

The Next Generation Bends Over - tptacek
http://37signals.com/svn/posts/1927-the-next-generation-bends-over

======
fallentimes
Please.

$170 million is _"fuck you"_ money. Aaron and I'm guessing many of the top
founders/executives made enough money to never ever have to work again. Fake
revolutions are cute and all, but think of how awesome it would be to never
ever have to work for the man again. They can do anything they want...for
profit, not for profit, TBD (Y Combinator). This wasn't some BS talent
acquisition; this was an absolute shitload of money to make in a very short
period of time (3 years!).

Techcrunch and many others constantly harp on how people should be working on
stuff that can help save the world. But the reality is, most of us have bills
to pay and a table to put food on. With FU money you can do whatever you
please without worrying about your family.

~~~
jasonfried
"Fuck You money" is such a myth. More on this soon in another post.

~~~
zackattack
Most of your blog posts strike me as you rationalizing why you aren't a hugely
profitable company.

~~~
abalashov
I think it's fair to say that 37 Signals' aspirations are, at best,
orthogonally related to profit maximisation. They're there to enjoy building
things they like, their way.

No, I'm not some sort of Kool-aid drinking acolyte. But ultimately, I'm trying
to do the same thing - to have fun and do what I find fulfilling, at the
expense of considerably faster and more lucrative routes to making more money
- so I can appreciate their general angle.

~~~
zackattack
I get that. Really, I do. But they keep saying it over and over again in a
public forum. Who are they trying to convince: the reader, or themselves?

~~~
ahoyhere
It's a Cult of Personality. Benign, sure, and helpful even, but that's what
you have to do to get your message across: repeat it, over and over, from a
million slightly different angles.

Only nerds -- and people with no persuasive skills (or influence) -- think
that saying something "the right way," once, is productive.

~~~
billswift
It's not benign or helpful when it drives, or excuses, attacks on successful
companies.

~~~
abalashov
That depends on whether you agree with it.

------
iamelgringo
Is it me, or is 37 signals being disingenuous.

They rail against people who take VC money. At the same time they take money
from an investment firm. They they say that their taking money was okay
because they wanted the advice of the investor:
[http://37signals.com/svn/archives2/bezos_expeditions_invests...](http://37signals.com/svn/archives2/bezos_expeditions_invests_in_37signals.php)
Other people taking money to get access to investor advice is bad and a
disease.

They rant against startups that pursue the eyeballs business. But then they
publish blogs that are frequently contentious and create drama in the startup
community. Really, RoR aside, if DHH didn't swear at conferences, or if 37
Sigs didn't throw rocks at other people's business models, would have heard
abou them as a company? They like being the "bad boys" of the startup world.
Bad boys get eyeballs and 37 Signals upsells those eyeballs.

The only problem that I have with 37 Signals is that they constantly say that
they aren't doing the things that they are actually doing.

~~~
jasonfried
We say don't take money up front. Money up front is the sin: You're entering
into a financial arrangement when you have no leverage. It's the worst
possible time to do business.

Re: Eyeballs... Our problem with action for eyeballs is when you have nothing
to sell the brains behind the eyeballs. Just building an audience with nothing
to sell (beyond ads) is what we rail against. But building an audience that
could also be your customers is something we encourage.

~~~
kyro
Often times, companies have no choice but to raise money up front. Tesla and
Facebook had to, and both seem to be well on their way to changing the way we
behave environmentally and socially.

Also, I really really really do not understand all the crap you guys give ad
based websites/business models. Advert business has well and long been an
established industry, dripping with cash. There are tons of websites out there
generating millions of dollars for their owners. From POF to sleazy SEO blogs,
these people generate enough money to live comfortably, and they're happy with
that. And when I see DHH rail against ad based sites at conferences in his
snarky ways, it's very disingenuous, as if he's completely blind to the world
of those who are making bank from ads.

~~~
jasonfried
"Tesla and Facebook had to"

Tesla makes physical products. They manufacture. They have inventory. They
have a factory. Money is required because they have significant initial
capital expenses.

I take issue with "Facebook had to". Facebook chose to, they didn't have to.
Software companies don't have to. They choose to.

~~~
tylerhwillis
I agree with your assertion that Facebook choose to. However, it seems like it
was the right choice.

There are plenty of times where the companies (and consumers, and founders)
best interests are served by taking early money and focusing on growth rather
than profitability, especially if their VCs are open to helping those founders
take money off the table as they hit milestones).

my .02

------
pg
A bit harsh, for something so speculative.

It's a rare founder who has no offer he'd take. In fact, if you have
shareholders or employees with options, and someone makes you an offer that's
significantly above the expected value of your company, fiduciary
responsibility requires you to take it.

You can bend this requirement to some extent by overestimating your expected
value, but there is always some number you'd have to take.

~~~
condor
I think what Jason's getting at is to look beyond the offer/fiduciary
responsibility mindset and to think bigger, to be motivated by passion and
have grander ambitions than looking at one's business as "company + product +
customer = offer/price".

There are many successful business that truly don't have a number they'd HAVE
to take. It's a choice, and that choice doesn't appear to be actively made by
this generation's poster-child business leaders.

I do disagree with Jason, I think that there are a lot of unspoken young
businsses, not in the spotlight, that do have the passion to take the baton
from the previous generation; it's just that they don't seek out the
attention, nor does the attention seek them out.

~~~
gruseom
I think what PG's getting at is that you can't "look beyond" the fiduciary
responsibility "mindset" without being fiduciarily irresponsible. Which is
basically illegal.

~~~
condor
Only if you CHOOSE to ACCEPT outside investors, and CHOOSE a board that
doesn't have the same vision for the company as you do. I'm no lawyer, but I'm
guessing if you own your own business, your fiduciary responsibility is to
yourself.

~~~
gruseom
Yes, that would be the "if you have shareholders" part. Can you find an
example of a $170 million sale of a startup with no outside investors?

------
justin_vanw
Ok, author of blog does not get it.

If I make a magic box, then patent it, and then sell the patent, whomever I
sell the patent will dominate the box making industry, since they are the only
ones with a magic box. This is what the author thinks is happening, but it is
not analogous.

If I open a factory for making boxes, and I sit in the front office and
monitor my factory, and hire great staff and motivate them to make boxes, and
figure out methods and practices that help workers stay alert, motivated and
uninjured, and I keep costs way below industry norms, I will have a very
profitable box factory. Now, BigBoxMaker wants to buy my factory, since it is
so much more efficient than theirs. They pay me $$$$$. I move to
${sunny_place}. They run the factory, but they aren't me, and they shit the
place up. All they did was drive me out of the market, and in a few years
another industrious soul will come in and they will have to buy their factory
too, otherwise, eventually, they will be out of business.

Now, the key is eventually. They can afford to pay me what I would profit from
running my awesome factory for 15 years, except it only took me 3 years. They
require me to stay at BigBoxCompany for 2 years, but I just have to meet
benchmarks, which is super easy since I already have the factory working at
the level the benchmarks specify. So 2 years of dicking around at
BigBoxCompany, doing whatever I feel like, plus a check for the amount I would
make if I worked my heart out for the next 10 years, or 10 years sitting in a
factory, looking at factory people, dealing with factory problems. Plus, my
factory might not be successful in the long run, there is inherent risk of
lawsuits, natural disaster, political shinanigans (BigBoxCompany gets your
factory rezoned as an old folks home by bribing the governor, or you get EPA
inspections every 10 minutes, or they bribe an employee to sabotage your
equipment).

Finally, you don't have to sit around after you take the check. Perhaps you
should open a bag factory (you probably agreed not to compete in Boxes), and
you turn that around even faster, since you will of course take all your
talented workers with you in 2 years once you are free of BigBoxCompany.

If the check is larger than (expected profit without selling out) * (risk
factor) - (estimated value of your time doing other things) you _MUST_ take it
unless you don't care about maximizing profits, in which case why are you
running such a great factory?

Obviously the loser is the consumer, but this is always the case. On their way
up, companies are models of efficiency (that is why they are moving up, so
this is a tautology). At some point they are able to use market position and
branding to get customers, and so they can let efficiency slip a little, so of
course it does slip. If you were guessing what an executive would do when
presented with 2 options, and one option requires 60 hours a week of hard work
for 6 months, and one requires a phone call and dicking around and playing
golf, and both have the same outcome, which would you expect the executive to
make? So of course established companies just advertise and give out free
schwag and sponsor events instead of buckling down and making a better product
and more cheaply, the executive only cares about profit for the period which
effects his compensation, and both methods are identical if that is your only
metric.

------
steamboiler
From a comment posted on the blog: "You may not realize how fragile Mint was.
All the hard part was being done by Yodlee.com; Mint simply built a thin layer
over Yodlee, and collected affiliate fees. Mint was not built for the long
haul, it was built to flip. (Check out the free yodlee.com to see that this is
true.)"

I think this point is important. Mint was adding value to an _existing set_ of
services rather than creating from scratch. This made its offering
_relatively_ easier to replicate. IMHO this point is not given adequate
importance when considering why Mint chose to sell.

~~~
nsoonhui
I have to disagree; if it was _that_ easy to replicate Mint's success, how
come Mint can worth that much of money, and why people are using Mint's
service instead of _Your-Mint-Clone_?

Your comment reminds me of the remark ( either here or on reddit, I can't
remember) that StackOverflow is easy and can be cloned in a week, because the
underlying technology is not hard to replicate. What you forget is market
often pays a premium for the database, not the technology. Getting the
technology to setup is easy, getting the subscribers, is not.

~~~
steamboiler
Unfair comparison. I never said it was easy to clone Mint or tried to
trivialize Mint's achievements. On the contrary I emphasized the word
"relatively". My argument was that Yodlee is the senior partner in the Mint-
Yodlee collaboration. I am also guessing here that Intuit has far more access
to financial data (banks as well existing quicken databases) than Mint-Yodlee.

EDIT: rephrased for clarity.

------
jmtame
Oh 37Signals. I can't figure you guys out sometimes. One day, you're telling
people to be happy with small niche markets. The next, you're on a soapbox
preaching about $170 million exits as merely "bending over." Make up your
minds.

------
gruseom
I also found it strange that Mint sold so soon for so little, relative to what
they would surely have grown into
(<http://news.ycombinator.com/item?id=821888>). But something bothers me about
the current critique.

The most common argument (by far!) that I've heard against VC funding is that
VCs only care about home runs, so their interests aren't aligned with the
founders', they don't care if 9/10 of their portfolio companies die, and so
on. But here the criticism is just the opposite: the "VC-induced cancer that’s
infecting our industry and killing off the next generation" is that VCs
_don't_ want home runs, they want early exits. Both criticisms can't be right.
So, are there two distinct and incompatible schools of thought about why VCs
suck? Or are there just a lot of people who are against VCs no matter what,
for whatever reason is handy? My spidey sense is that there's a little of the
latter at work. (FWIW, I don't have an opinion for or against VC funding in
general.)

------
davemc500hats
[sorry, late to the party -- traveling & running several DC events last 24hrs;
just jumping in]

as a Mint investor, friend of Aaron's, and someone familiar with most of the
other Mint investors, i can only summarize my feelings on this by saying that
Jason Fried is 100% wrong and pretty much completely full of shit on this
topic.

if he'd bothered to even lift a finger to check a few sources on this issue,
he would quickly have realized how WILDLY INACCURATE his conspiracy theory
was.

in my opinion, blogging at length about a subject which he fully admits he
knows little about -- and had not attempted to research -- is incredibly
ignorant & irresponsible.

please forgive my anger, but when someone attacks my friends with stupid lies,
i tend to get a little pissed off.

------
natrius
I find the Jefferson quote toward the end rather ironic. Jefferson and his
compatriots were fond of explaining why anything was worth trading for
freedom, yet the author is suggesting that the Mint founders should've passed
on the guaranteed "freedom" the acquisition money provides for some trite
devotion to slaying Goliath.

If you want change, make your own change. It's no one else's responsibility.
Even if it were, the founders are now better positioned to execute on any idea
they have in the future with few limitations. How shortsighted.

~~~
tc
That's being a bit equivocal.

You're using the word freedom in very different way than Jefferson ever meant
it. In Jefferson's world, the Mint founders are no more or less _free_ now
than before selling to Intuit.

Otherwise, I agree that it isn't for us to judge. The founders were certainly
_free_ to sell their company.

~~~
natrius
Hence the quotes.

------
mcherm
From the point of view of mint.com employees and even moreso the investors in
mint.com, this may be a wonderful deal.

But from the point of view of a consumer of financial software, this is
terrible. Intuit's products have been terrible and getting worse. I do better
with a spreadsheet than their money management software, and it isn't even
money management software any more, it's just an advertising platform that
also keeps track of your money. The only good thing I can say about them is
that their chief competitor (Microsoft Money) is as bad or worse.

Mint.com was different. It was great. Maybe it will continue to be different
and great. Maybe not. But if I were to guess, I would guess that it will
change for the worse.

My only REAL hope now is that someone else decides to come along and build
something great. And then maybe THEY will sell it for another $170 million.
Intuit, Microsoft, the phone company oligopoly: they all seem to be a new form
of monopoly where competitors cannot break in to the market because the
incumbent is too rich.

------
wavesplash
Jason you're projecting your ideology on others. That's a Fail smell.

There's nothing wrong with a decent exit. The old guard doesn't have to die,
and right now we're relying on the old guard since they're almost the only way
startups can get liquidity.

The Silicon Valley venture game isn't about making lifestyle businesses. It's
about making good returns on investment. $170m was a respectable return for
everyone involved.

~~~
kareemm
Mint's definition of success isn't your definition of success.

Wait, didn't I read that somewhere?

Oh, right:
[http://37signals.com/svn/archives2/define_your_own_success.p...](http://37signals.com/svn/archives2/define_your_own_success.php)

------
fogus
I can't speak for Mint, but not everyone is interested in creating a
revolution.

~~~
buugs
Yeah but it is counter-intuitive to open a business with the intent on being
bought or anything along those lines.

This just feeds big companies and will likely cause innovation to happen
slowly through common user perspectives and reduce competitive businesses.

~~~
Erf
Why is it counter-intuitive? If your goal is to make a lot of money, sometimes
your exit strategy will be acquisition.

~~~
buugs
I was assuming that when people open a business they like that business, I
guess I assumed wrong for startup culture.

------
zacker
Jason's point is broader than the business deal, he's making a critique of the
Silicon Valley culture. While I have the utmost respect for the capabilities
of the Mint team, I agree that it's disingenuous for the community to wrap
itself in the flag of _"We're in this for the revolution, not the money"_ and
then be just so damn quick to take the money.

That said, Mint seems like the exception out here. Facebook and Twitter seem
to be doing a great job keeping the champagne at bay.

~~~
adw
What community?

Okay, I'm not in the Valley, but businesses are in business to do business -
to make money for their shareholders. Arguing against that as a reasonable
motivation is disingenuous. You can disagree with the business decision; that
essentially amounts to "I think their expected value is >$170m and I'd take
their risk profile". Fair enough. But if you're arguing it on any other basis
than that, then you're substituting your morals for economics, and what's
more, your morals for those of all the individual shareholders. Not cool.

Isn't it easiest to just assume that Facebook and Twitter haven't been bought
because their equity holders think they make more money doing it their way?
They've got a case too; as Twitter's paper valuation climbs past $1bn, the
crew there get proved more and more correct.

~~~
zacker
Do you use Intuit software? Have you tried Mint? Everyone I've talked to that
has a Mint account and has been forced to use Intuit software in the past is
uniformly dismayed and confused by this acquisition.

Banker math surely proves Aaron would have to show real hubris to ignore
Intuit's offer, but founders rightly run startups, not bankers. Intuit is a
$9B twenty five year old company. Mint could have given them a run for their
money. They took the payday instead.

~~~
adw
So you're arguing that Mint can make more by displacing Intuit than by getting
bought, and that this is likely enough to offset the risk.

Fair enough, judgement call. But what justifies it? 'Banker math'.

~~~
zacker
Motivation and conviction could have rightly trumped justification.

------
dolinsky
Having gone through a few startups myself, and currently being at the tail end
of one looking for an exit, I know at some point the desire for growth can be
trumped by the desire to generate a return on your investment and move on. For
us on the line who have only put sweat equity in, we're much more likely to
hold on for more growth (and a bigger pay day) while those who have put
millions of their own dollars on the line are looking to trade in their
senior/junior debt and move onto the next investment.

Even for a company like Mint (of which I am a long time user), at some point
their business model has a maximum angle of growth, and unless they went to a
freemium-based model to generate recurring revenue, the short of it is they're
running out of room to make money on their userbase.

That being said, as a user I'm very distrusting of Intuit taking Mint and
running with it in any direction but into the ground.

------
tptacek
Here's what this makes me think about: if Mint had an independent future, then
there are employees at Mint for whom this acquisition was not the best move.
That's true at $170MM and it's true at $50MM and it's true at $5MM. Founders
can get rich on deals that make line employees nothing.

And there's nothing wrong with that --- I mean, I have kids to put through
college, and my first loyalty is to them, etc --- but employees should know
what they're getting in to.

------
old-gregg
_They were on their way to redefining an industry — one that was left for dead
by the current custodians._

I have never seen Mint and haven't used Quicken in ages. But isn't Mint the
same thing only hosted? Where exactly did they innovate, I haven't heard of
any exciting features. Anything here besides just "onlineness"?

~~~
fallentimes
It's the same thing as Yodlee.com (literally - Yodlee powers its backend) with
a prettier user interface and waaaay better marketing.

~~~
kareemm

      prettier user interface and waaaay better marketing
    

a prettier UI and waaaay better marketing are clearly not to be poo-poo'ed as
"no innovation", apparently.

------
rooshdi
I'm sure Mint's founders and investors analyzed the acquisition quite heavily,
more than any of us for that matter, and concluded that the acquisition was a
fair and reasonable deal, otherwise they would not have agreed to its terms.
Only time will tell if this acquisition actually becomes a detriment to Mint
and its end-users in the long-term. I believe if Mint continues to have a
focused and creative team behind its product, one which continues to
effectively evolve the service in order to accommodate their users needs, they
should continue to grow steadily.

------
jsz0
Honestly IMO Mint wasn't all that revolutionary. It's an online personal
finance tool that Intuit more or less cloned to make their own Quicken Online
service which is actually pretty good. Mint was going to have a tough time
competing with such a well known and established brand with a huge installed
base. Who's to say the Mint founders won't turn around and make that $170M
into something really revolutionary?

------
intellectronica
Did anyone ever offer $170 million for 37 signals? I can guess that the answer
is 'No' just by knowing that it wasn't sold.

------
abalashov
I don't know anything about Intuit's history, management structure, internal
bureaucracy, vision, or product direction, so it's hard for me to say anything
critical about this post in any level of detail.

In general, though, I would point to something that ought to strike anyone
with an outside angle on the culture and worldview pervading the tech startup
community and much of small business: there is a rather Messianic complex of
exceptionalism, particularly with innovation.

While it is certainly true that large companies necessarily homogenize
business processes and impart well-known characteristics of "mediocrity,"
that's exactly what they do best: optimise for profitability. Large
organisations are very good at extracting value from existing things. They are
also the only ones with the capital to bring many innovations from an
incipient level to mass-market; that's a large-scale, and very capital-
intensive endeavour.

I think startups often like to imagine themselves leaders in innovation due to
hypothetically negligible distribution and replication cost structure
introduced by the Internet, but that's a silly thing to extrapolate to a
universal. It really depends on what the product is, and certainly on the
nature of the innovation. There are a lot of modern conveniences, well-known
products, appliances, brands, etc. that would have never seen the light of day
- in a household name sort of sense - if they had been left in the stewardship
of the original creators. It takes a lot of money - and, indeed, a lot of
thankless, cheerless, rather bland and unremarkable process development and
management - to get the escape velocity.

My point is that without knowing more about Intuit, I am not convinced, _ipso
facto_ , that Mint is going to die a mediocre, bromidic megacorporate death
simply because it was acquired by a much, much larger company. That doesn't
necessarily follow. That it will undergo considerable change and adaptation to
the business imperatives of the acquirer is almost certain, but whether that
will turn out to be utterly horrible or something quite pleasant depends on
the quality of the acquirer, not the mere fact of the acquisition.

------
qeorge
I don't understand why the sale of Mint is regarded as the end to Aaron &
co.'s great adventure. They're now free (and funded) to tackle another
interesting problem, and let Intuit handle the inevitably _boring_ business of
running an established company.

I don't hear anyone criticize pg for selling Viaweb, and that sale was
obviously what opened the door to the Y-Combinator experiment (which is _much_
more interesting than running an established company).

There's a reason founders leave when the company "makes it", and its not the
money.

------
brown9-2
Isn't Aaron Patzer taking a fairly high-ranking job inside Intuit (as head of
"personal finance software" or something) once the acquisition closes?

If this was an acquisition fueled completely by a VC or investor, I doubt the
founder would be interested or willing to then commit to the Big Evil Company
that his revolution is being sold to.

Therefore I think the main premise of Jason's blog post is wrong.

~~~
vagostino
You've hit the nail on the head here.

See Scott Cook's (Intuit's founder) blog post:
[http://www.mint.com/blog/updates/intuit-not-out-to-change-
mi...](http://www.mint.com/blog/updates/intuit-not-out-to-change-mint-says-
founder/)

~~~
telemachos
A side note, but the pitch of that blog post is so odd:

>>Scott Cook from Intuit here. OK, I’m about to date myself. Long ago (27
years ago in fact), I watched my wife complain about paying the bills. That
gave me an idea. And that idea became Quicken. Check with your parents – they
might use it. Maybe even your grandparents.

>>But probably not you. For many of you, Quicken is a 20th century product in
a 21st century world. It’s like the car your parents had growing up. So you
turned to Mint.com. Because it wasn’t Quicken.

He seems to deliberately and at every opportunity play up what an out-of-touch
old fart he is. You can almost hear the fake twang as he sits on his rocking
chair...

------
Skeletor
Is there any way to tell from the outside and at this point in time if the
deal is a takeover from the inside like Apple buying Nexxt?

Will the lead people at Mint have real power in Inituit? Will one of them be
the next CTO? Are terms like those ever specified in a buyout?

~~~
plinkplonk
"Will the lead people at Mint have real power in Inituit? Will one of them be
the next CTO?"

Very unlikely. And even if someone from Mint were to become CTO, he would find
it very difficult to change direction or focus. Intuit has multiple levels of
management fiefdoms(within fiefdoms) and is infested with layers of clueless
middle management and with a few honorable exceptions(mostly old timers from
the old days, and some sharp kids just out of school, who don't stay very
long) the tech people aren't very hot either (which is why, with all their
resources and customer base and domain knowledge, they couldn't compete with a
thin layer around Yodlee's backend).

------
zmonkeyz
A wise man once said:

Get in, get out - that's a O.G.'s classic

------
Mz
RE All the talk of loaning/giving money to family/friends should one suddenly
find themselves rich:

I have a long history of being a bleeding heart. I also come from an
environment where "throwing money at the problem" is kind of the default
mental model. So I've spent lots of time fantasizing about how I would improve
the world/help people around me should I suddenly have money. Over the years,
I have concluded that financial problems grow out of real problems, so in most
cases just throwing money at the problem actually hurts a person's ability to
solve the underlying real problem. If someone is convinced that "The Problem"
is how much money they owe and you pay off their debts, it lets them off the
hook for wondering if there is something about their lives they should change.
(And in many cases, those debts will quickly pile up again because the cause
of the debts was not resolved. My recollection is that about 2/3s of people
who win the lottery are bankrupt 5 years later.)

For intractable personal problems, the odds are very good that the person with
this intractable problem is very resistant to change and/or the problem itself
is inherently difficult to overcome. In both cases, an easy way out of a
portion of the consequences tends to undermine any hope they will buckle down
and do the hard task of making the necessary changes. Also, paying off
someone's debts inherently contains a judgement about how the money should be
used. I have concluded that it would be better to just give someone money, no
strings attached, no questions ask, no expectations, as a gift. And then not
roll one's eyes and such when it isn't used the way one thought it ought to
be. I have also concluded that if I want to help people address some serious
personal problem, throwing money at the problem is not the way to do it. Some
day, I might figure out how making money available could grease the wheels of
progress towards a solution without causing all kinds of unintended negative
side effects. Should I ever work that out in my mind, I might well found a
charity. In the mean, I will share info and try to mind my own business.

------
sscheper
Running Mint.com probably isn't fun. Money is. That's all.

------
ahoyhere
Yawn. So much philosophizing, people.

Everyone on this thread is just screaming their own point of view so they can
feel validated.

Quit arguing on HN, and go DO something.

------
delld
No truer words have ever been spoken.

