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I called it. The money men have praises Idera for their new and innovative approach to software development. Also know has fixed cost devlopement to the lowest

I called it. The money men have praises Idera for their new and innovative approach to software development. Also know has fixed cost devlopement to the lowest bider. If you want stop this type of practice please don't sign multi year contracts. That is stage two. This is where they get their value. Without the contracts they can't use it as leverage to take out huge debts -- where they get their value from. If the fed raised the rates this practice would also end.

toomuchtodo 8y ago
There's a lot of problems to go around. If you're a founder, you're usually going to cash out for the right price. Everyone has their price. No one wants to grind forever. This isn't a problem if you're profitable enough that you can hold forever (Basecamp). If you're an investor, you're struggling for returns right now (to your point about interest rates and the Fed). You're going to squeeze whatever you can get your hands on as hard as possible (as an investor myself in real estate and small SaaS companies I've bought, I try very hard to not do this, but you're hedging against a multiple you paid for the asset; you don't want the asset's cashflow to disappear and watch your capital evaporate). Interest rates rising would help, but so would orgs more tilted towards employee ownership. You have to align incentives. Are you happy with a lifestyle business? (Not derogatory! I'd take a lifestyle business any day over any sort of possible unicorn status) Are your coworkers/shareholders? Would you customers be willing to be shareholders thereby becoming stakeholders? These problems are solvable with corporate structures and governance. Such a shame to see this happen. Great opportunity for GitLab and their CICD team though.
- mbrumlow 8y ago
  This is not a investment. It is a tool for leverage. The goal is not to grow the company it's to get as many contracts as they can and lower the ebita. Once they do this they will take out huge loans for the next company to destroy. I don't blame the founders. But at the same time I think if enough of these deals for bad these types of investors will stop their bad practices. This sort of move not only hurts employees. It hurts those who use the product too. It's a net bad for everybody but a few. I am still digging into how these things work and how the money gets out. But I would not be surprised if sometime in the future this sort of business engineering would be made illegal. Look what PE did to solar winds and general dollar. Both had huge piles of cash and were drained and put back on the market for the general public to pay the debt.
  - toomuchtodo 8y ago
    > This is not a investment. It is a tool for leverage. The goal is not to grow the company it's to get as many contracts as they can and lower the ebita. Once they don't his they will take out huge loans for the next company to destroy. All investments are buying cashflow or value appreciation, that is the end goal, regardless of the method. As long as the PE firm involved gets more cash out then they put in, it was a successful investment. I address how both companies and customers can protect themselves in my comment you replied to. If someone buys a private company, the majority shareholders were willing participants. Better ownership and stakeholder models protect against these outcomes. No one is going to buy Let's Encrypt. Consider if that model would work for CICD as a service. Start a non-profit, round up the talent, fire up the infrastructure, provision a Stripe account, and build something better. Let's Encrypt secures the web for $3 million/year. Crunchbase and Glassdoor mention Travis CI had ~$1-1.5 million/year in revenue.
  - hnzix 8y ago
    It sounds like a new spin on 1980s-style corporate raiding? Pillaging a company then moving on, leaving behind the carcass. I can't see how this behavior helps us as a society, it's legal but unethical.
    - pas 8y ago
      I don't know if it's good or bad, but we like to think that vultures fill a niche, make ecosystems richer. Sure, our economies and ecosystem of firms doesn't necessarily have to look like a full out evolutionary war for resources, but .. it sort of does, and it's not going to change any time soon. So, im that sense if we want stable and nice companies, we have to care for them. Sort of like we do with pandas, rhinos, and so on. One possibility is doing pledge, using corporate bylaws to try to guarantee some of that niceness. Do it through IT (and startup, and VC and so) communities' wall of fame/shame.
      - mbrumlow 8y ago
        The problem is these vultures tend to swoop in while the company is still alive and kicking. Everybody expects their company to do amazing in 3 to 5 years and if does not they kick it to the curb. The problem is if you look at all the amazing companies that are doing really well. The majority of them took near 10 years to come to their own. Half the amazing companies in SV if ran buy these PE guys would not exist if they were given to them at year 5 of their life.
- billiam 8y ago
  I'd like to see a real discussion among the readership of this news site about the kind of companies people want to build. Do you want to create a great place to work and grow that builds value that scales smoothly, or a unicorn that makes VCs, Private Equity, and the douchebag CEO you hired from Cisco rich and you without a job? If the answer is b, that is fine, but technical founders and employees should have their minds and eyes open about how it works.
- hinkley 8y ago
  What do you do when the idea that made you start a new company 8 years ago, made you get up every morning, doesn't do it for you now, and all of your equity is tied up in your old idea? I don't think I have that kind of stamina. When you cash out there's no guarantee the next person will do a better job than you did.
jrochkind1 8y ago
> The money men have praises Idera for their new and innovative approach to software development. Buying something that's already been developed and then not developing it further is a 'new and innovative approach to software development'?
- goobynight 8y ago
  That's the joke
- treis 8y ago
  You joke, but when have you ever heard of a software company calling their product complete, firing most of their developers, and moving to maintenance mode? Building a product and making money by selling it is somewhat of a novelty in the hypergrowth VC world of software.
  - jrochkind1 8y ago
    I bet we could find tons of other private equity examples. It's how they do. When they aren't firing most staff to then try to re-sell the company instead.
  - opportune 8y ago
    As a developer this obviously sucks but this seems to be pretty efficient from a high level view. If all the low hanging fruit is done and all future development is just adding features with continually diminishing returns, it makes sense to just go into maintenance mode, extract your profits, and let your developers go work on something else
    - u801e 8y ago
      And, then, after years have passed and the hardware it's running on starts failing, developers have to scramble to update components to a version that's actually supported.
      - 8y ago
rmrfrmrf 8y ago
Is Idera basically the Valeant pharma of software?

toomuchtodo 8y ago

There's a lot of problems to go around. If you're a founder, you're usually going to cash out for the right price. Everyone has their price. No one wants to grind forever. This isn't a problem if you're profitable enough that you can hold forever (Basecamp). If you're an investor, you're struggling for returns right now (to your point about interest rates and the Fed). You're going to squeeze whatever you can get your hands on as hard as possible (as an investor myself in real estate and small SaaS companies I've bought, I try very hard to not do this, but you're hedging against a multiple you paid for the asset; you don't want the asset's cashflow to disappear and watch your capital evaporate). Interest rates rising would help, but so would orgs more tilted towards employee ownership. You have to align incentives. Are you happy with a lifestyle business? (Not derogatory! I'd take a lifestyle business any day over any sort of possible unicorn status) Are your coworkers/shareholders? Would you customers be willing to be shareholders thereby becoming stakeholders? These problems are solvable with corporate structures and governance. Such a shame to see this happen. Great opportunity for GitLab and their CICD team though.

mbrumlow 8y ago
This is not a investment. It is a tool for leverage. The goal is not to grow the company it's to get as many contracts as they can and lower the ebita. Once they do this they will take out huge loans for the next company to destroy. I don't blame the founders. But at the same time I think if enough of these deals for bad these types of investors will stop their bad practices. This sort of move not only hurts employees. It hurts those who use the product too. It's a net bad for everybody but a few. I am still digging into how these things work and how the money gets out. But I would not be surprised if sometime in the future this sort of business engineering would be made illegal. Look what PE did to solar winds and general dollar. Both had huge piles of cash and were drained and put back on the market for the general public to pay the debt.
- toomuchtodo 8y ago
  > This is not a investment. It is a tool for leverage. The goal is not to grow the company it's to get as many contracts as they can and lower the ebita. Once they don't his they will take out huge loans for the next company to destroy. All investments are buying cashflow or value appreciation, that is the end goal, regardless of the method. As long as the PE firm involved gets more cash out then they put in, it was a successful investment. I address how both companies and customers can protect themselves in my comment you replied to. If someone buys a private company, the majority shareholders were willing participants. Better ownership and stakeholder models protect against these outcomes. No one is going to buy Let's Encrypt. Consider if that model would work for CICD as a service. Start a non-profit, round up the talent, fire up the infrastructure, provision a Stripe account, and build something better. Let's Encrypt secures the web for $3 million/year. Crunchbase and Glassdoor mention Travis CI had ~$1-1.5 million/year in revenue.
- hnzix 8y ago
  It sounds like a new spin on 1980s-style corporate raiding? Pillaging a company then moving on, leaving behind the carcass. I can't see how this behavior helps us as a society, it's legal but unethical.
  - pas 8y ago
    I don't know if it's good or bad, but we like to think that vultures fill a niche, make ecosystems richer. Sure, our economies and ecosystem of firms doesn't necessarily have to look like a full out evolutionary war for resources, but .. it sort of does, and it's not going to change any time soon. So, im that sense if we want stable and nice companies, we have to care for them. Sort of like we do with pandas, rhinos, and so on. One possibility is doing pledge, using corporate bylaws to try to guarantee some of that niceness. Do it through IT (and startup, and VC and so) communities' wall of fame/shame.
    - mbrumlow 8y ago
      The problem is these vultures tend to swoop in while the company is still alive and kicking. Everybody expects their company to do amazing in 3 to 5 years and if does not they kick it to the curb. The problem is if you look at all the amazing companies that are doing really well. The majority of them took near 10 years to come to their own. Half the amazing companies in SV if ran buy these PE guys would not exist if they were given to them at year 5 of their life.
billiam 8y ago
I'd like to see a real discussion among the readership of this news site about the kind of companies people want to build. Do you want to create a great place to work and grow that builds value that scales smoothly, or a unicorn that makes VCs, Private Equity, and the douchebag CEO you hired from Cisco rich and you without a job? If the answer is b, that is fine, but technical founders and employees should have their minds and eyes open about how it works.
hinkley 8y ago
What do you do when the idea that made you start a new company 8 years ago, made you get up every morning, doesn't do it for you now, and all of your equity is tied up in your old idea? I don't think I have that kind of stamina. When you cash out there's no guarantee the next person will do a better job than you did.

jrochkind1 8y ago

> The money men have praises Idera for their new and innovative approach to software development. Buying something that's already been developed and then not developing it further is a 'new and innovative approach to software development'?

goobynight 8y ago
That's the joke
treis 8y ago
You joke, but when have you ever heard of a software company calling their product complete, firing most of their developers, and moving to maintenance mode? Building a product and making money by selling it is somewhat of a novelty in the hypergrowth VC world of software.
- jrochkind1 8y ago
  I bet we could find tons of other private equity examples. It's how they do. When they aren't firing most staff to then try to re-sell the company instead.
- opportune 8y ago
  As a developer this obviously sucks but this seems to be pretty efficient from a high level view. If all the low hanging fruit is done and all future development is just adding features with continually diminishing returns, it makes sense to just go into maintenance mode, extract your profits, and let your developers go work on something else
  - u801e 8y ago
    And, then, after years have passed and the hardware it's running on starts failing, developers have to scramble to update components to a version that's actually supported.
    - 8y ago

rmrfrmrf 8y ago

Is Idera basically the Valeant pharma of software?