
Facebook Acquires Drop.io - whyleym
http://blog.drop.io/2010/10/29/an-important-update-on-the-future-of-drop-io/
======
waxman
Facebook's recent talent acquisitions sort of make sense to me from Facebook's
standpoint (good, entrepreneurial talent is hard to find), but I wonder how
the founders, employees, users, and investors feel about these relatively odd
buyouts.

This drop.io deal sounds a lot like the Hot Potato acquisition from a few
months ago: in both cases the startups were well-funded, but didn't have much
traction, and then Facebook paid 8 figures to essentially buy the main founder
(Sam Lessin at drop.io, Justin Schaffer at Hot Potato), and essentially let
everything else die (the sites were shut down, the technology scrapped, other
employees weren't hired by facebook, etc.)

A few questions for HN:

\- _Is Facebook paying too much for these founders?_ (They're basically
shelling out a $10 MM signing bonus that lets these entrepreneurs placate
their investors, and then come to Facebook. (Accept the founders only get a
fraction of the money, obviously). _Is it worth it?_ What are other new
Facebook executives paid in signing bonuses?)

\- _What do the investors think about this?_ (Are the investors in Hot Potato
and Drop.io happy to get a modest return instead of nothing (because these
companies hadn't taken off yet), or are they frustrated that these companies
ended somewhat abruptly?)

\- _How do the employees feel?_ (Does it feel like success for them when the
whole point of the acquisition is really just to buy their boss? Obviously
they get money for their equity, so maybe that trumps any other feelings.)
[Full disclosure: I actually work with one of the co-founders of Hot Potato
(who didn't go to Facebook), so I know his opinions on this issue, but I'm
still curious to hear others' thoughts].

\- _How do users feel?_ (Are these buyouts fair to them?)

\- And lastly, _Isn't there a slight paradox with the fact that these founders
are being plucked at such high premiums because they're brilliant leaders, and
yet, in both the cases of Hot Potato and Drop.io, these startups weren't
runaway successes?_ In other words, doesn't the lack of clear success of these
startups undermine the basic premise that the founders deserve $10 MM "signing
bonuses"?

~~~
biznickman
To be totally frank ... Zuckerberg just helped out one of his friends. Sam
Lessin lived in the same dorm as Zuck and they were friends (despite the fact
that the Social Network movie suggests he only had one, he had a few).

Sam helped him out and now he's repaying the favor. If it was $10M+ that's
nothing when Zuck's a billionaire on paper. Additionally, it doesn't matter
what the investors think as he still has complete control of the company. I
don't think it's fair to compare Hot Potato and drop.io as there's a history
with the founder that wasn't there before.

If I'm sitting on a runaway success, you better be damn sure that I'm going to
help my genius friend (Sam's a crazy smart guy) out and bring him on whenever
I can. He's only going to add value and when Facebook is expected to be worth
$100 billion eventually (pure speculation right now but it's in that
direction), there's nothing wrong with holding out a golden hand.

~~~
ahoyhere
Then why did Sam fuck over his loyal users?

Nobody ever asked us to pay. We would have. But suddenly, bam! It's gone.

Was it a non-negotiable part of the acquisition? Or did he not even try to
negotiate?

~~~
edash
Drop.io has paid features and additional storage for a fee. I've been a paying
user for two years. Paid accounts were even mentioned in the blog post
announcing the acquisition.

Seeing the recent development of the site and the evolution of Dropbox made it
clear Drop.io wouldn't be around long term.

~~~
ahoyhere
I never saw it. I never got an email. I never even knew the paid option
existed.

Drop.io obviously choked to death because it was too afraid that gesticulating
its agony would be embarrassing.

------
MediaSquirrel
It took the longest time for me to understand what Drop.io did. And during
most of that time I was a NYC entrepreneur.

It's hard to build a real company if no one understands what you do. Maybe
they would have had a better outcome had they hired a CEO who could create &
communicate a cohesive vision.

But that's just me.

~~~
tensor
No one that I've suggested drop.io to has ever even heard of it. The response,
on the other hand, has been "oh wow! this is cool!"

They certainly could have used more marketing as far as I've seen. I'm sad to
see them go.

------
davidu
This was a sale of near last resort.

This was not a "win" or an "exit" by any measure.

~~~
johanhil
Did they really burn through their $4.85M from their Series C in 6 months?

~~~
davidu
If you are burning $500,000/month, which is not unreasonable, then you get 10
months with $5mm.

If you haven't turned the corner after 5 months, you know you won't get out of
the hole before you run out of cash.

Therefore, you sell the company and reduce your burn as much as possible to
make a sale happen.

If your sale is all about talent and not the technology there is almost no due
diligence required and a deal can happen quickly, in about a month.

~~~
jack7890
It's not unreasonable for drop.io to burn $500k/mo? I run a ten-man startup
and I can't fathom burning that much.

~~~
forsaken
You pay people less than 50k/mo?

~~~
jemfinch
If he doesn't, I'm working for the wrong company.

------
smarterchild
I always wondered how Drop.io made money. I use it all the time for one time
file sharing drops, but they never had anything to sell me.

------
paul9290
Congrats to Drop.io. In 2007 I presented my start-up at the New York Tech
Meetup (<http://www.businessinsider.com/2007/11/nytech-meetup-at-iac>). It was
an odd meetup as only two unknown start-ups presented that evening, mine and a
complete unknown, Drop.io who launched at the meetup. Other presenters were
established companies presenting new products.

------
rradu
Hm, someone just asked me this week if their data will last on Drop.io--I told
them yea for sure, they've been around for a long time, they're not just gonna
shut down all of a sudden.

And then this.

------
webnerd
Does anyone know the deal price?

------
_pius
Drop.io has very interesting technology; I think it deserved more than a
talent acquisition.

Their company had a positioning problem. They built a platform that did
something very unique (abstracting the coolest features from XMPP into an
HTTP/RESTful API) and yet the takeaway for most people is that it's "a file
sharing service."

Had the Drop.io team done a better job communicating their value proposition
to developers with clarity and aggressively positioning their service, I think
they could have had a big following.

------
cavilling_elite
My first thought was to take Drop.io and create a Google wave out of it. Now
that Rasmussen has defected to Facebook, this may be
true(<http://techcrunch.com/2010/10/29/rasmussen-facebook-google/>)

------
ardit33
seems like just a talent acquisition to me

~~~
erikpukinskis
It's sad that founders do this kind of thing to their users. Why not sell the
company to Facebook (with attendant personnel agreements), but sell the assets
(users, technical infrastructure) to a competitor at a steep discount, maybe
in exchange for shares?

That way their users have a fighting chance at a smooth transition, and the
technical contribution you made can continue.

~~~
rguzman
I upvoted you and agree. However, there is also that the shutdown may be
driven by facebook for a variety of reasons. As a founder, it is probably
really hard to walk away from an offer that is very attractive personally but
bad for the service.

On the other hand, starting with that mentality is probably bad. c.f. pg's "do
something you think is good for the world"

------
jkhaff
I'd love hearing more drop.io alternative suggestions from others. Dropbox and
Tonido have been mentioned, but they really aren't the same thing.

My band lives in various areas of the country, and we share mp3 files via
drop.io. We're able to comment on each riff/song, link directly to the files,
get updates via RSS, and even listen to the mp3s without downloading them.

Anything else like this exist?

~~~
Jardenberg
For that specific need you should use <http://soundcloud.com>

~~~
jkhaff
Thanks for the suggestions. SoundCloud would be great, except keeping the
riffs/music private is important and there's no secret link sharing in the
free account (the lite account is €30). Still searching for alternatives...
nothing I've seen yet is as good as drop.io for this purpose.

------
meemo
Maybe some should copy their business plan and enter that market niche they
occupied (assuming their plan has been successful so far).

------
Rantenki
Obviously not for their ability to build scalable blogging services (dropio
blog site currently down) ;)

------
dageroth
That's too bad, I always recommended the service for easy collaboration and
sharing, was one of my favourites.

But well, Facebook will hopefully make good use of the technology and the many
channels drop.io had already incorporated to extend it's group collaboration
options.

------
sabat
A replacement for Drop.io is already in the works, I imagine. (And Dropbox
won't cut it for a lot of people; it's not as straightforward to do a simple
fileshare, and there are other cool features [e.g. RSS] that Dropbox doesn't
do.)

~~~
prawn
Even Drop.io wasn't particularly straightforward IMO. I would give the URL to
clients who needed to get me a batch of files and many would not understand
the process without help.

