
Acquisition condolences  - johns
http://37signals.com/svn/posts/2565-acquisition-condolences
======
iamelgringo
I'm really quite tired of the arm chair quarterbacking that occurs when a
startup decides to exit.

Ron Conway said it best in response to Arrington's "Dip shit companies"
comment. Ultimately it's up to the founders. The founders have put the blood
sweat and tears into the company. It is the founder's life, their equity and
their company. If they decide to cash out, then good for them. If they decide
to stick it out and work towards an IPO, good for them. The founder is the
gladiator in the arena, fighting for their company and their lives. Who are we
to publicly criticize and belittle them.

Being a founder is hard enough as it is without other founders publicly
criticizing their decisions while waiting for the delivery of their custom
Pagani Zonda[1].

ref: [1] : [http://www.autoblog.com/2010/09/07/pagani-zonda-hh-
commissio...](http://www.autoblog.com/2010/09/07/pagani-zonda-hh-commissioner-
revealed-as-30-year-old-chicago-sof/)

~~~
ajg1977
I know people like to jump on the 37signals guys, but I don't feel this
article is a criticism of founders or investors who choose to sell or be
acquired.

It's a footnote reminder that acquisitions, no matter how well intentioned or
promising, often result in promising products gradually being starved of
attention and resources as the fickle nature of the acquirer shifts to other
matters. Condolences to the users as the product is left to wither in
"maintenance mode", or mothballed entirely with the sourcecode & IP archived
in a drawer somewhere.

It's interesting to contemplate what the del.icio.us and Lala's of the world
may have become had they been able to go it alone, and conversely what would
have happened to the Facebook or Twitter's had they been acquired in the first
few years.

~~~
danilocampos
Very interesting – that is a conversation worth having.

The trouble with 37signals and posts like this is their tone. It's shrill,
nose held aloft, almost scoldy. It's guaranteed to polarize.

I'm sure it's great for traffic, and thus builds their brand, but it doesn't
generate the constructive conversation it could.

edit: What's more, come on, "condolence?" Selling a business you built from
the ground up is a career-defining move.

------
risotto
This isn't DHHs fault, but I think this is the straw that broke the camel's
back w.r.t. my own reading of "startup news."

This advice is worthless.

Everything is possible in business. Get acquired and snuffed out, get acquired
and blow up, don't get acquired and run a healthy business, don't get acquired
and fade out. Get sued and go out of business tomorrow.

Nobody has any idea how the founders and employees at Doppler feel. I respect
my fellow professionals enough to congratulate them for their successes
however they manifest, and to trust them to seek new opportunities if their
current ones fail.

The acquired founders and employees are oppressed and we should offer them
condolences? People would kill to have these problems.

------
mixmax
There _are_ actually other motivations than having a shot at significance.
Maybe the founders want to retire on their $20 mill. Maybe they want to go on
to building bigger and better stuff with the money they've made. Maybe their
investors are prudent and actually expect a return on their money sometime
this decade.

This is rather one-sided, but as always from 37signals great linkbait.

------
dhh
If there's a scoreboard for the assignment of blame, I would put it 98% on
acquirer and 2% on "acquireree". It's hard to fault someone for taking a $20M
exit too harshly, but it's quite easy to fault a share-holder backed
corporation that should know better.

~~~
patio11
To be fair, $20 million acquisitions would not be the first time money was
wasted at a publicly traded company. That is actually pretty cheap compared to
running a line of business with no future, such as the search engine at Yahoo
or the automobile manufacturing at General Motors. (An obscure American health
insurance company, misnamed due to funny historical issues.)

~~~
jacquesm
The pension funds of GM are at least as big a problem as the health insurance
part.

And GM still sells very large numbers of vehicles, if Skoda could be turned
around I don't see any reason why the same could not happen to GM.

------
endlessvoid94
I have a really hard time being sad about this.

Human beings create. We have new ideas daily. When some of them die, it's
okay. And it's okay if someone made a LOT of money from the deal.

People will cry. That's fine, meanwhile the people who just got bought will go
on to create more, interesting, new ideas.

------
danilocampos
Could this be any more self-righteous?

Here's the deal:

You build value in a startup. A company comes along and sees that value,
decides it's worth some cash to advance some internal mission. Company offers
you something that feels like a good deal.

Boom: sold. Right?

Who better than the people who built the company can judge the quality of
these offers?

Moreover, let's say stodgy old company absorbs an awesome startup and puts
their tech forever in the basement (a la Nokia here, or Microsoft with
Danger). So what? It's not as though these bright minded founders simply
evaporate into the atmosphere, forever lost to the future of human
civilization. Now these guys are smarter, more experienced, and hopefully even
better capitalized than when they started. If they're truly so bright, off to
build a new idea they will go.

And if not, no big deal either, the world got what it could from them. Who's
to say their idea/technology isn't in better hands now, held by a company with
perhaps steadier revenues or a more mature infrastructure for distributing or
selling the product?

There's value in independence. There's value in seeing things through with the
long view. Absolutely no disagreement there.

But as long as you're not running an elaborate scam, how you make your money,
who acquires your company and what they do with it afterward is none of my
business. I hope you got a great deal and that you're in great shape for your
next stab at the next big thing. (edit: if you end up making a dominant yet
shitty product, though, I reserve the right to pine for the next big
disruption.)

~~~
davcro
> Could this be any more self-righteous?

I believe this self-righteous attitude regarding acquisitions comes from being
a bootstrapped startup. When you bootstrap your company starts with a
valuation of zero. The only way to increase your company's valuation is to
start making a profit. For the bootstrapped guys an acquisition offer means
that your company has grown to the point where competitors feel threatened.
When you are in this position the only reason to sell is if your company is no
longer growing (why sell now when your company will be worth more next year?).
That is a tragic situation.

The founders who raise money start with an expected valuation greater than
zero. Usually these guys can sell well before they ever meet the expected
valuation. I mean shit, the startup SocialThing! sold to AOL for $7 million
while they were in private beta. In other situations these companies fail to
meet the expected valuation and have to sell in order to protect the
reputation of the investors and founders. For example Slide sold to Google for
$183 million. My company Quiz Monster (bootstrapped) is a competitor to Slide,
has a larger userbase, and is worth $1.5 million at best.

TL;DR: Bootstrapped companies have to work harder than venture backed
companies in order to receive acquisition offers and thus feel very self-
righteous.

~~~
danilocampos
Solid analysis. I suspected as much thanks to their series on bootstrapped
companies.

I say cut the crap, though. If bootstrapping is the better way, awesome –
37signals will enjoy the bathtubs full of money they get at the end of the
rainbow, etc.

Life is too short to spend your time with a chip on your shoulder. Or, at
least to write like you have one.

~~~
edanm
"If bootstrapping is the better way, awesome – 37signals will enjoy the
bathtubs full of money they get at the end of the rainbow, etc"

That's the problem. 37 Signals says it's the better way, but not obviously
better for the founders. You won't get rich, but the world will be better off
for having a better company.

~~~
whyleyc
_"You won't get rich"_

Says who ?

Some estimates peg 37Signals as being profitable to the tune of $6 million per
year. Divided equally between the 12 employees that's $500k each. Not bad for
a year's work.

For more see:
[http://blog.jedchristiansen.com/2008/12/04/estimating-37sign...](http://blog.jedchristiansen.com/2008/12/04/estimating-37signals-
revenue-and-general-profitability/)

~~~
edanm
But also not the kind of exit and FU money that entrepreneurs often seek.

This is just my understanding of _their_ argument, though. Better to grow a
company slowly and keep running it, than to grow a company and get bought.
They think you should be in the game to keep running the company, not get
rich. Getting rich while running the company is also possible, but that's a
nice side-effect as far as they're concerned.

------
phil
Sometimes it cuts the other way though. Take Flickr: bought for just a bit
more than Dopplr by a company with significant problems, today the #2 photo
site in the world (after Facebook) and more relevant and vibrant than ever.

~~~
gregory80
flickr is huge, but I don't think yahoo has done very much to advance the
original feature set. which is also true for delicious. though I agree there
are cases, I'm hard pressed to find many. Maybe android (google), but not
dodgeball (google).

~~~
blasdel
Though Yahoo did do things to clean up some of the dipshit decisions made by
the founders after they left. Originally if you uploaded anything but photos
taken with a lensed camera (like illustrations or screenshots), your account
would be marked so that everything you posted never appeared in searches or
public site areas. This practice only stopped maybe 2 years ago.

They also finally redesigned the photo pages to display them larger than 400px
wide. It's no longer lower-res than Facebook, but it's still much slower since
they don't prefetch images.

------
danielharan
Right, according to the condescending trolls at 37s, selling a company for $20
million is a failure.

Sounds like: "You poor thing, running a company by yourself so you decided to
sell? Better luck next time, sucker"

37s built a good company. Congrats guys. Now quit shitting on other people's
corn flakes. Deal?

------
Gibbon
I noticed DHH said in the comments his beef was not with the founders selling
their companies, but with the Megacorps that let their acquisitions rot.

~~~
sushrutbidwai
I think sometimes these Megacorps buy out some one just so some one else cant
do that and challenge them. Of course some of these could just be bad
decisions.

------
bradly
Shouldn't we feel more sorry for the people who can cash out and spend the
next 50 years on a beach with their families and friends, but choose to work
instead?

Don't get me wrong; I love creating and I am really looking forward to working
on my start-up full time, but you know what I love even more? My family and my
friends. If I had an opportunity to comfortably spend every day with them, I
wouldn't think twice.

~~~
scootklein
it never is, nor it should be, a binary choice. you forever have to find a
balance between the two. if you would quit your startup forever assuming you
had full financial backing to spend with your family and friends, then you
really see your startup as a means to an end and not a hobby/lifestyle like
many others do

you call it work, many others call it their hobby. they just happen to do it
full time and get paid for it.

~~~
bradly
You are right, each person has their own balance they must find. Otherwise, my
comment is no different than dhh's article.

I would argue, though, that I can still see my startups as a hobby/lifestyle
even though I would I be more than happy to retire early with fu money.
Primarily because I would still want to start build my own products even
without the lure of getting rich quickly.

------
hasenj
I think many HNers are missing the point.

This shows that building something with no profits in the hopes of getting
"acquired" is not a sustainable model.

Cases like this might eventually convince big companies that acquiring
startups is not that valuable after all; specially the startups that have no
business model other than hoping to get acquired.

This is specially true if you (as a big company) think you're acquiring the
talent (the guys who built the startup). The truth is, they will inevitable
leave, because working in big companies sucks.

Building something valuable without a business model other than hoping to get
acquired sounds like a scam against big companies. Basically the business
model is to sell the product once for a _huge_ sum of money, and the guy who
buys the product (the big company) doesn't get anything out of it; hence the
scam.

The second point is, your product (as a startup) is now dead. Doesn't that
make you sad? Wouldn't you be more satisfied if users loved you _and_ you were
making money _and_ still doing what you love?

------
bond
It's up to the founders to judge a good exit or not. They are the ones who
built the product and they know if the offer is good enough based on their
product and their lives.

I just don't understand the flak founders get when they sell. Tell others is
bad to sell without knowing the dynamics of the company and founders is not
the way to do it.

People have different expectations from life and their work. One thing is
growing a business and having no problems with money and feeling good about it
and having no plans to sell, other is building a business and trying to make a
living off of it. If you get a good offer and meets your expectations is
reasonably that you would sell.

Ultimately is up to the founders to know what to do with their product and we
have nothing to do with their decision because we aren't part of the business.

If the product goes to the basement after being acquired that gives the rest
of us an opportunity to build another better than the one who was acquired.
The founders have done their job and it's time to move on and think about a
new idea.

------
omnigoat
Man, these guys talk about $20 mil as if it were chump change. Probably
because they have all that blog-money now.

If someone ever wants to buy _my_ company for $20 mil, and I walk away with
even half that, I will be a very, _very_ happy man.

~~~
bad_user
Probably because they make that amount of money in a single year.

------
joelmichael
He is right that acquisitions kill companies, and it is tragic to watch. I
admire the romance DHH attaches to his work. You can tell he pours his heart
into it.

But he underestimates the benefits of money. Even if "mojito island" is a
mirage, having enough money so that you don't _have_ to work again is
extremely valuable. You can take long breaks, tour the world, or pursue
endeavors that may not necessarily be profitable, such as art, philanthropy,
or politics. If you choose, you also have the means to start a new company
from a position of comfort and control.

And besides, people often simply get tired of working on the same company and
want a change of pace.

------
danielnicollet
You know the rules from the start. You start a company and you own only what
you put in it. If it's ideas, you'll own them. Comes the day you need cash,
investors make an offer. You don't have to take it. If you do, time to share a
piece of your company, or more. Comes the day your little startup attracts the
attention of a behemoth, they offer you a deal. You don't have to sell.

So all in all, I would recommend the following: Only complain about the way an
investor treats your company if they deceived you. Otherwise, just accept that
it's not your toy anymore and you got paid for it.

------
adw
The thing is: the Dopplr founders, early staff, and investors all likely made
money. Whatever you call it, that's hardly a _bad_ result for them...

OK, bad day for Nokia. Dopplr's fault? Nope.

~~~
samd
The argument isn't that some people don't make money, it's that the users and
probably the founders are better off building a company that lasts. The users
get a great product and the founders get to build and run a profitable
business. Part of their argument (which is referenced but not explained in the
post) is that it's not personally fulfilling to get rich and retire early but
rather to continue to build.

~~~
adw
Reading the article, you can certainly argue that Dopplr didn't have the
adoption curve they hoped for. They get money, they get to do something new
(one founder's a partner at BERG London, who are pretty kick-ass).

The users? Sure. But it's a free service. Like the recent quote says, the
users are the product. (<http://www.metafilter.com/95152/Userdriven-
discontent>, top comment.)

DHH's hating the players when he should hate the game.

------
j_baker
While this post is a bit on the dramatic side, I think the core point is good.
I don't blame founders for selling companies knowing their product will be
destroyed, nor do I blame BigCos for buying them.

But how is this encouraging startups to provide something useful to society?
It's just encouraging them to target products at larger companies, not to
actual customers.

------
aaroniba
If megacorp buys a promising startup and thwarts it, then does this also
create a new opportunity to fill the space left by the startup?

~~~
ajdecon
Perhaps; but it seems likely to me that another startup in the same niche
would find it harder to be acquired, as megacorp #1 doesn't need another
acquisition, and other megacorps might not choose to enter that space
themselves. A new startup in that space might have to be bootstrapped, which
might not be an appealing option.

------
triii
Don't listen to rich people telling you that you shouldn't get your first
million dollars. Is this post that different than a VC hoping poor founders
stay hungry?

------
pajarito
I think there would me more condolences if money were hidden away from
creators. Acquisition is a fruit you can take or reject but anyway is a sweet
fruit.

