Most startup/bootstrapped companies are not in that position. Most end up failing and winding up with nothing, but there are some that will end up with these talent acquisition situations.
Remember, both sides (the acquirers and the acquirees) have to agree to the deal. Google doesn't just come along and say "we want to acquire you for your talent" and the other side has no say in the matter.
In this situation you are faced with a choice. Talent acqs happen because a) the acquire target is not really doing that well, and b) they have a group of people that work well together that the acquiring company wants to keep together to do great things under their umbrella.
Given the choice between: keep working on your low-to-modest traction product which isn't producing a lot of revenue and wonder how you might pay rent next month OR a multi-million dollar check/stock offer at a large, successful company... which would you choose? I would take the check in that situation. Sometimes you can't achieve your world-changing vision before your investor and personal money are gone.
The goal of a company should be to succeed and be self-sustaining, of course. But sometimes that doesn't happen, and these talent acqs happen for a reason.
I wonder how the poo-pooing of anything that isn't a $10m+ funding or $1bn+ market cap business on sites like HN encourages people to think "well, hey, perhaps I should go join a business like that if mine can't be."
Poo-pooing is what babies do in their diapers.
On second thought, maybe you did have it right ;)
I'd look to the open source world for good geek tools, honestly. I think expecting people to sell them to us in the app stores just won't work. No one will buy this stuff at the $50/seat the developers would have to charge to avoid the Google and Facebook buyouts.
The only way to make that stuff is to sell it as some kind of "cloud" service where you make your money on eyeballs elsewhere.
No one will buy this stuff at the $50/seat the developers would have to charge to avoid the Google and Facebook buyouts.
Can you please re-state? For some reason I can't follow.
1. The minimum price to sustain development as standalone software is $50/seat.
2. Consumers will not pay $50/seat for this software.
3. Some businesses have been successful with cloud-based monetization.
4. Therefore, the best chance for success is to sell a cloud service, rather than standalone software.
What didn't you get? Both Macro's post and the parent are reasonable and non-contradictory. Marco says "I was only able to reject those offers because Instapaper is a healthy business" and the parent says "Well, congrats to Marco for having a successful and sustainable business".
My point is, you are disagreeing with two people in agreement. What you "heard" is a miscalculating brain that projected sentiments that don't exist.
Even so, if you take his advice and do what you can to support software you love to keep it alive, in the long run it may not be enough. Either way, my comment about why these things happen still stands.
It's not hard to bootstrap. The hard part is coming to terms with what is actually sustainable. It takes a while to figure that out.
> The hard part is coming to terms with what is actually sustainable. It takes a while to figure that out.
Exactly. And if it takes longer to figure out than the money you have to burn, then why not at least try for some sort of exit before giving up completely?
Given the choice between: keep working on your low-to-modest traction product which isn't producing a lot of revenue and wonder how you might pay rent next month OR a multi-million dollar check/stock offer at a large, successful company... which would you choose?
I would also choose the latter. I'll be the first to admit I'm not trying to change the world or 'disrupt and industry' or anything lofty like that. But I think there are quite a few people who would eschew the big check for the opportunity to do something tremendous, and they deserve to be lauded.
Who knows, you might be right and some developers might be able to think of an idea, build it, and market it successfully enough to get the acquihire they want (along with a big paycheck), but I suspect most just want to build a product _someone_ finds useful.
Yes, people build companies to flip all the time. Many/most of them don't make the front page of Hacker News.
Seems strange to me that people would consider setting out to flip themselves (but I can believe that it happens).
For example, in today's "the new digg" feedback survey, I told them I will not use the service until they have a sustainable revenue model (they happily tout their current lack of one), for this reason - the last thing I need is yet another service I like to be bought and then shut down. Granted, I don't believe they're starting out with the goal of being acquired, but this whole "useful stuff goes away because the people building it have no business sense" is pretty annoying to deal with.
Don't forget to start by creating something YOU find useful, then.
I'm starting to think the main problems nerds have are mostly social, btw.
It is quite alright to disclose as a small business owner that things are slow or somethings are not quite going to plan. If you've got a userbase that loves your product, it is amazing what goodwill can do to help find a solution.
You guys go realize that it is ok to dissolve a company and in the case of a software company, release or open-source the code right? If the service was popular, someone will pick up the torch and carry on with it.
But who knows, along comes Microsoft who can write off huge amounts like the $6.3 billion for aQuantive.
Should we require employees to wear a sign to work everyday saying that they will leave their job for a better one if the right offer comes along?
I've seen a few folks chime in here already that one of the reasons they work for themselves is that for them freedom is greater than money. Not everyone agrees with that but wouldn't some personal and business interactions benefit from a bit more transparency of goals or stated missions? If you want to shoot for the stars, financially speaking or regarding market coverage, then tell me. That's great and I applaud your enthusiasm. If you are happy just providing reasonable service and expect to make a reasonable return then tell me too. At least that will allow me to make a somewhat informed decision about possibly interacting with you. Don't make us guess as most people are terrible gamblers.
I'm not sure how any of this relates to wedding rings, but I assume that's not too important anyway.
The diamond ring is a silly simplistic example of where some people don't have a price. If my spouse has a 5 carat diamond band, does she subscribe to some idea that if a 6 carat diamond ring were offered by someone else then that must surely be a better opportunity and "sell out?"
Some individuals don't have have a price for some things in life.
We can substitute work/employment for anything that you value. Family? Religious/spiritual beliefs/non-beliefs? Are you saying you'll stand for some value/idea/principle...up to a certain price? Nothing is verboten?
I don't think this was a plea to developers to not sell up, I think it was a plea to people to support small companies to make not selling up a more appealing option.
The purpose of copyright is to provide a limited monopoly in the interest of creating, in the long term, a public good. Without the source code, we never get the public good. Under this proposed law, Sparrow (and other, similar, products) would have to become open source once it was unsupported, or would not be protected by copyright in the first place.
To get copyright protection you should be forced, eventually, to give away the good stuff.
Interestingly, in the early days of software development a lot of programmers didn't quite know what they needed to do to protect their software under copyright, and some I know personally went so far as to print out their code as books and deposit them with national libraries.
Those numbers are sustainable if you have a small team (1-3 people), but I'm not sure how big Sparrow's team was. Either way, I would say that they were in a very similar position to Instapaper, except the only difference being they had raised some VC funding (with all that implies regarding needing an exit in the future).
Talent acquisitions happens when you have big potential to compete and are willing to cash out early instead.
Otherwise it's just giving up and getting a job.
Even if a huge corporation would offer me a lot of money, I still wouldn't want to join since I would loose so much more. Money doesn't make me happy, freedom does. So, as long as InstaDesk (or other, future, apps) generate enough money for me to survive, I really doubt I would sell (with the exception that if the offer is, just as Marco said, really good and the continuation of InstaDesk is guaranteed).
However, a free life where I'm not obliged or controlled by anybody is just so so so good. (I say this after having worked in IT companies and startups since 2000).
So yeah, support the products you love, and spread good news about them, and give them good reviews.
Guess what money buys?
The only problem (in this context) is that it has to be a fairly large amount of money, and all in one chunk. Seriously, if Facebook offered you $10MM for instadesk, under the condition that you'd have to work for them for one year, you'd turn that down? No way. You'd be silly not to take it, because you could put in your one year and then be free for (basically) ever.
I think freedom is more like love... money can not buy it, you have to work at other things to get it. If you think money buys you freedom then you become a slave to money rather than a person living with freedom.
I've recently quit the corporate treadmill and am working on a startup. I've gone from an annual 6-figure (GBP) income from my day job and projects, to an £8k income from one actually profitable bootstrapped company.
I don't think I could go back to the corporate world, and whilst a VC firm is currently trying to court me I fear it's just a talent acquisition attempt. I'm not interested in any scenario that isn't me pushing my work forward.
The only thing I'm interested in is the freedom to work today on something that I care deeply for and believe in. My entire existence is focused on one this thing: This idea I have must come into being.
No money can stop me from doing this, and that is freedom to me. To, today, choose everything I do and how I do it. To be happy knowing I have no distractions just to put food on the table, to be able to dedicate myself to this.
Today I can truly say that there is no amount of money for which I'd enslave myself again. Perhaps there might be such a figure tomorrow, but today there isn't. I live day by day, and I think that tomorrow I will feel the same way.
One fear I had in the corporate world earning that large sum of money... "What if I never quit and follow my dream?", "What if I spent my whole life working to secure the ability to follow my dream and then my life ended?". If you can, go for the freedom today. Money isn't worth it, it's such a bad measure of success, status, happiness and worth.
That said, if you execute your dream well and others agree. Then I think that money comes.
So freedom may bring you money... but money won't bring you freedom.
So getting a modest amount of money annually, and increasing the freedom at which I can do my other things is also attractive. I think a lot of people really just want to be comfortable.
Nice words, but I doubt it matters. Sparrow got nothing but support for their entire company history. Every review was golden. Every user was a paid user. And they still sold out.
(Or maybe Marco means people should join his subscription program: http://www.instapaper.com/subscription )
The same goes for sparrow. These one-time purchase apps don't have continued revenue per user. So we can write rants on the internet all we want about "don't give in to the acqui-hire," but obviously the benefits of taking google's money greatly outweighed the future of trying to run a business by selling an app on the App Store.
Glad to see that he's happy and feels like he's making enough.
That's not entirely true. I buy a car knowing that if it needs repairs, I can repair it. Or at least go somewhere else to get it repaired. It will cost money, but so be it. I would not buy a car I had to rely on the manufacturer to fix. There are slow attempts at that in the industry, but by and large, cars are much more open than something like Sparrow ever was.
And yes, I consider carefully my choice in software the same way. I don't mind paying for software.
I also consider the business model. Does it make sense what they are doing? Does it make sense in the long term? Will they be around to support their own business?
The App Model doesn't make sense (and so I generally don't invest in it, at least for nothing critical).
If I remember correctly it adds search and the ability to use the full API by 3rd party clients.
And it never will -- there are always going to be developers who are in it for the money and will leave you high-and-dry (which is heartbreaking, in a very-small-violen way, but fine).
My own takeaway is if you don't want your apps to disappear, use open source apps.
(Except for some reason, open-source apps seem to tend to be terrible, UI wise. Not sure why this is, though I have a couple half-baked theories.)
I'm very confused by all of the anger at Google and Facebook for acquiring these companies. The companies look like they were designed to get talent acquired in the first place! They both have very small teams (2--5), Sparrow at least appears to have taken very small amounts of funding (just seed a year or two ago), and I can't name a consumer desktop application (especially a really generic one like mail with tons of free competitors) that has become a major $1bn+ (or even $100m+) business in the last several years. There probably aren't enough eyeballs for ads, and App Stores have made consumer software cost expectations too cheap. What's more, Sparrow is pretty much designed to make Google's offering better.
Is this interpretation wrong? Could these small teams have built independent companies (rather than attractive teams for talent acquisition) on Mac desktop software in 2012?
Not just that. Previously when you released a paid desktop app, you weren't expected to give out free upgrades to the user. With the App store model, if a user purchases your app at V1, and five years down the line you're making a V4, the user will probably still feel entitled to getting the "update" (note, I said update, not upgrade) for free.
Update is basically like bug fixes, or resolving incompatibilities and stuff like that. [For eg. Windows XP -> SP1 -> SP2 -> SP3]
Upgrade would mean adding new features. Moving along with the times. New technologies etc.
Exactly. An "exit" can mean a lot of different things depending on the company, situation, financials etc.
If you accept a talent acquisition, you will -- and should -- have a devil of a time getting customers at your next venture, having thrown away the customers from your previous one. Tread lightly.
It might be true that overtime this will erode customer's confidence in startups in general, but so will being shut down because the founders are starving. And it's not like major corporations are guaranteeing products for the long-haul either.
Basically, the whole computer industry is one big case of buyer beware. If you really care about your data use open formats, open protocols and free software whenever you can.
>Basically, the whole computer industry is one big case of buyer beware.
But not with this:
>If you really care about your data use open formats, open protocols and free software whenever you can.
Your first statement actually kind of contradicts your second - if we think of "buyer" as "user" even if the person has not bought the product - for the reason given below:
There's no guarantee that a particular free software will continue to be supported, just because it is free. Example: iText, the popular and widely-used Java PDF generation library. It was free and open source earlier but some time back got converted to a commercial for-pay product (except that, IIRC, you may be able to use it for free if you make your own product that uses it, free/open source as well).
Will you singlehandidly cover the developers' living expenses once the savings/investor runway is gone so that they can keep your data from being thrown away?
This advice is some of the worst advice to give entrepreneurs, because revenue/profit is fundamental for any company's survival, and growth does not translate to long-term success.
Then again, investors are in a constant conflict of interest with owning a piece of a long-term profitable businesses, and their expertise is not close to knowing how to manage a profitable business. Having said that, VCs are good at flipping startups to cash-rich companies, who seem to care little on value dilution. How many acquired companies have Google, Microsoft, Yahoo, AOL, New Corp, etc shut down?
Which makes me think: what is the net value of Venture Capital flips to the economy?
All things equal, future investors are more likely to trust someone who has had an acquisition in the past. You're more likely to get press exposure. All these things are meaningless if you're building something no one wants, but they definitely help if you're on the right track.
And you get the IP as well, which is nice. In some cases you're consolidating power and shutting down competitors. It makes a lot of sense in some situations.
Unless you value the goodwill or IP of the target company, it makes no sense to buy out the original investors of the target company.
First: why would the investors of a company allow the team to be bought out from under them? A good investor will align the incentives so that the founders are incentivized to exit at the same time as the investor.
Second: why would a founder of a successful company accept a hiring deal? Most founders (heck, most developers) turn down several job offers before the second cup of coffee. And even if the $ paid to founders for acquisition vs pure hire is identical, there is an important psychological distinction between being bought and being hired that affects both the negotiations and the status and authority of the "employee" at the acquiring company and thus their wellbeing and autonomy. These factors matter.
My guess is that Google, etc, do this for anti-competitive reasons, as a way to keep engineer salaries from getting bid up. There seems to be a cultural stigma with paying much more to some engineers than others, which is why they don't just offer everyone at the target company a $250k signing bonus to come on board instead of cashing out the target company's investors.
Long term though, I'd prefer "talent collaborations" to acquisitions. Did Nike "acquire" Michael Jordan? Sponsoring and supporting, not acquisition.
You have a set of people working for the startup and the outside investors in the startup, and you have an outside company trying to purchase them. The outside company offers $X for the company in an acquihire. Let's say all the outside investors own fraction Y of the company. Why can't the outside company offer a total of X * (1-.5Y) in signing bonuses to the people in the startup, leaving both them and the employees strictly better off? Are founders and early employees just walled off with non-competes to make this not realistic?
The subtext I'm reading here is that none of the offers Marco has received yet are attractive enough for him accept. So he is in the exact-same position as Pulp Wallet and Sparrow then, it's likely that quite a few offers came knocking before the right one came along.
If you use and love a product, then the developers get acuihired and the product dies, getting upset about it is kind of childish. Get some perspective. You had X months with that product that you loved, it's better than 0 months.
If you built your own product that relied on theirs, well you knew the risks going in. Fare better next time.
I also don't understand the impetus behind blaming Google or Facebook and treating it as if they are antagonizing you as a user. They made an offer and the developers accepted it knowing they would not be able to develop their app any more. This course of events is one that the developers actively chose. Frankly, I think it's great that these guys are getting acquired. They worked hard, caught the attention of a big company and were rewarded handsomely. After all, that's why they developed the app in the first place: to make money. There's absolutely no warrant for you to expect that the developers put their lives on hold so that you can have a piece of software.
As for Instapaper, I think that Marco is disconnected. If he is in a position where he has enough money so as to be able to ignore offers for his app and instead run a lifestyle business, fine. I also think that part of his attitude towards a buyout comes from the fact that, despite that he denies it and refers to it in jest, Marco is actually fairly rich. He was one of the earliest employees at Tumblr, a company now worth ~800m. That means that even the most minimal equity would give him a net worth in the millions. That's great for Marco. But I'd imagine that very few people are in his place. A lot of app developers probably dream of being acquired. Who can blame them? Everyone wants money.
So, although Marco has enough money where he can basically ignore the need to sell, most app developers don't. The Sparrow guys obviously didn't.
What are ways to show appreciation for a company/product you like aside from buying their product, tweeting an occasional praise, and liking their FB content? Is that enough?
The situation when you have built a big fan base or other sort of "attention" asset is that taking a job is surprisingly risky.
I had this situation with a potential acquirer. The job was awesome, the company was great, but the goodwill and potential I've built up is too valuable to part with lightly. Why? The worst case is you get bought out at too low a cost and then, for whatever reason, you're out of a job a month later. Now you have a little pile of money in the bank and.. back to square one. That's a risk regular employed folks don't have.
This is why most talent acquisitions are in the 7 or 8 figures. It's enough money to eradicate the risk of taking on a full time job and losing one's hard-built business assets for most people (even low 7 figures each is enough to pay off mortgages, cars, and have healthy savings).
I had a similar situation with one of my first businesses. Low six figure acquisition and then.. oh, what do I do now? It took me almost 4 years to figure it out(!) and now I'm back on my feet again. Good luck!
Excellent apps like Sparrow are damn expensive to write. If Apple cares about keeping companies like Sparrow alive (they should) they can do two things to help us.
1) Allow Apps to charge monthly/annual subscriptions.
2) Give ad/social marketing campaign data to devs so they know which of their efforts to attract users is working.
More details are on our blog post: http://blog.selligy.com/post/27652044305/apple-help-the-best...
So if Marco was paid enough, would he let big companies shut down Instapaper by acquiring it?
Would I sell my business for $100m tomorrow even if the whole thing got destroyed in the process? I sure would (though I'd use the money to start a new one ;-)).
As I once told an owner offering me equity "I'm at a stage of my life where finical stability is a welcome rest-bite so don't be offended if I duck out early."
Was that supposed to be "respite"?