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> 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

> 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.

JohnJamesRambo 6y ago
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.
- rexreed 6y ago
  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.
  - NineStarPoint 6y ago
    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.
    - njarboe 6y ago
      Somewhat ironically, Google is an example of two founders doing just this.
  - jmsad 6y ago
    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.
- minikites 6y ago
  >I know the money is so alluring 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?
  - ineedasername 6y ago
    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
    - minikites 6y ago
      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.
      - lotsofpulp 6y ago
        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.
        6y ago
- dkersten 6y ago
  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.
  - dasil003 6y ago
    Do you also not buy products from big companies? Because they also kill their own products or let them wither on the vine out of apathy.
    - ineedasername 6y ago
      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.
      - dasil003 6y ago
        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?
        deleted 6y ago
        [deleted]
        ineedasername 6y ago
        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)
- goatherders 6y ago
  "...will that money make you happy?" 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.
- alexashka 6y ago
  > The future of humanity depends on tech people making tiny principled stands like this over and over. No it doesn't.
- disgruntledphd2 6y ago
  What about Instagram? Acquired at 10mn users, not really used by anyone except SF hipsters. Now a massive juggernaut and the same size (in MAU) as Facebook was when they acquired it.
  - warbaker 6y ago
    And YouTube, and of course DoubleClick.
- deleted 6y ago
  [deleted]
- verdverm 6y ago
  There are other stories like PayPal and the numerous new companies that came after. I'm much more in favor of having Tesla and SpaceX than not
- thelean12 6y ago
  > 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!
  - loxs 6y ago
    To me it seems really preposterous and dishonest when somebody does NOT think like this. We have one life. The time we do not spend with our children (or the time we postpone having them "for the greater good") can never be returned back.
    - rapind 6y ago
      Sanctimonious much?
  - RandallBrown 6y ago
    Yeah, the only way I'm not selling my business in that scenario is if I'm already in a position where I don't have to work again.
- elevenoh 6y ago
  >The future of humanity depends on tech people making tiny principled stands like this over and over. Well put. And the reward? You + family/friends look back on your work with deep fondness & respect if you choose principles > acquisition $.
socmedia99 6y ago
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.
- minikites 6y ago
  >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. :)
  - socmedia99 6y ago
    Define success? If it’s material wealth from a social stand point look at the decades of math; it’s monopolized. There’s always been a hierarchy; those lead to water are whacked into looking no where else for it. Be pious. Be materially rich. Different words for chemical addiction to aligning with social memes. We’ve seen the brain can rewrite itself to adapt to acquired handicaps. Is it so hard to believe it can’t adapt to a less industrialized pressure on time economy and still feel fulfilled? Map/Reduce, deal with it. Ultimately 1 in 7 billion is a shared identity none of us can escape. New logistics models should not be ignored for old ones.
- disown 6y ago
  > 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.
dalbasal 6y ago
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.
- jonny_eh 6y ago
  > A lot of "new Googles" got made. Such as?
  - dalbasal 6y ago
    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.
znpy 6y ago
>> 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.
yumraj 6y ago
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.

JohnJamesRambo 6y ago

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.

rexreed 6y ago
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.
- NineStarPoint 6y ago
  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.
  - njarboe 6y ago
    Somewhat ironically, Google is an example of two founders doing just this.
- jmsad 6y ago
  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.
minikites 6y ago
>I know the money is so alluring 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?
- ineedasername 6y ago
  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
  - minikites 6y ago
    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.
    - lotsofpulp 6y ago
      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.
      - 6y ago
dkersten 6y ago
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.
- dasil003 6y ago
  Do you also not buy products from big companies? Because they also kill their own products or let them wither on the vine out of apathy.
  - ineedasername 6y ago
    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.
    - dasil003 6y ago
      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?
      - deleted 6y ago
        [deleted]
      - ineedasername 6y ago
        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)
goatherders 6y ago
"...will that money make you happy?" 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.
alexashka 6y ago
> The future of humanity depends on tech people making tiny principled stands like this over and over. No it doesn't.
disgruntledphd2 6y ago
What about Instagram? Acquired at 10mn users, not really used by anyone except SF hipsters. Now a massive juggernaut and the same size (in MAU) as Facebook was when they acquired it.
- warbaker 6y ago
  And YouTube, and of course DoubleClick.
deleted 6y ago
[deleted]
verdverm 6y ago
There are other stories like PayPal and the numerous new companies that came after. I'm much more in favor of having Tesla and SpaceX than not
thelean12 6y ago
> 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!
- loxs 6y ago
  To me it seems really preposterous and dishonest when somebody does NOT think like this. We have one life. The time we do not spend with our children (or the time we postpone having them "for the greater good") can never be returned back.
  - rapind 6y ago
    Sanctimonious much?
- RandallBrown 6y ago
  Yeah, the only way I'm not selling my business in that scenario is if I'm already in a position where I don't have to work again.
elevenoh 6y ago
>The future of humanity depends on tech people making tiny principled stands like this over and over. Well put. And the reward? You + family/friends look back on your work with deep fondness & respect if you choose principles > acquisition $.

socmedia99 6y ago

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.

minikites 6y ago
>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. :)
- socmedia99 6y ago
  Define success? If it’s material wealth from a social stand point look at the decades of math; it’s monopolized. There’s always been a hierarchy; those lead to water are whacked into looking no where else for it. Be pious. Be materially rich. Different words for chemical addiction to aligning with social memes. We’ve seen the brain can rewrite itself to adapt to acquired handicaps. Is it so hard to believe it can’t adapt to a less industrialized pressure on time economy and still feel fulfilled? Map/Reduce, deal with it. Ultimately 1 in 7 billion is a shared identity none of us can escape. New logistics models should not be ignored for old ones.
disown 6y ago
> 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.

dalbasal 6y ago

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.

jonny_eh 6y ago
> A lot of "new Googles" got made. Such as?
- dalbasal 6y ago
  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.

znpy 6y ago

>> 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.

yumraj 6y ago

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.