
Why I Sold My Startup to Google - danshapiro
http://www.danshapiro.com/blog/2011/07/why-i-sold-my-startup-sparkbuy-to-google/
======
staunch
Some people might take away from this the idea that you can just build a cool
little prototype and Google will come along and snatch you up.

I'd bet this acquisition happened almost entirely due to relationships and
salesmanship. Most hackers who don't already know the right people (e.g.
former Googlers) would have no chance of pulling this kind of thing off.

Do not try this at home folks. The only real chance of an exit for most
startups is one based on actual success in the marketplace.

~~~
zach
What is true for getting acquired is about as true for acquiring customers. If
people don't know about you or haven't heard of your product from other means,
you have to break through a wall of indifference.

This is the real value of coverage in the industry press and why I think Steve
Blank's fretting over people jockeying for TechCrunch articles, which I
initially agreed with, is a little too idealized. Companies get a lot of
mileage from being featured in startup industry press outlets. I know it
doesn't get them many customers, but it puts them in position to get them. It
really helps grow partnerships, boost stature at industry events and frankly
increase interest in the founders' future endeavors.

~~~
staunch
Getting tech press works largely based on relationships. If you have those
relationships then of course you should exploit them.

For everyone else the only safe bet is to follow Steve Martin's advice and "be
so good they can't ignore you"

Reddit didn't get a TechCrunch article until they were acquired.

~~~
zach
I hesitate to recommend the Steve Martin line to non-performers.

I've known several entrepreneurs who have sunk a year or years of their lives
into codebases and eternally-half-built products instead of businesses.
Including myself at 20! It's actually a common affliction among game
developers looking to become entrepreneurs. They have an artistic vision, no
concept of hustle, and just want to put their head down until they get
something amazing. It's the artistic E-myth, _The Thief and the Cobbler_
syndrome.

It's an important message because a lot of people today are probably still in
this mode of thinking. I really need to write a blog post about it.

~~~
staunch
If you define being "good" as having a quality product that's growing
revenue/users successfully then the Steve Martin idea works perfectly.

Plenty of people have grown amazing businesses without being able to attract
the attention of TechCrunch or Google's M&A guys.

~~~
zach
Absolutely agree.

We're all passionate about great products here, right? And stories where great
products win despite all odds are what I want to tell my kids at night.

But I'm going to be honest, given a lone founder, I'd prefer to invest in one
with great connections and ability to excite people but who is a little
clueless (though passionate) about the product. I know that's heresy, but hear
me out here. Entrepreneurs almost by definition go into fields where there's a
huge gap between how crummy things are and how much better they can be with a
little work. And we know that a startup is not going to be as able to define a
market as a huge company is. And it's actually better for them not to come in
with a lot of assumptions about a fully-formed product that customers "must"
love.

So it's honestly pretty important to get someone out there who is going to put
the work into making those relationships and selling the product. I know
people should rarely concern themselves with improving on their weaknesses,
but I think this is one of the few counterexamples. Product and technology
wonks really need to know they need to step up their bizdev game or have a co-
founder who can do it to succeed as a startup.

To bring this back around to the topic at hand, learn from Dan! He was
tireless in presenting Ontela to everyone who would listen to his pitch, and
got really good at communicating the best message. And he got some good
practice presenting to audiences at conferences before he went into startups
(Dan, forgive me for this one):

[http://www.google.com/search?q=dan+shapiro+they+wanted+to+st...](http://www.google.com/search?q=dan+shapiro+they+wanted+to+stone+him)

------
dschobel
_Most VCs don’t care how long your company takes to show a return – they don’t
get to re-invest proceeds of their deals, so if you exit early, the money sits
in a bank account earning interest for years instead of contributing to their
returns._

Can anyone explain why this is the case?

~~~
rfrey
Many VCs raise a fund, allocate it, then distribute the proceeds to the
limited partners as the investments exit. That's why VCs are sometimes seen
simultaneously sitting on several boards, looking for the last one or two
investments, and raising the next fund.

~~~
danshapiro
(OP here) I tried to explain this in my post here:
[http://www.danshapiro.com/blog/2010/08/vc-insanity-
economics...](http://www.danshapiro.com/blog/2010/08/vc-insanity-economics/)
although rfrey's explanation is excellent and succinct.

------
dennisgorelik
Google essentially killed <http://www.sparkby.com> (Like it killed Gizmo5 in
the past: <http://www.google.com/gizmo5/> \- initially it was "temporary", but
then became permanent).

Why does Google do that? Why not allow it to grow and gradually integrate
refined pieces of technology into larger project [Google Product Search]?

~~~
rokhayakebe
You know that "Call phone" link in your gmail, and when you answer a phone
call inside your gmail, that's Gizmo5.

~~~
dennisgorelik
What's the replacement for SparkBuy?

I want to buy an inexpensive laptop with 80+ GB SSD and 4+ GB RAM. Where do I
go to find that?

\---

Edit: thanks to sliverstorm for suggesting newegg.com It's seems to be a good
replacement to SparkBuy (unlike Google Products Search).

NewEgg even looks somewhat similar to SpartBuy interface.

~~~
avree
They're likely reviewing and QAing it and then going to integrate some form of
it into Google Products/Google Shopper.

~~~
dennisgorelik
So when do you think Google Product Search team would deliver similar
features?

I'd say in a couple of years.

And that would not really work as good.

------
dotBen
_While I’m not in the position of my good friend Rand, who’s gone on the
record saying that his life savings is $25,000, I was not previously wealthy_

I continue to be of mixed minds as to whether having personal wealth (or not)
leads to a greater or lesser level of risk tolerance - and itchiness to exit.

Sure it's easy for those with a high net-wealth to take bigger risks but we
see all the time those with nothing (or even less with nothing, ie college
debt) take just a big risks because they have nothing to lose.

I wonder if willingness to take risk is essentially a bi-polar bell graph,
which leaves something like $25k in the bank in that sticky middle... not
enough money to risk it all but too still much to be lost.

~~~
daleharvey
I was really confused by the implication of this statement

is someone who has $25k in life savings "poor" or "wealthy"? I agree with you
that its a sticky middle, but the post seemed to imply one or the other.

~~~
rewind
I think in Rand's case, it means "poor". He has tremendous value built up in
his company, but nothing personally to show for it. He's still an unforseen
string of bad luck or hospital stay from being completely broke (or worse).
That's why some people mention it's okay for him to take some money off the
table if he raises additional funding.

------
photon_off
I'd never heard of SparkBuy.com -- how did it get snatched up so quickly by
Google? A precursory glance at it's stats shows it as being tagged only a
handle of times on Delicious [1] and is ranked 200,000+ on Alexa [2].

[1]:
[http://www.delicious.com/url/dd6d860947e61d97884bb3719377c7f...](http://www.delicious.com/url/dd6d860947e61d97884bb3719377c7f8)
[2]: <http://www.alexa.com/siteinfo/sparkbuy.com>

It's a great concept, and I think it could fit into Google Shopping quite
well. If you haven't checked out Google Shopping, you should -- they do some
interesting things by aggregating reviews, doing NLP, and extracting out key
terms. An example would be showing you a TV and it's ratings/sentiment
analysis for several attributes like "color", "design", and whatever else is
relevant for the product. With a more clever UI, they could churn out some
amazing product search. I sure wish I had their data.

Tangentially related, I've been working on a similar website in my spare time.
If anybody could point me in the right direction in terms of a price
comparison API, and/or how to sign up for decent affiliate programs, I'd be
quite grateful. Also, Google, if you'd like to hand me the keys to your
product database I'd be happy to make a much more useful UI for you.

~~~
photon_off
Why the downvotes? Is it not legitimate to ask how a scarely-known website
ended up being acquired in such a short time?

------
rdl
Congrats on building something people want AND exiting! Thanks for writing
about your experience (this was the good kind of post mortem)

I think another consideration for a (good) founder is "what happens to my
team". If I had spent 2-3y building a great team, and had normal startup
equity distribution (founders had a lot relative to virtually all employees),
there would be a bit of a disconnect in motivations.

Selling a company where you own 10-20% for $100mm is life changing, at least
for me. Even if it means working for a really shitty acquirer (e.g. Yahoo) for
2 or even 4 years, that might be enough money to make it personally
worthwhile. After all, you could kick back and emphasize "work/life balance",
especially after years of startups -- maybe work on non-commercial side
projects, maybe teach or take classes, do hobbies, etc., while working at a
stable job. Then do your own awesome company, self funded (or VC financed on
very favorable terms) in a few years.

However, for employees, it might only be $50-500k of equity payout. That still
leaves an employee in the "must work for a living" category, and I personally
would be a whole lot happier going to work every day for an awesome small team
at an independent company, or for a great acquirer or a PE/fund style "hands
off" acquirer (where the team/product stays intact), than to get a $50-100k
bonus to go work for Yahoo for 2 years.

A lot of the entrepreneurs I respect the most, who have recently done M&A
deals, explicitly valued "what happens to the employees and the company"
pretty highly. A lot of them ended up selling to companies like Amazon which
have kept operations intact at their acquisitions, vs. the Yahoo-style glue
factory.

~~~
danshapiro
Great point. I was including them in the first two points, but their welfare
was a huge consideration and I should probably have called it out separately.

~~~
rdl
Also, do you have any thoughts on Seattle or other parts of WA/PNW vs SFBA? I
love Seattle but am doing a startup down in SF for now.

------
rokhayakebe
Very good post. It is very easy for people who do not know you from Adam to
sit tell you when/if/how you should exit.5 10,20,30 millions can make a huge
difference. Always remember the most important person to make happy is
yourself. No apologies needed.

------
chopsueyar
_health insurance reform is key to promoting entrepreneurialism and small
businesses in this country!_

Agreed.

------
dennisgorelik
Dan, how long do you have to work for Google?

~~~
danshapiro
Not at all! I can leave any time I choose. But I'll be here for a good while -
it's a great team doing cool stuff, I'm learning & making great connections,
and it wouldn't be cool to ditch. There's obviously some economic incentives
as well, but that's the lesser part of it at this point.

While I personally wouldn't mind sharing details, for obvious reasons, I
can't.

~~~
dennisgorelik
Could you share one last detail: when would economic incentives irreversibly
kick in?

I'm a little bit skeptical here, considering the following:

1) You are not working for Google founders directly. You are working for
subordinates of subordinates (think bureaucracy).

2) You are not working for any of the best Google teams (Search, Ads, Gmail,
Maps)

3) Your project is killed already without any working replacement.

\---

Edit - to all of you downvoters here: I consider the decision Dan made as
quite reasonable.

He did a good job and got good reward for that.

He also shared his experience with all of us, which is very educational. I'd
like to thank Dan for that.

Still, there is another side to that story which I think should be exposed
too.

------
writetoalok
So what's the word on continuity after being acquired by Google? The frickin
site is down and no news on if or when it'll be up again.

~~~
zach
I'm sure it's presumably the usual Google continuity scenario, as made famous
by Writely, GrandCentral, JotSpot, and many others.

The site goes dark, there's a series of huge planning and strategy sessions,
the project gets staffed up and there's a lot of back-end work done. Then,
just about the time everyone forgets about the original company completely
(not long in the startup world), Google announces a product that takes the
original startup's product to a scope and scale well beyond the original.
However, it may leave out features that made the product quirky or popular
within certain niches. Then a bazillion people start using it and everyone
takes it for granted.

------
nedwin
Congratulations Dan

------
georgieporgie
_I get to swing for the fences_

Ah, sports metaphors. I consider it to be lower on the language scale than
excessive swearing, in terms of limited vocabulary. At least swearing can be
used to humorous or vaguely poetic effect.

~~~
jswinghammer
Why would you say that? Do believe yourself to be above sports or the people
who enjoy sports?

If I were to fault that metaphor for anything it would be that it has become
cliche at this point.

~~~
AlecSchueler
While I have nothing against sports metaphors myself, one drawback that I can
see is that people unfamiliar with the particular sport might not be able to
understand them. Indeed, I'll admit that I'm completely ignorant of baseball
and do not know what "swinging for the fences" means. In fact, I only know
that this was a baseball reference because of another comment.

------
pagekalisedown
Call me cynical, but I think health care reforms will never happen because it
gives big business an edge over the little guys.

~~~
jacoblyles
It's not _that_ expensive to get group insurance for a startup with 6+
employees. Count me skeptical of the idea that health insurance reform will
unlock a wave of entrepreneurial talent from people who previously couldn't
figure out how to swing a few hundred dollars a month for personal health
insurance.

~~~
pasbesoin
Try to get -- or to _hold_ \-- such insurance with an older workforce,
especially once someone is or has been seriously ill.

I'm not in that position, but a relative is -- minus the illness part, as far
as i know. I think their rates went up over 20% last year. Although they are
not a tech start up; rather, medical, and already established for some years.

My real concern is that people in the U.S. are, these days, paying "life"
rates for what is essentially "term" insurance. Take an all too typical
contemporary example. Someone has held one or several jobs that included
health care insurance from the time they graduated, say two decades ago.
During that time, they may well have paid significantly more in insurance
premiums than they received in care -- as a statistical average, their
demographic certainly did. (I don't care whether they employer paid some or
all of the premiums; call it an indirect wage, if you will.)

Now entering the latter half of their forties, and at higher risk, they are
sh-tcanned by their (latest) employer and face extended unemployment or a job
that doesn't offer health care benefits.

If they were still in employer provided coverage, they'd still being paying in
their X per employee per year (simplifying away the differences between
diferent employer-provided plans). It might be time for the system to, on
average, pay back some portion of all those accumulated premiums. Sort of a
"whole life" insurance policy, from a health insurance perspective.

Instead, the "accrued benefit" (I know this is a crude analogy) has fled along
with the job.

Aside from arguments about innovation and economic growth, the current health
care insurance model in the U.S. is simply not coherent nor predictable with
regard to providing coverage. For many, a third party -- one increasingly
having wildly diverging interests -- is in control of their coverage.

Many people would be happy to pay into a pool at the kind of pricing the major
employers receive. But as independents, they don't have that option.

