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Facebook Acquires Drop.io (drop.io)
151 points by whyleym on Oct 29, 2010 | hide | past | web | favorite | 49 comments

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"?

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.

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?

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.

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.

As a user it's definitely somewhat disheartening. It seems like whenever something cool/useful comes from a small, previously unknown team, there's a significant chance that it'll just be bought and killed by a big player. Both makes me more wary of relying on such services to begin with (even if they're paid!), and from a progress-of-technology perspective feels unfortunate. I'm sure it's great for the founders, but it's like big companies are using their cash pile to do the opposite of encouraging technological progress: find technological progress elsewhere, buy it, and axe it.

Things do occasionally turn out okay, e.g. Google allowed the EtherPad team to open-source the code after Google bought/killed it. And, although I don't personally use/like it, Dodgeball got more or less resurrected as FourSquare after Google bought/killed it.

I have a suspicion - based purely on speculation - the unspoken thing here is that most of these businesses had awesome products & teams but were hurting so badly financially that they were on their last breath.

I wouldn't be surprised if its more of a case of struggling but very smart startup, about to collapse, turns to facebook as a last resort liquidation move. Handing over to FB or Google and having them pay back some investors and shut down the service looks much better than sending out a solemn "we screwed up" email to all your users & stakeholders...

I doubt the investors are unhappy with an exit, employees and users on the other hand are probably disappointed (though I hope the employees saw something of the exit which probably alleviates disappointment).

Can anyone think of an example of one of these eight-digit "talent acquisitions" that would now be viewed as a success (several years later)?

That's a great question to ask. The problem is, how would you measure if an acquisition was a success?

Facebook's Friend Feed acquisition wasn't that long ago but it looks like a success; They got a new CTO out of the acquisition.

If the site/businesses that they had build where worth anything at all, surely they would have sold them too instead of shutting them down?

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.

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.

This was a sale of near last resort.

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

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

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.

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.

Do you host an unlimited number of 100MB files, indefinitely, for an unlimited number of non-paying users?

No, but if I did, I'm fairly certain I could do it for less than $500,000/mo, assuming I can do something like "once your file has been hosted without being downloaded for more than x amount of time, users will get a link sent to an email a few hours or so after requesting the file".

Some tuning on that, and I'm fairly certain you could run things for less than $500,000k a month -- most files are probably uploaded, downed a few times in a week or two by a select number of people, and then forgotten.

Then again, and this is key here, I have not tried this. It's also something that could be difficult to patch into codebase if it wasn't considered early -- we're all familiar with the problem of coding ourselves into corners, especially when time is on the table.

You pay people less than 50k/mo?

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

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.

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.

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.

Does anyone know the deal price?

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.

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/)

seems like just a talent acquisition to me

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.

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"

I agree. As more and more services close, customers will be wary of putting content online or using a public online service. Thats the reason we started Tonido.

Zuckerberg has said that all of the acquisitions FB has made are essentially for the talent, not the product.

Facebook only does talent acquisitions.

Though, I always wondered why drop.io got any attention. Upload thing. Get URL. Share URL? Optional paywall behind URL. Did they have other features?

A nice interface. Making it extremely easy to do something simple (but something that the average person can't do without some kind of service) is often all you need.

Don't complain about others' successes. Learn from this that a nice interface for something simple is often enough, and go find a market where you can do the same thing, and get rich :)

(Note that I've used it to a very limited extent. But even if they have other features, my understanding was that the main value proposition was its simple, pleasant interface.)

I was a paying customer and actually found it somewhat difficult to use.

When an upload finished, many of my friends / contractors didn't know you'd need to refresh the page to view files. I'd sometimes find two or three copies of the same file in a given drop.

My drop had an admin password, but also a manager password (which were different, but would presumably be used by the same person).

Even browsing for files to upload was more difficult than it should have been. Once a file was selected some users assumed it was being uploaded already.

These were manageable interface problems for me, but required delineated instructions to the "average user."

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?

For that specific need you should use http://soundcloud.com

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.

I'll have to give a plug for my company Indaba Music here - http://indabamusic.com

Our site was pretty much designed exactly for this use case - the free account allows for private sessions, in-song commenting and in-session discussion.

> Dropbox and Tonido have been mentioned, but they really aren't the same thing.

As an aside, an interesting difference with Tonido is they also sell a "plug-in server" for their service too: http://www.tonidoplug.com/ I assume it's based on a SheevaPlug / Marvell Plug Computer style device.

maybe try cloudapp ? http://www.getcloudapp.com/

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

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

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.

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.)

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.

Dropbox does actually offer an RSS feed with file changes in your public folder.

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