11 ms·

Google prefers to acquire startups that are pre-revenue

36 points by kitsguy 17y ago

DenisM 17y ago
That's probably because people who do have revenue are much harder to negotiate with, and demand higher price.
- netcan 17y ago
  That's the slightly cynical view. Another is that they want the team. Yet another that seems most plausible to me is that pre-revenue probably means pre-baggage. If they want to shut down the service & use the technology in some new or existing Google service but some users have already prepayed for two years, how do they get out of that? A variation of your suggestion is that they aren't really interested in your revenue so they don't want to pay for it. Most of Google's products are not directly revenue generating. That makes some sense to me. They don't want 200 $5m businesses. They want to add another billion to their existing businesses or build a new billion dollar business. Look over these acquisitions. In which case was google out to 'buy a business' in the revenue/cashflow sense? http://en.wikipedia.org/wiki/List_of_acquisitions_by_Google http://en.wikipedia.org/wiki/List_of_acquisitions_by_Google
- dstorrs 17y ago
  Surely. But this is still great news for entrepreneurs--start your company, get bought for $10M or so, work at Google for 6-12 months gaining contacts and big-infrastructure experience and then leave to do the next thing.
zaidf 17y ago
Google has one of the best M&A strategies IMO. On the same note, Yahoo probably has one of the worst.
deleted 17y ago
[deleted]
arohner 17y ago
How do I get in on that? I can't exactly call Google and say "hey, I'm willing to sell my pre-revenue startup for $FU_MONEY" (that offer is for real, btw, if any Googlers are reading :-) )
- wmf 17y ago
  You have to launch first. Don't call Google, they'll call you.
- evgen 17y ago
  The caveat here is that since they are looking for pre-revenue startups they are basically using the process as a short-circuited recruiting/hiring system. You are not going to get big money out of the deal because you have nothing that they want to pay for other than your future labor: the "acquisition price" is your hiring bonus.
ars 17y ago
I hope google buys http://www.tineye.com/ http://www.tineye.com/ they could integrate it into image search and make it awesome.
loganfrederick 17y ago
Google's strategy: Acquire pre-revenue for low valuations so that they can make money down the road with the startups most valuable resource, the founding team. Google's strategy works because they don't often acquire the startups for the startup's business. They acquire businesses for the people working on them. Acquiring talent, as opposed to businesses, is cheaper and provides a ton of value and wealth creation for the company down the road.
- shpxnvz 17y ago
  If so, it sounds like they are basically just hiring with a larger-than-typical signing bonus. I wonder if the teams being acquired in that fashion view it that way?
  - ephermata 17y ago
    Dodgeball is one example where the team did not view it that way. The founders were excited at the time of acquisition with the directions they thought they could go with Google. After the acquisition, they found it difficult to get resources or traction within Google to improve Dodgeball. This led to them leaving. Maybe today's teams coming in feel differently, since the Dodgeball story seems to be well known. Plus articles like this one. That being said, there are plenty of examples where an acquisition by Google did take off. Android is the most high profile right now.
  - loganfrederick 17y ago
    I'd almost think of it more like buying an employee from another company out of his/her contract. In this case the contract would be the founder's obligation to his/her company.
- wallflower 17y ago
  Dodgeball is a famous Google acquisition because it got purchased and died. However, it's founder started foursquare post-Google.
elblanco 17y ago
It would be nice if they preferred to buy my startup...
coliveira 17y ago
Most of the time Google just wants the engineering talent. And, as a secondary advantage, additional technology that they can incorporate to their products.
- deleted 17y ago
  [deleted]
MicahWedemeyer 17y ago
Remember folks: "Google prefers to acquire pre-revenue" is not an excuse for your startup to have no business model.
chris123 17y ago
It's a great recruiting shortcut -- in the Malcolm Gladwell "Blink" kind of way. And, it's a great way to snap up talent, bring it in house, see if it (the people) sticks, if not let 'em go. It's basically a real option acquired for pocket change. And that's a good thing (for Google).
10ren 17y ago
But they want users (I think). Or do they also buy pure tech startups - the software equivalent to a fabless semiconductor firm (e.g. ARM) - just a patent and a demo?

36 points by kitsguy 17y ago

DenisM 17y ago

That's probably because people who do have revenue are much harder to negotiate with, and demand higher price.

netcan 17y ago
That's the slightly cynical view. Another is that they want the team. Yet another that seems most plausible to me is that pre-revenue probably means pre-baggage. If they want to shut down the service & use the technology in some new or existing Google service but some users have already prepayed for two years, how do they get out of that? A variation of your suggestion is that they aren't really interested in your revenue so they don't want to pay for it. Most of Google's products are not directly revenue generating. That makes some sense to me. They don't want 200 $5m businesses. They want to add another billion to their existing businesses or build a new billion dollar business. Look over these acquisitions. In which case was google out to 'buy a business' in the revenue/cashflow sense? http://en.wikipedia.org/wiki/List_of_acquisitions_by_Google http://en.wikipedia.org/wiki/List_of_acquisitions_by_Google
dstorrs 17y ago
Surely. But this is still great news for entrepreneurs--start your company, get bought for $10M or so, work at Google for 6-12 months gaining contacts and big-infrastructure experience and then leave to do the next thing.

zaidf 17y ago

Google has one of the best M&A strategies IMO. On the same note, Yahoo probably has one of the worst.

deleted 17y ago

[deleted]

arohner 17y ago

How do I get in on that? I can't exactly call Google and say "hey, I'm willing to sell my pre-revenue startup for $FU_MONEY" (that offer is for real, btw, if any Googlers are reading :-) )

wmf 17y ago
You have to launch first. Don't call Google, they'll call you.
evgen 17y ago
The caveat here is that since they are looking for pre-revenue startups they are basically using the process as a short-circuited recruiting/hiring system. You are not going to get big money out of the deal because you have nothing that they want to pay for other than your future labor: the "acquisition price" is your hiring bonus.

ars 17y ago

I hope google buys http://www.tineye.com/ http://www.tineye.com/ they could integrate it into image search and make it awesome.

loganfrederick 17y ago

Google's strategy: Acquire pre-revenue for low valuations so that they can make money down the road with the startups most valuable resource, the founding team. Google's strategy works because they don't often acquire the startups for the startup's business. They acquire businesses for the people working on them. Acquiring talent, as opposed to businesses, is cheaper and provides a ton of value and wealth creation for the company down the road.

shpxnvz 17y ago
If so, it sounds like they are basically just hiring with a larger-than-typical signing bonus. I wonder if the teams being acquired in that fashion view it that way?
- ephermata 17y ago
  Dodgeball is one example where the team did not view it that way. The founders were excited at the time of acquisition with the directions they thought they could go with Google. After the acquisition, they found it difficult to get resources or traction within Google to improve Dodgeball. This led to them leaving. Maybe today's teams coming in feel differently, since the Dodgeball story seems to be well known. Plus articles like this one. That being said, there are plenty of examples where an acquisition by Google did take off. Android is the most high profile right now.
- loganfrederick 17y ago
  I'd almost think of it more like buying an employee from another company out of his/her contract. In this case the contract would be the founder's obligation to his/her company.
wallflower 17y ago
Dodgeball is a famous Google acquisition because it got purchased and died. However, it's founder started foursquare post-Google.

elblanco 17y ago

It would be nice if they preferred to buy my startup...

coliveira 17y ago

Most of the time Google just wants the engineering talent. And, as a secondary advantage, additional technology that they can incorporate to their products.

deleted 17y ago
[deleted]

MicahWedemeyer 17y ago

Remember folks: "Google prefers to acquire pre-revenue" is not an excuse for your startup to have no business model.

chris123 17y ago

It's a great recruiting shortcut -- in the Malcolm Gladwell "Blink" kind of way. And, it's a great way to snap up talent, bring it in house, see if it (the people) sticks, if not let 'em go. It's basically a real option acquired for pocket change. And that's a good thing (for Google).

10ren 17y ago

But they want users (I think). Or do they also buy pure tech startups - the software equivalent to a fabless semiconductor firm (e.g. ARM) - just a patent and a demo?