service is supported by
investors, you aren't the customer." Unless the startup can achieve
profitability and "payoff" the investors, then a sale--either to keep the
project going or for IP/Team--is the startup catering to it's customers.

------
205guy
Attitude and bad language aside, I understand the sentiment. But I haven't
seen one rant on this topic that looks at the bigger picture: how much these
shutdowns hurts other startups. When there are lots of shutdowns, especially
high profile ones like Google reader, potential customers are going to be more
weary and other startups won't get the same traction. It's one thing when you
loose the convenience of buying your widgets online, its a lot more painful
when you've uploaded content, created a network, etc. Maybe it's so blindingly
obvious it doesn't need to be said.

------
quackerhacker
I love this snippet: "You thank your fans for supporting you, and in the next
breath you tell them you're no longer supporting them"

Although, I believe some start-ups require acquisition (of some level) to
survive, I at least concur with the spirit that if a developer/developers
objective is to get bought and then abandon their creation, it is a disservice
to end users.

Side Note: exceptions to this rule Arthur Frommer (gotta give him credit for
buying back from Google)!

------
zensavona
I guess business are just run for fun and for the benefit of customers.

Unless your company is a non-profit I don't see any validity in this at all.

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owenjones
Not a super professional tone.

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beachstartup
yeah!

those grapes are probably sour anyway.

------
michaelochurch
I know there are commenters who don't agree with me, but I think there's a lot
of value in this bit of polemic. Sure, it's not fair to everyone who exits--
sometimes, people have no other option-- but the VC-istan careerists who use
acq-hires to legitimize themselves and get real PM positions or pole-vault
into VC positions deserve it.

