It erodes the confidence of users and potential customers. People put their company blog on Posterous, they add their business to GoWalla, they gave AdGrok a few hours of their time, etcetera, etcetera.
I'm not saying I would turn down the offer. But I fear the long-term effect of all these acqui-hires is my potential customers saying "No thanks. I doubt you geeks will be around in 18 months" when I market to them.
It's even worse if you're selling to enterprises, and was worse long before anyone ever thought of the term "acquihire". You can trounce your competitors on every axis, come in at half the price, charge a flat-rate site license instead of a metered seat license, and buy the purchasing team 52-day aged ribeyes every week for 6 months and still lose if you're the one who looks like you might be out of business 2 years from now.
However, teams and products that do manage to make a name for themselves potentially end up leaving more unhappy people in their wake when they're 'acquihired'. It's not quite 'fail fast' from the point of view of the users who've been around for a while. (NB I'm not suggesting that the Posterous team could/should have done anything differently.)
Edit: FWIW each acquihire-type story nudges me slightly more to consider open-source alternatives, even if they involve some pain to set up/manage. Purely to feel a little more insulated from scenarios like this.
Right. While it was certainly unfortunate that Posterous was acquihired the impact from a saas/paas closing would be magnitudes more disruptive.
Everyone comes across as a winner and doing well with no chance of going under until it happens. Imagine building something using mailgun,appfog, engine yard or (pick whatever you want) and then having to scramble (even over the course of several months) to try and replace the functionality.
A good analogy might be the crappy customer service provided by AT&T, Comcast and [insert most utility cos] over the past 20 years. Most consumers now expect poor service and I'd wager that has, to some degree, had an influence on purchasing decisions.
It just is risky to do business with startups.
I think this is the main differentiating point between 'failing' and 'acquihires' (from a user's perspective).
If a company is simply shutting down, there's some sympathy for the team and it's known that the service will stop. With a talent acquisition, nobody really knows what's going to happen to the service (maybe even the founders don't know) and that extra level of uncertainty is off-putting. 
Eventually, that extra level of uncertainty transfers over to the List Of Reasons Not to Work With Startups(TM).
 This is also true of straight acquisitions but there's a reasonable expectation that the acquirer is purchasing the product as well as the team.
Or in other words, I would sacrifice many many startups to get EtherPad back again.
In semiconductor startups, you sometimes need to secure "second source" agreements with a bigger business (that could be your eventual acquirer ) that assures they'll takeover manufacture your existing silicon if they go down.
In our case we had a second-source partner until our acquisition that had "rebadged" parts available. It was annoying, but it's sometimes the only way for a startup to sell to big multi-million dollar customers.
I'm with the GP poster -while I probably would do the same thing in an acquihire situation, it does start to (somewhat) poison the well over time for newer startups.
While I love Path to bits - I have zero clue what their business model will be, and wonder what will happen to all my carefully journaled "moments" if Path gets acquhired sometime in the future. Somebody needs to come up with a good Diaspora like solution for personal journaling where _i_ control the data, and store it on something that is likely to be persistent (S3 is the only thing that I can think of that has a greater than 90% chance of being around in 10+ years. Dropbox, if they have good public offering, will likely be the second candidate)
I'd pay money for that - $10 for a Dropbox/S3 storage social network akin to what we get with Path today.
For your question about a place to store all of your data, check out: http://lockerproject.org/. While it doesn't support Path yet (they don't have a public API) it certainly will when Path makes their API available.
Also as someone else said they've turned down very large offers.
S3 is the only thing that I can think of that has a greater
than 90% chance of being around in 10+ years.
I think a site that acts as a reseller/affiliate for pair.com, dropbox and the like, where all you do is set up someone's (new) domain, connect it to the storage provider, and provide an easy install of something jekyll-like and turnkey would be a good thing to try.
At first you'd only get people who are aware of the user-as-a-product issue with Google and other free providers, but as those providers are more widely recognized as problematic, the market will increase.
"So what happens when you guys get aquired and shut this product down"
"We don't plan to, it makes money and we're growing"
"If you keep growing one of the big players will get worried or interested or both and make you an offer you'd have to be stupid not to take"
It makes sense, the aqui-hire doesn't just get you a proven team with known talent, it removes a potential competitor that might disrupt the status quo. There's a reason it's happening so often and it's because it's great business.
But as a trend it's certainly going to make it harder to get customers for startups that aren't based on creating a fad-ish service for consumers but are providing services people consider important.
There is certainly an extra lack of confidence in startups because of the "find a big exit!" culture and the growing trend for aqui-hiring.
As if it wasn't hard enough as a startup to attract customers, this perception is certainly not helping.
First of all, Posterous is not bootstrapped, it's received $10M in VC funding. Second Posterous has few customers compared to users, but well paying ones like Coca-Cola, I'm sure they will be taken care of.
If you have a product worth buying your customers will not question how long you've been around. Some will but there are enough that won't. If you're really worried about it, buy an off the shelf company with updated filings, it's not very difficult to find a company 3 or 4 years old. If you've got the cash you could even buy a publicly listed shell. Even NYSE shells come up now and then but those are very pricey.
But honestly, unless you're selling items in the thousands of dollars per month range no one is going to pull your corporate charter.
As an aside, do you offer Cilantro in bulk / whitelabel or do you have an affiliate program?
Posterous had a good four year run, but the strong hint from the press release is that they'll be shutting the service down.
The web is built for innovation, not longevity.
Apple killed newton, clones, xserve and other products. I'm sure you can think of more.
Sun killed cobalt servers.
GM killed Oldsmobile, Pontiac etc.
Survival of the fittest. All the warm fuzzy folksy stuff (that you don't see in traditional business - you know things like a dog at the office or free food) means very little in the end. They will do what they need to do to survive.
With web startups, you get (at best) an email with 90 days notice.
But more importantly there is an ongoing concern that has a reputation (not the same with an entire company folding) and the product killed is just a part of many products that are offered. And of course they are charging for something whereas in the case of web startups what they are giving you is free. So there is no "consideration" and as a result I would think they are not subject to any class action lawsuits. How can you sue for something you didn't pay for?
On the seller side, VC investments are to blame, I think, because of their ROI expectations. We are missing a good investment model for successful tech/web businesses that aren't the huge windfalls VCs want, like most businesses in other fields. You could say that angel investment is that model - the problem is that VCs want to invest in many companies, and it's sometimes hard to reject their offer. Once you do take their money, it's hard justifying slow growth and good though less-than-stellar success, and in that case, both the company and its users are "doomed".
And why do VCs want to invest in so many companies? This has to do with the buyer side (see http://news.ycombinator.com/item?id=3546629 for an interesting discussion about acquihires from the buyer's perspective). I think they have to invest because they have so much money, they can't accurately identify the stellar companies (well, obviously), and acquisitions give them a good enough ROI to continue doing what they're doing.
Nothing against the guys, they're just optimizing, but it sucks to be on the receiving end. Is web 4.0 going to be a DIY world where vps-es are the only "services" you'll need and other products will have to plug in to what you host on your own vps just like normal purchased desktop software?
Both web and brick/mortar companies can suddenly close shop for a huge amount of reasons, and I have my doubts that "being so talented at what you do that you get bought out" is at the top of too many peoples' worry lists, IMO.
But it really does make you pause the next time you decide to commit to a new company. Today I got reminders in my email about how SimpleGeo and IndexTank will "sunset" their services within the next month after their acquisitions last year. I knew it was coming, but after having to spend all this time removing them from my app, I'll be a little more wary going forward of using third parties in the things that I do.
That's the context I'm referring to (acquire -> integrate engineering talent -> shut down original product). When that happens, it's the users who get the short end of the stick (VCs may lose $ or break even, but that's an expectation in their world).
Software–however niche, crappy, or "beta"–gets used for a lot longer than developers realize. Somewhere out there, a secretary is using a Word macro that's older than my teenage daughter and she'll stab you with her letter opener you if you try and take it away. But, in a Web-app/SaaS world, we developers can shut things down with a simple keystroke. That doesn't mean it has no consequences.
For instance, my blog is on Posterous, but with my own domain, so I can migrate to some other service with no visible disruption.
The startups that stick around will have access to more of both all things being equal (ie assuming the same economy).
Posterous is apparently about to create a lot of orphans. Those are customers now available for a lot of other remaining startups etc. If you're a bootstrapped startup in the Posterous space, you should be licking your chops, Christmas is coming early.
Our fear is that bootstrapped companies aiming for long-term reliability will have trouble finding customers because the customers have been burned before by a company that, from their perspective, looked very much like yours but turned out not to be reliable at all. That's where the difficulty finding customers comes in. Imagine setting up a plumbing business in a world where 75% of plumbers were actually armed robbers. Sure, you have the nominal advantage of actually being a real plumber, but how many people do you think will take a chance on you after the last three plumbers cleaned them out?
And bootstrapped companies by definition don't take a lot of funding. Once you get into the VC game, a reliable business with steady income income is no longer enough, because that isn't how investors make money. Once you take venture capital, your goal is some sort of liquidity event, like this sale.
Sounds like posterous is not long for this world. This is a bummer, I really like posterous.
Sounds more like they're answering a potentially frequently answered question, not hinting that they'll be shutting the service.
> What happens to my Space? Will Posterous eventually shut down?
> You can use your Space(s) exactly as you have in the past. We’ll give you ample notice before any changes or disruptions to the service and we’ll provide specific instructions for exporting your content to another service.
Notice they don't actually answer the question.
> Posterous engineers, product managers and others will join our teams working on several key initiatives that will make Twitter even better.
Sounds like they'll be working on Twitter, not Posterous. It doesn't say anything about people at Twitter working at Posterous, so it doesn't sound like a merge.
>Can I export my Space’s to Wordpress, Tumblr, Blogger, or >another service?
>Over the coming weeks we’ll provide you with specific >instructions for exporting your content to other services.
I don't think there is any doubt they'll be shutting down Spaces soon.
All your ducks are in a row.
WordPress.com figured out how to monetize with VIP hosting/support.
Not to cheapen the work done but sometimes it's just how the cookies crumble.
I doubt the investors made a return.
Obviously you have more knowledge of Posterous than I do, but generally a founder leaving tends to have negative implications (it scares potential investors, damages momentum).
I use both Tumblr and Posterous and from a user perspective when Posterous pivoted to be focused on "spaces" it seemed like the decision was panic driven. The reason that Tumblr was succeeding over Posterous wasn't due to the feature set of Tumblr but rather the community that Tumblr had.
Posterous had advantages over Tumblr and in many ways it's the better blogging platform, but rather than playing on those strengths and improving them Posterous instead went after the social aspects that Tumblr was succeeding in without fully appreciating that it couldn't just take a social feature set and foist them onto it's user-base.
I'd guess somewhere between $5m-$10m.
Given the number of employees and the amounts they've raised I guess their burn rate was around 250-300k/month (that's probably on the large side). Their series B was only raised 6 months ago so based on their burn rate I'm assuming they've still got 3m-4m of that in cash so that would be the lower bound for the acquisition.
Given the company probably had 12 months of cash left I suspect the Series B investors would only have agreed to a sale if they got all their money back (they'd have liquidation preference anyway so they'd get their money back first), so that probably means a lower bound greater than $5m (the size of the Series B).
Anything over $10m would be high for a talent acquisition so that's probably a decent upper-bound.
Liquidation prefs are rarely exercised, at least when the acquirer is clueful. (The company spending the money wants the incoming employees to be reasonably incentivized, often that takes the form some delayed payout. They really don't care if the investors make their money back or not.)
It's usually among the first things to go in a negotiation.
There's a pretty good chance Twitter is already profitable. If they aren't then it's pretty clear they can do a facebook and turn on the profits when they choose.
If I worked at Tumblr, I'd put the blog post in my link in a glass frame.
I use Posterous for my personal and startup blogs.
Reading the Posterous FAQ, they barely use any "exciting" colloquialisms. Everything is cast in a shadow of uncertainty. In fact, I would probably go far as saying this is one of the worst acquisition FAQ's I've read.
I'm very pleased for the Posterous team, but you haven't truely given any insight as to where you plan to be in 6 months from now.
Some startups are just "aqhirisations", and from a cynical reading this sounds all too familiar.
I could be wrong, and perhaps the author of that article just never read Shakespeare, because right now I can see the clouds overhead.
Given the effort that goes into carefully negotiating the acquisition process, you can be sure that this lack of clarity is not an accident.
I don't generally mind when this happens with a services firm, or a tool with very few users, but Posterous? We all moved our Wordpresses there. True enough, we all got it for free so we can't complain, but I can't help feel that the Posterous owners let something lovely fly. Ahwell, no 10x ROI eh?
Sad to say, but every time I find myself using a tool or site regularly, this crosses my mind...
Everyone who joined Twitter was handsomely rewarded for their hard work and their accomplishments at Posterous. We're taking much of what we built at Posterous to make Twitter a more powerful platform.
If the employees simply got to keep their job, they wouldn't have accepted the Twitter offer and instead have joined another startup. There are plenty of great opportunities out there.
Self-host anything you consider important enough to warrant a 301 down the road.
I see no reason why Twitter would aquire Posterous for any reason other than the experience that the staff have. As far as I am aware Posterous doesn't hold any valued patents. It doesn't appear to be leading the way in pioneering technology. I don't really see how the site itself fits in with Twitter's strategy.
It looks like a smash and grab to get more staff. Is this a statement about the typically applicant Twitter recieves when looking to hire? Its also a shame as aquisition's like this are happening more and more often killing off fairly popular websites in the process.
Another aspect is the user-base that will come with Posterous.
I've decided to do something about it
I've setup http://p.ostero.us A paid Octpress based blogging service for the ex-posterous users - using an awesome blog platform - makes money - and thats not ganna get purchased and killed off
Hopefully this will help other posterous user wondering where to go
Hey Twitter, how about you give me the platform, we'll split 50/50 anything I make with it, I'll assume all the downside liability.
Posterous can go a lot further. This is a failure of imagination.
Although this is just a subset of their total traffic, they were consistently doubling traffic every 4 months or so.
edit: seems the relaunched with a new design around that time
It really does make me want to take a run at getting the platform from Twitter, if they are in fact going to close it down. I've got the perfect name to rebrand it with, far better than the Posterous name.
Twitter might see serious tax benefits from shutting it down after the acquisition unfortunately. To them it might be worth more dead than alive.
Yep, it had a very real business opportunity.
Obviously once Posterous took the A & B $10 million in venture funding, their clock was seriously ticking. The founders no longer had real control over the company or its future. It wouldn't surprise me if they were diluted down to 10% or less ownership each, which wipes out the incentive to continue with a situation where you're going to see nearly zero payout due to VC terms unless you build an absolute monster company.
No matter what they did, due to the VC they took on, they were unlikely to have a long term time horizon unless they were 'beating' Tumblr. It was get extraordinarily big or go home, because apparently #500 wasn't big enough.
So they bailed, and it probably made perfect sense for their situations.
Tumblr daily pageviews: 500m; Posterous daily pageviews: 1m
Posterous would never be a billion dollar service, but it could be the type of service that generates $10m+ in annual profit.
100 servers from a competent host + bandwidth via a pooling deal = less than $50,000 per month. It wouldn't be sexy, but it'd hold.
I wouldn't keep the current Posterous business model of chasing Tumblr into a pool of red ink. I'd place a bet that users will pay for a service that will stick around. It would reduce usage, but there's a large base to monetize that would be willing to stick around.
1m pageviews a month is about equivalent to 10/second. A single app server can handle that easily. Add on a redundant app server, two database servers, and some static/queue/mail ones, and you're looking at 10 servers _tops_ for that level of traffic (and much more).
"We're really struggling here cap'n":)
Quantcast actually gives 1 million pageviews a day (and not a month), which is, yes, 10/s (and 550 times less than Tumblr).
Either Quantcast numbers are very off, either Posterous can indeed run on very few servers.
(edit: but yeah, you only need 100 servers if you're running something with "enterprise" in the name ;)
100 servers would assume media hosting for images and other files that go with a blog. That could all be kicked out to other services like Amazon, but the costs would obviously go up and I don't think it would be necessary.
At $500k +/- a year in infrastructure costs, I think Posterous could be wildly profitable. You could run a tight ship with five to ten people (throw in $500k to $1m in employee costs). If someone put a gun to your head, it could be maintained with a two or three person team.
HN Y U SO HATE?