
An acquisition is always a failure - rrbrambley
http://pandodaily.com/2013/04/02/an-acquisition-is-always-a-failure/
======
mindcrime
No, no, a thousand times no. This is complete bullshit. I'm sorry, but you
lost me at:

 _The proper ambition for a tech entrepreneur should be to join the ranks of
the great tech companies, or, at least, to create a profitable, independent
company beloved by employees, customers, and shareholders._

Nobody, not you, not my mom or dad, not "God", not Linus Torvalds, not Bill
Gates, not the Queen of England, not the Dali Lama, not Zoroaster or the
Easter Bunny or President Obama or the sterno bum at the corner of 3rd and
Main, not Sergey Brin, not Kevin Rose, but NOBODY has any standing to tell
_me_ what _my_ "proper ambition is." Why? Because "fuck you", that's why. You
don't know me, my life, my past, my future, my dreams, my fears, my hopes, my
goals or a goddamned other thing about me. Don't f%!#ng try to tell me what I
ought to aspire to.

Say I build a company to a point where I could sell for enough that I could
walk away with, I don't know, let's call it $10,000,000 USD. The other option
is to stay independent and maybe, _maybe_ eventually IPO. It's easy to sit on
the sidelines and say "Go for the IPO, don't sell, selling is a failure". But
you know what... maybe I need the money _right now_ to do some things I always
wanted to do. Maybe I want to buy my aging mother a new house, and I don't
want to wait for a bloody IPO, I want to do it _now_. Maybe I have a family
member who needs special medical care, or - fuck it - maybe I just want to
cash out, fly to Scotland, and spend the rest of my life looking for a 6'
tall, redheaded supermodel with a Scottish accent to marry.

In any case, no, you don't get to tell me that I failed, if I choose to pursue
what matters to _me_.

Look, I get the point... I agree that - _in general_ \- entrepreneurs _would_
want to stay independent, and _would_ prefer to wait. I don't relish the idea
of building a company and then selling it... but life is more complicated than
that. And life is a series of tradeoffs and a constant balancing act between
doing what is best for us _right now_ versus what is best for the future. One
is not a failure for making a rational, reasoned decision to favor one set of
priorities over another.

~~~
sliverstorm
_Say I build a company to a point where I could sell for enough that I could
walk away with, I don't know, let's call it $10,000,000 USD. The other option
is to stay independent and maybe, maybe eventually IPO._

This is the part that rankles with me. Why is, "stay privately held and
continue to turn a profit year over year" never considered an option? Why is
it only "sell" or "IPO"?

~~~
mbell
It depends on your goal. Even companies that stay privately held and turn a
profit year over year end up in many ways being a lifestyle company; Often
resulting in stagnation and then slowly erode from the inside. It can work,
you can avoid stagnation, but only for a few types of companies / founders.

For example Valve can pull this off, they are a game company, always building
the next great game, they always have something new to work on and have gone
to great lengths to keep their employees involved and attract top talent. They
have avoided stagnation.

On the other hand, many of the companies you see get acquired built one or two
focused products, they don't have 'the next big game' to work on, that is
boring for many people, particularly the 'founder type'. Boredom -> stagnation
-> erosion.

You could say that company X could just define themselves as e.g. a 'mobile
app' company the way that Valve is a 'game company', but in reality, 'mobile
app' is way too broad. How is a 'mobile app' company any different than
startup? The difference is that instead of investors taking the risk on the
new product, the company takes the risk, which doesn't bode well for the
constant year over year profit ideal.

The 'company taking the risk' model can work, e.g. Google, but you have to be
wildly profitable to pull it off, that is hard, really hard, so hard that only
a hand full of companies have ever pulled it off.

tl;dr Privately held long term companies can get boring quickly. It takes a
very particular type of market, a founder who really wants a lifestyle
company, or a company that is wildly profitable to avoid stagnation. All three
options are relatively rare.

~~~
epsylon
> Valve can pull this off, they are a game company, always building the next
> great game

Ironically enough, Valve hasn't created a game for years. These days they are
mosty a platform (Steam) company rather than a game studio.

~~~
mbell
Many modern games take a long time to produce, 3-5 years is not uncommon for
AAA titles. I also wouldn't say they haven't released a game 'for years',
there has been at least 1 title a year, a ton of DLC for older games, porting
games to linux, etc.

------
aneth4
There is absolutely nothing wrong with getting into business to make money.
Nothing.

There is nothing wrong with discovering a problem you don't have or care about
that people are willing to pay to have fixed, slugging through building
something to solve that problem, and trying to maximise your profit and
minimize your time. There is nothing wrong with working hard in a field you
are not passionate about to make money.

How passionate do you think the guy soldering your alarm clock battery to the
circuit board in Guangdong China is about his job? He does it to make money
for himself and/or his family. Is there something wrong with choosing
entrepreneurship with the hope of making a fuck ton more money than that, or
are you required to take the job you can get unless you want to build a
billion dollar business for shareholders?

Only working on something you are fully passionate about and getting paid well
is a luxury not everyone can afford.

There is also nothing wrong with creating a non-profit to help limbless
children in Cambodia, taking no salary, and spending all your time in service
of others.

In fact, the former can allow you to do the latter, still support your family,
and live well yourself.

I agree with mindcrime. And I wonder why so many PandoDaily writers are so
full of pomp. And fuck that guy.

------
georgemcbay
Pretty easy position to take once you've already earned your own "fuck you"
money.

I do sometimes wonder why these sorts of acquisitions remain so prevalent
though when minus a few notable exceptions the life cycle tends to consist of
a company paying many millions or even a cool billion for some tech in a stack
they don't even use (only to kill it soon after) plus a handful of employees
that tend to stick around barely engaged until just long enough to unlock
whatever golden handcuffs they have on.

Seems like way more often than not they are failures more on the side of the
acquiring party though I guess there may be some valid (though ultimately
unfortunate and cynical) reasons for participating like nipping a potential
future competitor in the bud.

~~~
drusenko
Almost all popular Google products (other than search and Gmail) have come
from acquisition: Maps, Analytics, Google Apps, Android, Blogger, Picasa,
YouTube, Postini, reCAPTCHA, etc.

My good friends Robby & Wayne's company, Zenter, was acquired by Google in
2007. While Robby has since left, Wayne is now a very respected eng manager in
charge of a very important project, so I would argue that acquisition was
successful for them.

So while many acquisitions do not work out well (and usually loudly), it would
be a big mistake to pretend that applies to all acquisitions.

~~~
bambax
You're right; some acquisitions survive as real products and it would be a
mistake to call them "failures".

I guess what the OP means is that price alone is not a sufficient criteria to
judge whether an acquisition was a success. If you sell your company for a
large amount of money, but it gets shut down, that's not "success" (although
it's certainly much better for you than closing down without any money).

------
alxbrun
I recently sold my company and I agree with Jake.

What most commenters don't understand, in my opinion, is that real
entrepreneurs don't start their company to get rich. If getting rich is your
priority, become an investment banker (If you really want to code, make some
automatic trading algorithms and financial models for investment bankers.)

In that regard, selling your company is, very often, a failure.

In my experience, the worst is to have to give up your values. As a young
entrepreneurs, I started my first company 10 years ago with not only a strong
vision for my product, but also an quite idealistic goal for the values of my
company and my team. We wanted to be different. We wanted to do things as we
thought it was right to do. And nobody could tell us what we had to do. It was
such a strong feeling. It drove the success of the company. Ten years later,
we got acquired by a large corporation that is not better or worse than you
normal large corporation. And we had to give up all that. That's failure.

~~~
mikeg8
You didn't describe failure, you described Regret. As a young entrepreneur
trying to do the same thing you did in the past (establish a company that is
strong, independent, has great values) I can see how "abandoning" those values
_feels_ like failure. But it really depends on your definition of success and
also what you do _after_. An acquisition could provide someone with the
financial freedom, knowledge, and business network to execute an idea with
even greater ambitions, values and impact on the world. That's why I don't
think it's always a failure. It's only a failure if it was the best thing you
could ever do. But to me, the best entrepreneurs are incapable of thinking
like that. You can always do better, be better, make something better.

------
crazygringo
> _With a fat bank account, I was pretty set to do whatever I wanted for a
> long time._ ... _But it didn’t take long to realize that my new life was a
> hell of a lot less exciting than running an independent company had been._

Sorry, but this is completely self-contradictory. With your fat bank account,
you can start a new, independent company. If what he wants is:

> _our way of thinking of a better approach to consumer tech, with less
> structure and more play, an exploratory mindset that, through trial-and-
> error, produces very tangible real-world value_

Then nothing is stopping him from doing that again. In fact, he's in an
incredibly privileged position.

Indeed, being acquired and then let go lets you focus your energies on new
things, rather than being stuck maintaining old things you created in the past
-- "maintaining" things being something that established companies might very
well be more skilled at.

So, besides being needlessly inflammatory, this post doesn't even make sense
inside of its own logic.

~~~
jlodwick
> With your fat bank account, you can start a new, independent company.

It takes years to build a great company. Running a great company was better
than having the potential to start a new one.

~~~
ok_craig
> Running a great company was better than having the potential to start a new
> one.

For you, in your specific context.

------
nine_k
I used to think about startups in bovine terms.

Some startups are beef type. These are made to grow as fast as possible,
increase the user base by whatever means, without care about long-term health.
They hunt for investments, especially big ones. Then, the sooner the better,
such a company is sold to a large company and butchered, either to be digested
and feed the corporate muscle, or just to remove competition with the big
company's product line.

Other startups are milk type. These are grown steadily and sustainably, if
slowly, with great care about long-term health. They are usually become
profitable early on, at least ramen-profitable. Owners usually reject several
acquisition proposals, and are careful with 3rd-party investments so as not to
lose control of the company.

I think that a milk-type company has a far better chance to be a long-term
success and transform the industry. It may grow huge, like Google, or stay
small, like Github or Craiglist.

In rare cases beef-type companies do not die within a large corporation but
become an important organ (e.g. Android inside Google), or enjoy a benign
neglect (e.g. Instagram inside Facebook). But usually they just die, the way
the post explains, or even worse.

------
jpdoctor
I'm going to guess that Jake will take a lot of flak here for this article,
but the truth is: I agree with him, for a certain version of "success".

There are folks who will pursue money, and then an acquisition looks like a
nice validation and exit. Great. No prob there.

But there are a bunch of folks who are satisfied when they are _building_ ,
and any other mode feels like something is missing in life. My advice to this
(my) cohort: Don't fight it, just accept that you're always going to need a
project to obsess over. Odds are that project will be a _failure_ but not as
much as anything else that is not so much a "project" as "going to work in the
morning."

~~~
joonix
You can keep building when you have $10M in the bank. You can build a lot of
things, not just websites. You can build a hotel. There's so much out there to
do. Working on the same thing my whole life sounds miserable.

------
michaelpinto
Jake is brilliant, but this isn't always the case: What about Google's
acquisition of Android? What about Apple's acquisition of NeXT? What about
Microsoft buying 86-DOS from Seattle Computer Products? What about Lenovo's
acquisition of the ThinkPad?

~~~
pekk
These are wins for the buyer, not as clearly for the seller. Of course, if the
seller sold voluntarily then it seems silly to argue that it wasn't what they
wanted.

~~~
prostoalex
Seller has a product, buyer has distribution. For each Android, NeXT and QDOS
there's a bunch of similar companies that went nowhere.

------
michaelwww
The "older doofuses who didn’t understand the Web" seemed to have done pretty
well with CollegeHumor and Vimeo without Jake. If they had run them into the
ground, I imagine he'd write an article about how being acquired is always
success.

~~~
jlodwick
The existing businesses were nurtured and optimized reasonably well. I was
lamenting the loss of the creative spirit that generated those two businesses
in the first place -- the larger, more valuable core of the company.

~~~
michaelwww
I kid because the title seems designed to be provocative. It's not always
failure to sell out. Quite the opposite in my case, but I hear you. You "sold
out" and lost something in the process. They have been good stewards of Vimeo.
It's one of the quality sites on the web, so I wouldn't fret too much. You
created something wonderful. That's more than most people.

------
mikeg8
The title is too strong and this post is too black and white. Succeed forever
and become a giant or fail? Not very inspiring. I like his views on
visionaries and how an acquisition _usually_ removes the real vision from the
company but other than that, this is just a very subjective piece.

------
greghinch
Choices you have with what to do when your startup gets successful enough to
consider your "exit"

A) sell B) IPO C) stay the course

If you've taken investment at any point, especially VC, you are pretty bound
to do A or B. Your investors want to see the company succeed in many ways, but
they are also looking for returns at the end of the day. Large ones. So if the
opportunity comes along, your board will probably make you take it.

So C is really only an option if you're 100% bootstrapped. That's pretty rare
these days. Even if you are, the excitement, challenge, and general "buzz" you
get from being a startup founder is going to pass at some point. Either the
company stagnates or you get too big to be nimble.

The author seems to be just lamenting the passing of time, that he's not as
excited and hungry as when he first started. In most cases, nothing you do is
going to bring that innocence back.

------
jsherry
I don't begrudge this author his wealth or his page views. But this piece
isn't the least bit serious. Ten times out of ten, he'd take his buyout over
again. The only thing that concerns me is that somebody might actually take
this post to heart and destroy his or her chances of joining the ranks of the
author should the right opportunity present itself.

~~~
jlodwick
> Ten times out of ten, he'd take his buyout over again.

How do you know that?

~~~
JoeAltmaier
...and how did the OP know what our proper ambitions are? Read it all as an
estimation of human nature, not a deconstruction of the author.

------
DigitalSea
This article couldn't be any further from the truth. How is selling a failure?
What if you're selling because your marriage is falling apart or family is
suffering because you're never home? What if you want to persue other
ventures? What if you're sick and tired of being responsible for a business?

Sometimes selling is the only option for some and I can sympathise with that.
Or if you invested a whole heap of effort, time and money and want to cash out
purely for the money, what is so wrong about that?

------
calinet6
Screw all y'all, I _love_ this article. It's a sequence of true statements
with a hard to swallow and idealistic conclusion, but it's _absolutely right._

The only upside to an acquisition is money. Does that often make it the right,
logical choice? Of course. Put that aside.

Once you're acquired by a larger more beaurocratic organization, your company
dies (perhaps quickly, perhaps slowly), your projects flounder or become
administratively managed, your ability to innovate quickly goes away. In
short, your dream dies.

His personal accounts of this happening are _on the money_ and are not
uncommon effects.

Facebook is a grand counterexample. Zuckerberg didn't sell out when the
company was young and he was offered ridiculous buyouts because _facebook
wouldn't exist today_ in the same way if he had. The dream would have been
killed. Far-fetched example, but maybe true.

Of course it's important to think about reality, of course you have to look at
the real world too; of course of course of course. No one can deny you that
perspective.

But just maybe, let all that go for one second, and think from an idealistic
perspective. Be a dreamer. Don't go after the most logical realistic thing
right away. Or at least consider it.

Because we need those companies too. We need companies that can dream, and
innovate, and remain independently fueled with a common goal and a vibrant
workforce. We need companies that aren't acquired because we need dreamers to
think big, so the world can go somewhere better—rather than just somewhere
with bigger bank accounts.

------
dasil003
Not every business is as free-form as ones where you luck into a $100k/month
business when you're just two college kids. In that scenario of course you can
throw as much spaghetti against the wall as you want with total creative
freedom. But most startups do not happen to be at exactly the right place at
the right time like this, and it's a multi-year slog to creak into
profitability, and then several more years of intense focus to actually
achieve real success. If you want to cash out early to buy yourself the
freedom to work on whatever you want, and you end up getting paid more than
99.999% of the world for your months of hard work, I don't see any way you can
call that a failure. Even assuming no element of luck and that Jake is just
one of the most naturally talented entrepreneurs alive, I still think
expectations need to be re-calibrated here.

------
smacktoward
And now for a counterpoint, we turn to our next guest, Andrew Mason.

------
jacques_chester
A sweeping generalisation in the title made by a tech blog is always a
success.

~~~
jlodwick
Yeah. My suggested title was "A Critique of Popular Ambition". In future
articles I might ask for more input on the title.

~~~
jacques_chester
You probably won't get it. Subeditors guard their privileges jealously.

------
zem
even neglecting the money aspect entirely, this is bullshit. as a hacker, i
want to build things. not "implement a vision", just build something that is
useful to someone. if some larger company sees the thing i built and says
"wow, this is exactly what we need to fill this gap in our
product/service/lineup" and acquires my creation (with or without including me
to continue developing it), i would consider that a resounding success.

as a real world example, does anyone think the keyhole vision was somehow
killed by becoming google earth?

~~~
jlodwick
Maybe it wasn't clear from the article, but I was talking about the
acquisition of a company, not a product. Hackers, and SV people in general,
tend not to distinguish between the two, as many "startup companies" are
actually just attempts to commercialize a single product idea. The potential
for a company is orders of magnitude greater, because a company can create
endless products. If you're talented enough to build things that are useful to
people, why not found a single legal entity that creates _many_ things,
mitigating per-thing risk and exploiting countless economies of scale?

~~~
mindcrime
_The potential for a company is orders of magnitude greater, because a company
can create endless products. If you're talented enough to build things that
are useful to people, why not found a single legal entity that creates many
things, mitigating per-thing risk and exploiting countless economies of
scale?_

Now that I totally agree with. And that's one of our goals at Fogbeam Labs.
I'm absolutely down with the idea of building a large, sustainable, profitable
company that branches out into many fields. I've joked with people that our
goal is to be "the next Red Hat", but in a lot of ways, I could say that we
want to be "the next IBM" or "the next GE" and it would be more on point.

The big part of TFA that I disagree with is the part where you presume to tell
entrepreneurs what their ambition _ought_ to be. That and what came off to me
as a judgemental tone, but that probably had a lot to do with the title.

------
csense
I didn't get farther than the headline.

Such a blatantly false sweeping generalization...obvious troll is obvious.

Why exactly is this on the front page with 115 upvotes?

------
EGreg
This is a great article! I would say that first-time entrepreneurs should try
to get a success even if it means they have to give away equity / get
acquired. You can own 100% of your next business if you like, after you have
millions in the bank and a track record with investors.

------
gingerlime
Of course it depends on your own goals, motivation, and the thing that gets
you out of bed. If you care about your product and your audience then I think
whilst it might sound promising to sell to a bigger company, there are chances
your product and audience will be both gone. There are also chances of being
able to reach even wider audience with an even better product.

I can think of a couple of examples like Picnik and Posterous. I'm not sure
what those guys wanted out of it, and I hope they are happy with the decision.
For me personally they were both two great products that dissolved into
nothing... I'm sure there are plenty of examples to the contrary (some people
mentioned other successful google product that really became huge).

------
aneth4
> my new life was a hell of a lot less exciting than running an independent
> company had been

That may partially be because he was too busy to learn what makes him happy
other than work.

------
davidw
So, that would make Viaweb a failure?

I think the world is a much better place with PG & Company running Y
Combinator than if they had slogged on and on with Viaweb.

------
pinaceae
observation: companies get big and successful if the founder is not driven by
money, but by the desire to be right (and prove it to others).

however, this does not mean that every companies main goal needs to be to get
big. if you're driven by other desires, your style of business will follow. be
aware of what you want, visualize it, this makes it far less frustrating.

------
kross
Many have problems with the title. It may be interesting to note that Jake
Lodwick ‏@jakelodwick stated:

"I wrote an article for Pando. My suggested title, “A Critique of Popular
Ambition”, didn't make it."

ref: <https://twitter.com/jakelodwick/status/319330932945469440>

------
adventured
From not seeing a headline from them in a long time, I had hoped PandoDaily
was banned from HN for being so terrible.

------
meerita
Wish I fail every week. I dislike this rant a lot. It doesn't fit any pattern
because everyone has different goals in life.

------
weisser
>I uploaded them to blumpy.org, my crudely named personal website

Oddly they link to the url when it is now some Japanese site.

------
Al-Khwarizmi
I'd like to fail like that too.

------
michaelochurch
First of all, let me say that I hate "acqui-hires" with a passion that could
summon Cthulhu. I've taken to calling them "welfare checks" because that's
what they are: a socially-closed, elitist private welfare system to keep rich
kids (born into the necessary investor and acquirer connections) from actually
_failing_ no matter how dogshit-awful their ideas are. Acqui-hires usually
benefit founders but screw employees, and should thus be thought of as a
"gentleman's C" for shiftless, incompetent, useless rich fucks Playing
Startup.

Thaaaaat said, I disagree with "always a failure", at least in the pejorative
sense. Let's be realistic, here. Let's first take a page from Eastern
religions. Impermanence. Go here: <http://en.wikipedia.org/wiki/Impermanence>

All things change. And die. That doesn't mean they were without value. They
contributed, and left a trace. Something that is a ghost or a fragment of a
god or a cloud of electricity (depending on whom you ask) carries around a
decaying corpse for 100 years. It's absurd! Everything is constantly falling
apart, but the universe seems to be get slightly better each day in spite of
it. Nothing in the physical world is built to be eternal. That's especially
true of businesses, which are generally built to effect one economic change
that is initially radical but, once proven, is taken for granted, at which
point it's commodity work that will be done better when a more innovative
competitor comes along. Circle of life...

I try to live life by the Boy Scout's rule: I win if I leave the place better
than I found it. Even though my effects will live on in subtle, chaotic ways,
no one's going to remember my name in 500 years. If reincarnation is true, _I_
won't recognize my current name in 500 years. So...

Yes, if you're building a business for "Teh Exit" with the intention of making
millions while leaving your colleagues stranded in brain-dead corporate
subordinate roles that they'll hate, then you are, in fact, a fucking loser
wankbasket and I hope you fail. Build-to-flip scene kids can choke on a taint.
But this doesn't describe everyone who starts a business and ends up selling
it. Sometimes, the thing generates legitimate value but proves not to have
enough upside to justify the entrepreneur's continued full-time commitment...
or it just gets into a state where she's no longer the right person to manage
it. There are good reasons for good entrepreneurs to sell their businesses.

We shouldn't be looking at the mode of Teh Exit for moral guidance. That's
what created this fucked-up, worthless VC-istan so-called "tech" ecosystem in
the first place. Sometimes good businesses are acquired and bad ones IPO
(which is just another form of acquisition). Instead of boasting or griping
about ExitzLulz!!!111!!(10^large-1)/9!!, we should be focusing a return to
_genuine value creation_ , no matter what form it takes (and it won't always
be a private-sector business). We should get back to Real Technology: solving
problems that people actually care about that make peoples' lives better. And
we should get back to ridiculing these well-connected (not "empty suit",
perhaps "empty hoodie"?) scene kids and their marketing-experiments-called-
technology, no matter how they "exit". We should drive those fuckers out of
town.

I _do_ think it is fascinating that acq-hires tend to be priced at 40-50 years
of salary, given that an employment relationship only lasts 4 years on
average. What does it tell us? It tells us that we, as engineers, suck so bad
at marketing ourselves and negotiations that an often inconsequential third
party (stone soup?) can sell us for a 10x markup. Also, it shows that large
companies are ridiculously bad at discovering internal talent. The fact that
Yahoo bought 17-year-olds at a panic price just indicates that their middle
management filter is so bugfucked that they've given up on discovering talent,
internally, at the bottom. If you have to buy a new winter coat for $800 every
November, it means you need to get some order in your fucking house so you
stop losing track of shit.

By the way, most of "social media" is not that innovative. It's just a wave of
marketing experiments that uses technology because _almost everything_ new is
technological. Social media are the reality shows of technology. Reality shows
aren't prolific because they're good, but because they're _cheap_ (no actor's
salaries, no writer fees). Social media startups are so common because they
don't require a deep technological understanding, and because well-connected
morons can CxO them, so long as they can buy a "scaling expert" at a panic
price post-Series-B.

Let's get back to the issues that actually matter. Bashing people just because
they get acquired as bad as the tyranny of Those Who Have Completed An Exit
(celebrity founders) in fundraising. So let's just stop the nonsense and talk
about how to direct ourselves to real work.

And... In-dig-nay-shun! <http://www.youtube.com/watch?v=EtCiP8B2xpc#t=7s>

