

Ask HN: Why do companies who’re replicable and non-defensible get acquired? - abbasmehdi

We hear about companies all the time that get acquired for millions of dollars by giants MS, Google, FB, Yahoo etc. If these companies can be replicated for much cheaper, why aren't they? They hold no patents usually, are still usually just selling to early adopters and not reached a critical mass, have not scaled significantly, a lot of their technology is dead simple to copy, they have softened the market by educating people to give a goliath a serious second-mover’s advantage, and most are actually even running at a loss or merely breaking even.&#60;p&#62;If you say this is just a way to buy out the founders as employees, my question is ‘Really? Were the founders ever offered a job? How do you know it’s the founder behind the skill-set you're looking for? What if it’s an employee’s work that impressed the acquirer? Only that company knows that.’&#60;p&#62;I mean trying to acquire a company that does what you do but does it much better makes sense - you’re squashing competition by moving in early, but trying to acquire a company that is more a little feature than a full blown product, a feature that can never generate more than 10% of what your revenue is even if &#60;i&#62;everything&#60;/i&#62; works out in its favor, that is only adding a feature to your long list of offerings, and isn’t even a revenue generator.&#60;p&#62;Sorry don’t mean to ramble, but somebody make sense of this. I know these goliaths aren’t stupid (maybe lazy, paranoid?), I know I’m missing something, and I’m waiting to be convinced by you! :-)
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edw
(In addition to the other comments...)

Because the acquirer wants the company's talent i.e. founders and employees.

Because the acquirer wants to deny a competitor the opportunity to buy the
company.

Because the acquirer is trying to put the kibosh on a disruptive innovator. In
other worse, keep the genie in the bottle—or shove it back in.

Because the acquirer wants to "inject new blood" into the organization. (Think
about the NeXTers charging the gang planks and taking over Apple after being
acquired…)

Probably others.

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abbasmehdi
Do any of these apply in say, Wufuu or PushLife cases? As in:

a) Google can't find people as smart as those at Wufuu and PushLife.

b) Wufuu and PushLife might get picked up Yahoo (search) or Apple/RIM
(mobile).

c) Google feels disrupted by Wufuu and PushLife.

d) Probable, but the cost is not justifiable for "inject[ing] new blood".

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edw
Well, Google didn't buy Wufoo; SurveyMonkey did. Based on my experience with
the two companies, Wufoo seems to plain "get it" way more than SurveyMonkey
does, and if I were a CxO of the latter company and if the company had some
money or equity lying around, I would snap up Wufoo. There's a combination of
technological cluefulness, design savvy, and customer-centric enthusiasm at
Wufoo that would represent a danger to SurveyMonkey if not purchased and
potentially a huge opportunity if the company were acquired and gently and
intelligently nurtured.

~~~
abbasmehdi
Sorry my bad for confusing Google with SM. Wufoo was a direct threat to SM, so
it applies in this case, kind of like if a better search came along Google
should make a move, but going back to the a,b, c, d I listed above, what would
you say for PushLife?

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ColinWright
People have learned that something might look easily replicable, but end up
having unexpected nastiness. Further, replication takes time, and requires
assigning people to the task.

In my company we often buy-in technology because, even though we could write
it ourselves, and might do a better job in the end, we are pretty sure that
there will be hiccoughs and unexpected difficulties, and during that time we
will be dedicating manpower that could be used doing things that other people
can't replicate.

dl;dr: Risk and time.

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abbasmehdi
Has your company paid 10x what it would cost for it to build and market
something? And that cost includes getting that many users.

I am starting to think they are buying the founder's passion and nothing more.
Which evaporates soon as s/he is bought out but that is why they make sure you
stay on a while and show them the ropes, after that time a replacement is
chosen by the founder I suppose.

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jrsmith1279
In my opinion it's because if you buy the site then you're buying the users as
well. For example if Google purchased Twitter instead of building a clone
(Buzz) then they would've inherited Twitter's users. Instead they did build
Buzz and it was/is a flop.

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abbasmehdi
Twitter had reached critical mass before Buzz came out (I don't question why
YouTube or Groupon or FB were targeted), I am asking about companies that lack
traction and revenue.

Most of their acquisitions are those little guys.

