> Tip for acquirers: when a startup turns you down, consider raising your offer, because there's a good chance the outrageous price they want will later seem a bargain.
There's no evidence that this is the case.
Indeed, after founders are acquired their fierce competitive spirit and drive often starts to dissolve once the founders have gotten their exit and the teams run into the inevitable corporate realities that exist when teams are merged / integrated into a new culture.
Simply "offering more" does not address the reason why there aren't more Googles.
The hard truth is that technology incumbents fiercely defend their space making it very hard for new entrants to compete. Strong entrants either get acquired, and merged into the Borg, or are sidelined as the incumbents defend their turf sometimes through enhancements to the product / feature set, but often through somewhat anti-competitive actions that bar entry from new entrants.
While I would like to think the world is a meritocracy ("let the best product win"), the truth is far from that. And I think a lot of this piece from 2008 rests on half-truths and wishful thinking.
I know lots of founders will read this, please for the good of humanity stop being acquired. I know the money is so alluring, but how much is your soul worth and will that money make you happy? The future of humanity depends on tech people making tiny principled stands like this over and over. Don’t believe the lies spewing out from the acquiring company. Nothing will ever be the same again and your product will be either killed or mutated into something hideous. Read the WhatsApp and Oculus and Nest stories over and over again.
While I totally agree with this comment, especially from experience knowing that the reality of an acquisition is far from the rosy picture promised to everyone, the truth is that founders and especially investors are motivated by the exit.
Some founders start their companies to be flipped. Some start with the intention of going for the long-game but find the reality of competing in the market exhausting and emotionally draining. Some realize that they won't be able to capture the market share they want. Other times internal strife or conflicts with investors get in the way.
There are many motivations for acquisition and the realities of the difficulties of startups make any good offer very appealing. It's very hard to resist.
Related, does anyone think that founders believe the “rosy pictures promised to everyone”? Like you said, there’s a ton of reasons for founders to want to sell, even ignoring the existence of investors who would obviously like a payout. Founders should known better than anyone exactly what they’re agreeing to with an acquisition, but that doesn’t remove the personal benefit.
More generally, I never really hear stories of founders stopping their work at a company that isn’t after an acquisition or IPO. The alternative is the founder going “I am retiring and leaving this person in charge, but maintain my ownership of the company and will be taking 20% of the future profit in exchange for my 10 years building up this company.” Maybe it happens and we just never hear about it, but without some alternative for founders to cash out at the end it’s not surprising that selling the company off is what happens.
One thing to help fix this is for the VC community to become more comfortable with (and even encourage) funding rounds which allow founders and early employees to get some liquidity from their equity. Taking a company from idea to IPO usually takes the better part of a decade (or longer), and it's pretty unfair to ask people who have already risked a lot to keep living on peanuts and hoping that some unforeseen situation which may be largely beyond their control doesn't send the value of their equity to zero before they get to IPO.
Yes. Very. More than you can imagine. Trading good work for great sums of money isn't selling your soul. No one is under a moral obligation to build something that benefits the future of humanity. Furthermore, the vast majority of startups (including the 3 mentioned) were arguably never going to be humanity-changing businesses regardless.
If this is a conversation worth having at least reference bio-science and space exploration startups that actually have a chance to change the world.
> I know the money is so alluring, but how much is your soul worth and will that money make you happy?
I really don't understand this attitude. If someone offers me enough money so that I never have to work again, you expect me not to take it?
I'll sell any company if I could get $4 million after tax and never have to work again. Every single time I'll take that offer. I guess that's how much my "soul" is worth. And yes, that will make me happy!
The risk of a startup being acquired has also prevented me from buying startup's products, both personally and for my employers, because chances are the "great news, we got acquired" is anything but great news for the actual customers. That announcement is usually the sign to start looking for alternatives.
Sure, but we're talking about probability here. Established enterprise products from large companies usually have a published roadmap and guaranteed support period years in advance. It may be a mediocre product, but a business knows Oracle isn't going to kill off their ERP system any time soon, and also knows the minimum sunset date for all versions and can plan updates & upgrades accordingly.
If Oracle ERP is your standard it might be hard to get anything modern. Thought experiment, for which product are you more confident about its longevity: Google Voice or Basecamp?
I'm just using Oracle ERP as an easy example. It's a spectrum though, Oracle ERP just happens to be on the far end of one side, while a < 2 year old startup or any new(ish) Google product is on the opposite end.
(Though even more established Google products that are not Search/Ads still never make it far past the middle)
For a startup product to be "safe", the startup has to not go under (and many do) and also either not get acquired, or get acquired and have the product not change too drastically.
There's an awful lot higher chance of a startup product not being a "safe" buy compared to an established company to kill a somewhat popular product and you can always look at their track record before making a decision (something a startup, by definition, typically doesn't have).
The deadpool of acquired companies runs very, very deep.
While it might not necessarily be true of 50%+ of companies that are acquired go into the deadpool, it's common enough that an acquisition of a company's product that you use should cause you at least to make sure you have some sort of strategy to deal with a potential deadpool situation. Maybe it's not a guaranteed probability, but it is indeed very likely.
Sure. Agree completely. However it's worth noting that the customer-centric view, while valid, is rarely a good one. Companies are acquired b/c they are about to go out of business, because the IP is good, because the team is good, because the customer list is good, etc. Pissing off early customers is often the cost of growing the thing to its fullest potential.
This gets said a lot, but it's not internally consistent. If you are forced to piss off the people who love you, perhaps you shouldn't call it "growing". Call it "a pivot". You're taking a flyer for the _possibility_ of future growth.
It's the only motivation. Why do you think wealthy and high income people fight so hard against repaying the society that educated them and provided the infrastructure to allow their business to flourish?
It's because most people want to believe that their success is due to their own specialness rather than some mix of luck and prior circumstances.
I forget where it came from-- I thin Warren Buffet but I can't source it now-- but there's a sort of thought experiment or anecdote about this: Give everyone in the US a dollar. Then randomly choose half the country and have them give their dollar to a specific person in the other half. Repeat this process with the remaining people until there's only 340 people that each have a million dollars, then talk to those 340 people: You'll have 340 stories of how they personally overcame the odds and beat out everyone else to become a millionaire
Absolutely. There are studies where groups of people were examined while playing "Monopoly", but some players started with a massive money advantage. If (usually when) they won the game, they attributed it to their own skill at the game, not the massive advantage they had at the start. Being wealthy fucks up people's brains.
People are capable of saying one thing, and thinking another. I do it all the time, mostly for political purposes. There are many times where it is not in my interest to tell others what I really think, and I assume other are also not playing the game with all of their cards showing.
I.e. I assume people know the role luck plays in life, but are also not interested in the consequences of acknowledging that, and/or are interested in the consequences of pretending like they deserved it.
This is known as preference falsification (https://wikipedia.org/wiki/Preference_falsification). It's something interesting to think about. I often try not to falsify my preferences, even if people don't like me because of them.
A minimal amount is preferred. But at the end of the day, it’s a very good tool to deal with allocation of resources. It’s also the definition of politics.
People do it all the time with friends and relatives. You don’t up front tell someone they’re only worth 10 min of your time, or you prefer visiting someone else in your free time. But you make up excuses or stretch some truths to give both parties plausible deniability, which allows everyone to save face.
Workplace politics is the same. You have a limited amount of time and energy to devote, so you will have to sacrifice some coworker’s or manager’s priorities for other colleague’s priorities. But you’d be foolish to tell them up front. Enter workplace politics, where you have to figure out whose aligned with who and for what purpose do you can figure out your next move.
The more scarce/valuable the resource, the more politics comes into play. And if it gets too scarce/valuable, it will end up in violence/war.
Being able to navigate these signals is a crucial factor to succeeding in society, in my opinion.
>> Why do you think wealthy and high income people fight so hard against repaying the society that educated them and provided the infrastructure to allow their business to flourish?
They have all committed to giving more than half of their wealth to charity. 5 of the 10 richest Americans are on that list. It amounts to around $1.2 trillion.
>> Tip for acquirers: when a startup turns you down, consider raising your offer, because there's a good chance the outrageous price they want will later seem a bargain.
> Simply "offering more" does not address the reason why there aren't more Googles.
You must put that advice in context...
The context here is that PG's job is to be the first investor in a company.
Advising potential acquirers to raise the offer can only grow his personal return.
It makes perfect sense for PG to encourage potential acquirers to throw more money at startups.
It makes a lot more sense from a 2008 perspective. Google IPOed in 2004 for 2-3% of its current market cap. The tech monopoly dynamic wasn't where it is now.
Also, he turned out to be right. Acquisition prices (eg fb acquisition of whatsapp, IG, etc) went up. Investors made a lot more small bets. A lot of "new Googles" got made. That may be played out already, but this is 12 years later.
facebook, netflix, twitter, uber... essentially all the "unicorns" of the last decade.
I suppose that what a google is, or was in 2008, is debatable. Two of the above are fellow "FAANG" members today. In a 2008 sense, I think we can take it as meaning 'new $50bn+ tech company." There are lots of those.
I agree and logically it makes no sense, since what is the limit?
Theoretically everyone will sell at some point and the above argument can be made in each and every case.
Let's say Yahoo had offered Google $1B, and Google declined, Yahoo ups its offer to $2B, Google still declined.. this can go on forever till we reach Yahoo's maximum capacity to pay and if Google still declines with: it's not enough - the above argument would still hold.
Thus, IMHO, the above argument has no merit. While price is certainly a very important factor, there are always other underlying issues as to why some sell and others don't.
Half-truths and wishful thinking are the fuel of VC and speculative economics
Paul Graham is one in 7 billion who stands out among billions of lesser educated.
He’s not a savant. His biggest success is early mover in a tech enabled society.
That’s not visionary, that’s following the social meme and being there at the right time.
Visionary in contemporary society means coming up with the next big thing itself; unifying scientific theories. Not seeing half-truths of reality in cherry picked stat bubbles of finance. There’s been no prediction of relevance just repeated habit
Billionaires are nothing more than gamblers who are propped up by monopolized politics.
> Billionaires are nothing more than gamblers who are propped up by monopolized politics.
Also monopolized capital. Lots of people understood the prospects of the "internet" market. The question is who has access to capital and political protection.
Amazon could have been shut down when the dotcom bubble burst like so many other companies. How were they able to maintain funding/capital for nearly 20 years without making a profit? Amazon could have been shut down in the 90s if they were forced to collect taxes. How were they able to ward off paying taxes for so long? Why was amazon afford such capital/political shelter?
It's a matter of markets and who gets a share of the markets. Historically, it was people with connections. The right school, right family, right race, right nationality, etc. Now I'd say who has connections to capital though school, family, race, nationality, etc plays a role.
>Billionaires are nothing more than gamblers who are propped up by monopolized politics.
But if the success of a billionaire isn't entirely related to their singular genius and effort, what does that mean for me and my chances of success? It's uncomfortable to think about that so instead I'll pretend it really is only about their singular genius and effort and that means I can get there too some day. :)
There's no evidence that this is the case.
Indeed, after founders are acquired their fierce competitive spirit and drive often starts to dissolve once the founders have gotten their exit and the teams run into the inevitable corporate realities that exist when teams are merged / integrated into a new culture.
Simply "offering more" does not address the reason why there aren't more Googles.
The hard truth is that technology incumbents fiercely defend their space making it very hard for new entrants to compete. Strong entrants either get acquired, and merged into the Borg, or are sidelined as the incumbents defend their turf sometimes through enhancements to the product / feature set, but often through somewhat anti-competitive actions that bar entry from new entrants.
While I would like to think the world is a meritocracy ("let the best product win"), the truth is far from that. And I think a lot of this piece from 2008 rests on half-truths and wishful thinking.