29 ms·

> Meta argued that the regulator was “sending a chilling message to start-up entrepreneurs: do not build new companies because you will not be able to sell them

> Meta argued that the regulator was “sending a chilling message to start-up entrepreneurs: do not build new companies because you will not be able to sell them.” This overlooks the traditional and perhaps now unpopular reason to start a company: making money by selling something useful. No need to sell the company. By the way, Facebook buys, does not sell.

notahacker 5y ago
Ironically, that statement is the strongest argument in favour of blocking the acquisition I've heard. Any company so arrogant about its market dominance it assumes that the only way for an entrepreneur to succeed in building a company in its market is to sell to them deserves to be broken up.
- paulcole 5y ago
  I think that's the only way for a gif hosting/copyright infringing platform to succeed. https://medium.com/@pasql/giphy-is-stealing-from-artists-689177b20c08 https://medium.com/@pasql/giphy-is-stealing-from-artists-689... Other companies that exchange money for goods and services might have better luck.
- Spivak 5y ago
  Or ya know, that startups talk about having an exit that's either getting bought by someone or an IPO. Nobody in the startup world seems terribly interested in building a lifestyle business.
  - dd36 5y ago
    The media only talk about companies with investors. Investors want exits. Investors influence the media to talk about companies they’re invested in.
    - jimnotgym 5y ago
      Or the intermediary making money out of the investors want exits, and only get paid when a deal moves through. For many investors they need neither exits, dividends or anything other than capital growth.
      - dd36 5y ago
        The intermediary is effectively invested, right? If you mean like a banker. IME, investors want a way to get their cash out. A private but successful lifestyle business isn’t going to get publicity.
  - willcipriano 5y ago
    Back in my day, businesses that made income by selling goods or services to customers were just called businesses, not lifestyle businesses.
    - BrianOnHN 5y ago
      Another crazy old idea: Businesses that prioritize people over capital.
      - lotsofpulp 5y ago
        Or governments take care of people, businesses focus on selling products and services.
        actually_a_dog 5y ago
        Or, maybe.... just maybe... both businesses and governments consider and prioritize the humans in the equation.
        deleted 5y ago
        [deleted]
        Pxtl 5y ago
        Businesses that don't prioritize winning in the market will be outperformed by businesses that do. Let the government do the job of setting the boundaries on the market so they can do what's best for humans, and let businesses do the job of optimizing for victory within the market. That's where their respective incentives lie, so that's what they do best at. tl:dr; don't hate the player, hate the game.
        deleted 5y ago
        [deleted]
        actually_a_dog 5y ago
        Ok. That's what your economics textbook thinks. What do you think? Competition is not the only way to get things done. Humans are definitely capable of collective action. You may recall a few weeks ago where hundreds of millions of Americans just said "fuck 2 AM, it's now 1 AM" early one Sunday. How would you harness that?
  - deleted 5y ago
    [deleted]
  - CivBase 5y ago
    Yeah, that's one thing that's always bugged me about startups and VC. There seems to be general agreement that two big problems we're facing in the economy are 1) a slow consolidation of businesses into a handful of mega-corps which span across many markets and 2) an obsession with short-term gains to appease investors and shareholders. Yet the startup world seems to be fixated on "exit strategies" which perpetuate those two problems.
    - Spivak 5y ago
      Because founders and early stock-holding employees want to get paid out, move on to something else, and let someone else handle the long-tail maintenance of the business. This is valuable work in the economy because you want people who are good at starting businesses, proving markets, getting investors, yada yada to be doing that and people who are good at running businesses to do that once it has roots. The intractable problem is that corporations with loads of capital are the ones equipped to run businesses long-term. I would love a world where an exit is turning the business over to the employees and a newly hired CEO in exchange for a payout from the business itself but massive corporations will pay more, have cash on hand, and won't default.
      - XMPPwocky 5y ago
        "This is valuable work in the economy because you want [...trimmed...] people who are good at running businesses to do that once it has roots." In my experience, things tend to get dramatically worse for users when a business is acquired or sold, not better. Long-term sustainability also seems to be significantly decreased by acquisitions, not increased- even when the business isn't closed outright (e.g. Pebble). And, from your second paragraph, it seems like you recognize this too. So, yeah, you might want people who are good at running businesses to do that - but selling a business does not seem to put people who are good at running businesses in charge of it. If anything, it's the opposite.
  - notahacker 5y ago
    There are markets where one potential acquirer being unable to do so doesn't completely scupper your chances of any exit though. If the antitrust regulators came down on Microsoft again, I don't think we'd see their lawyers argue that there's no other route for B2B software vendors to cash out except to sell to them.
  - mikepurvis 5y ago
    Isn't there a selection bias going on here? The only entrepreneurs allowed in the club who don't fit the go-for-broke mold are those who make it there by being celebrities in other ways (thinking Fried/DHH or someone like Maciej Cegłowski).
- frankfrankfrank 5y ago
  Not to sound too obvious, but that is precisely the current state that is also ever increasing. As with seemingly most things, we are witnessing a reemergence of a system similar to what existed before the American Revolution, the feudalistic, aristocratic, monarchical system where you must show fealty to your vassal lord corporation. Even the subject supposed effort to prevent monopolization is not understanding the underlying issue, that competition (a form of freedom) has for all intents and purposes been totally subverted because rather than monopolizing an industry or sector, today's monopolists/cartels realized they should just totally supplant the whole market so people have no choice but to kiss their royal ring. That is something that has effectively been accomplished and society may just have not understood yet what's going on, or likely those who would be expected to ward this off were also totally compromised and corrupted ($$$). What we need is reinstatement of conditions that lead to are allow competition. That may take on several different forms, e.g., (not to pick on Apple, but to use a recent example) that Apple must provide the same access to core integration (based on reasonable technical specifications anyone can meet) that AirTags utilize to competitors like Tile, including the whole apple device network (AirTags are real reason that SARS-CoV-2 "contact tracing" was snuck in to save us all, btw). Another example; Apple and Google, may not block or ban any user or any app that meets its general and public technical specifications and are not a violation of law and human rights like free expression, whether out vassal lord corporations like what users have to say or if an app is a competitor or does something they don't like or not. The alternative should simply be that Apple and Google can just build their own internet if they wish to violate people's rights on the public internet and communications … at the very least.
  - random314 5y ago
    > As with seemingly most things, we are witnessing a reemergence of a system similar to what existed before the American Revolution, the feudalistic, aristocratic, monarchical system where you must show fealty to your vassal lord corporation. This is not something new, but has always been the case. Capitalism is the 2nd iteration of feudalism. When the French revolution threw feudalism into jeopardy, the feudal lords - conservatives who sat in the right wing of the French parliament- hoped capitalism would rescue feudalism and help maintain social hierarchies. Democracy is seen as anti feudal and anti capitalist in its genesis, by giving everyone one vote independent of wealth. Earliest proposals for elections were only for Male land owners. The founding fathers were capitalists for the most part.
- asdfman123 5y ago
  Yeah, now that you say it it does seem to be very close to "plata o plomo." (Translating as literally "silver or lead": take this money or take a bullet)
- viro 5y ago
  This is how the entire VC market works either get bought or IPO.
  - londons_explore 5y ago
    Option 3 is to become very profitable and give big dividends back to those VC's... Few take that route though...
    - swiftcoder 5y ago
      I think you'll find that VCs aren't in it for dividends. If they were content with 10% per annum they'd play the S&P 500... You can certainly build a long-term profitable business, but you wont find VC funding for that.
      - londons_explore 5y ago
        But some businesses that take VC funding could pay out 1000% dividends every year, especially businesses that don't take much initial funding and manage to become a monopoly in some small niche market and decide not to expand further.
        swiftcoder 5y ago
        It's certainly possible in niche cases, but if you tell a VC that is your plan, I thin you are likely to find a luke-warm response. Aiming at an acquisition is in many ways a surer bet that aiming for niche market dominance with outlandish returns
    - jensensbutton 5y ago
      Because that's not what VCs want.
    - danudey 5y ago
      Option 3 is to become very profitable and then have Facebook create its own competitor and integrate it into their own apps, killing your business overnight.
- Aunche 5y ago
  There isn't any other way to make money from something like a gif hosting platform. Plenty of new companies get started all the same without being acquired.
- parasense 5y ago
  It's not ironic at all, nor is it very persuasive. It's pretty well established truism by now that start-ups are a business model where the founders and angel investors become wealthy once the business sells. It would be interesting to see the breakdown of how many start-ups sellout, continue as an independent entity, or completely fail. Regardless, just because Facebook recognizes the business culture in the SF Bay area is not a persuasive argument for why they should be broken up.
  - notahacker 5y ago
    > It's pretty well established truism by now that start-ups are a business model where the founders and angel investors become wealthy once the business sells. It's a pretty well established truism that startups in most markets would have absolutely no difficulty at all in selling their business via many different exit routes if one particular player wasn't able to go through with an acquisition for any reason. If it was too early to go public the could sell to Instagram Inc or WhatsApp PLC, or a private equity firm that wants to get into a sector where many, many firms have become stable and profitable. Facebook's statement that if they're not allowed to buy, entrepreneurs [in their market] won't be able to sell [to anyone else] is a truism specific to the social media market Facebook dominates, and a direct consequence of it having the sort of monopoly power that gets them scrutinised by the Competition Commission.
- danudey 5y ago
  Too many people are trying to create a startup with short-term success in order to get acquired. Get that $500m acquisition in the bag and then retire. Boom, done.
BurningFrog 5y ago
This feels like a wilful misunderstanding. FB doesn't claim selling the company is the only reason to start one. But it is a top 3 "exit strategy" for startups, so limiting it would have a chilling effect on startup formation. How big that effect would be is probably a better avenue for counter arguments.
- djbusby 5y ago
  Where is the limit though? There are literally 1000s of other places to sell the company. It's only blocking one HUGE company from this one deal.
  - jonas21 5y ago
    Do you have a few examples of those other places? I'd imagine that anyone interested in buying Giphy would fall into one of two categories: 1. Large tech companies for which the same antitrust arguments would apply. 2. Companies that can't afford to pay anywhere near $400M for a GIF sharing service.
    - deleted 5y ago
      [deleted]
    - Apocryphon 5y ago
      Imgur? Reddit?
      - fuzzer37 5y ago
        > Imgur? Reddit? Both of which fall under arguments 1 and 2
    - legostormtroopr 5y ago
      > Companies that can't afford to pay anywhere near $400M for a GIF sharing service What makes a free GIF sharing service worth $400M dollars - apart from the data harvesting Facebook can do to better target users with ads. We don't need to outlaw these sales, just outlaw the integration of data from purchased services, and then you'll see what the true value of the company is.
lvs 5y ago
> making money by selling something useful. This one weird trick venture capitalists hate!
stuaxo 5y ago
Meta and Giphy are nothing like startups, try a better argument.
ludamad 5y ago
You can also sell them to the public. The real crux is that Facebook was the highest bidder, so it does lower potential valuations not being able to be purchased. All well in my books. I'm still salty about Red Hat optimizing the short term and becoming an IBM arm
mrkramer 5y ago
But sometimes you need to sell your company because simply you do not have enough resources to fulfill your mission and vision.
- globular-toast 5y ago
  That's what the stock market is for.
  - Hamuko 5y ago
    Or just funding rounds.
    - globular-toast 5y ago
      Yes, but the stock market would be better as it would allow the public to invest. Funding rounds are just a way to let the rich and privileged get even richer.
      - oblio 5y ago
        No, you're wrong. They're still taking risks. You see, when you have 1000 million and you invest 500 million in chunks of 1 million into 500 different companies, practically guaranteeing a return of >500 million [1], then you're taking a huge risk! Almost like the Average Joe/Jane investing on the stock market :-) [1] Since it's supremely unlikely all 500 companies fail, and it's much more likely that at least 1 of them comes up with a decent return on investment.
- thesuitonym 5y ago
  Traditionally we would call that a failed business.
  - mrkramer 5y ago
    Instagram and YouTube were failed businesses? They sold to big companies in order to scale to billions of users and millions of SMBs because they didn't have knowledge nor human and financial resources for such task.
lordnacho 5y ago
Indeed, you have to wonder if the world might be a better place if mergers were just not allowed. There's a famous Adam Smith quote about people in the same business coming together to screw the consumer. Mergers are perhaps the ultimate collusion. For instance, what if the default position was that mergers were banned, except where you could convincingly show that everyone is better off? For instance in dying industries where scale is necessary.
- lotsofpulp 5y ago
  A lot of money (including taxpayer money) would be spent on lawyers and courts figuring out how to "convincingly show that everyone is better off".
  - abduhl 5y ago
    Probably less in aggregate than is currently spent on lawyers figuring out how to structure these deals.
  - hallway_monitor 5y ago
    A lot of money is spent on useless things. This would be completely worth doing and may be the change in corporate law that we need.
- ethbr0 5y ago
  It's an interesting point, and ultimately kind of boils down to "Is a more profitable company good for consumers?" To which the answer seems inarguably "Sometimes." Scale that reduces production costs (and therefore prices), yes. Or prices could be maintained and the increased profits given to shareholders, in which case no. I think the broader question is "What systemic features exist that make giant companies more efficient than a network of smaller, independent companies?" And to that, I'd argue that in the 21st century, not many. The market and communication B2B inefficiencies that drove conglomeration in the 20th century have most been reduced to zero. The only reason to have a hyperscale company these days is to deploy capital at scale in loss-making enterprises in hopes of capturing market share... and I'm not sure that's something that's been healthy in aggregate?
caturopath 5y ago
This is a catchy take, but a silly one. The quote didn't say that the only purpose of a new company is to get acquired, it just said that it's chilling to have one option less available, which isn't wrong.
- libertine 5y ago
  We're deprived from options on a daily basis thanks to these monopolies, so I guess we can live well with one less option.
  - caturopath 5y ago
    That viewpoint makes sense, but I don't think really works against what I was saying. It seems like the OP was saying "this cost is fake/gross" and you're saying "this cost is worth paying".
Angostura 5y ago
If the regulator habitually stopped sales, I think Facebook would have a point. But I think the regulator makes a good case for why there are very specific factors that suggest that this particular takeover is not a hood idea. Full statement here: https://www.gov.uk/government/news/cma-directs-facebook-to-sell-giphy https://www.gov.uk/government/news/cma-directs-facebook-to-s...
Hamuko 5y ago
It's not even correct because you'll still be able to sell companies, just not to form monopolies.
klelatti 5y ago
Meta argued that the regulator was “sending a chilling message to start-up entrepreneurs: do not build new companies without a viable business model because you will not be able to rely on a competition harming sale to a dominant market player for an exit.” More realistic interpretation.
- viro 5y ago
  You understand that the goal of most VC-funded businesses is to get bought, right?
  - klelatti 5y ago
    > "a competition harming sale to a dominant market player" Fine except for those that rely on this.
    - viro 5y ago
      what constitutes a market? Giphy hadn't generated any revenue it was operating off the $20 million of VC money. Or are you just trying to say big American tech companies shouldn't be allowed to buy companies?
      - Nextgrid 5y ago
        The advertising market. Giphy has plans to make an advertising network which would compete with Facebook and force the latter to be more competitive (which at least may result in better outcomes for end-users of both products).
        kevinventullo 5y ago
        I’m pretty sure Facebook is more worried about competition from Snapchat than Giphy. Which is to say, not at all.
      - matheusmoreira 5y ago
        > Or are you just trying to say big American tech companies shouldn't be allowed to buy companies? Exactly. Not only should futher consolidation be prohibited under anti-trust, big tech should be forcibly broken up into several businesses.
jonplackett 5y ago
How is it the UK reg has the power to do this? I thought Giphy was a US company. Shame they didn’t have the balls to stop ARM getting bought originally too.
- M2Ys4U 5y ago
  > How is it the UK reg has the power to do this? I thought Giphy was a US company. Because both Facebook and Giphy are active in the UK market. If they don't want to be subject to UK regulation then they're free to stop doing business in the UK.
  - native_samples 5y ago
    This is an unsustainable position that will simply retard free trade, cause companies to refuse to hire people outside their home country, to the loss of everyone. It also breaks the moment two different countries decide they want mutually contradictory things (which happens all the time), and would result in people being forced to use non-innovative and poorly executing local clone companies instead of the best available services.
ldehaan 5y ago
That's a moronic HN type of idea, most people build businesses to help the people around them, this crowd does it, lies, cheats and steals to con people into working with them and then turn around and stab every employee in the back so they can get rich... it's weird to see a comment dissing the very existence of HN at the top, guess the mods haven't gotten here yet.
- mbg721 5y ago
  I thought people built businesses because they had to eat, and selling something useful was an effective and morally acceptable way to obtain food-money. Sure, most people aren't sociopaths, but businesses don't exist primarily out of philanthropy.
rchaud 5y ago
> This overlooks the traditional and perhaps now unpopular reason to start a company: making money by selling something useful. Was Giphy even set up to be a business? It's just a database of gifs converted to video, for use in social media posts or Slack channels. Who would ever pay for that, besides a social media behemoth?
- detaro 5y ago
  They had some advertising thing, and getting paid by social media behemoths for integrations is what now gets them into trouble in a way?
- Nextgrid 5y ago
  It's been set up to collect personal data and either build an advertising network (unsure how successful it would be) or sell to a highest bidder. If this failed acquisition discourages future advertising/data collection companies it will be a major win for society.
gwelson 5y ago
Agreed. I also think that once you grow beyond one employee (yourself) as a founder, you acquire a deep moral and ethical (although not legal) responsibility to the wellbeing of your employees. The very notion/term "exit" has always made my skin crawl, at least in the context of "serial entrepreneurs". Treating a company - a thing that often dozens, hundreds, or even thousands of people depend on for their livelihoods - as nothing more than an assert that can be bought and sold at the whims of a founder is fundamentally gross to me. Sure, not every acquisition leads to layoffs, but many (most?) do and I think that's abhorrent. I know it's how the world works, but I don't think the culture of starting a company to get acquired for a nice "exit" should be celebrated and I think policy measures that can stop or diminish this culture are fundamentally good.
- deleted 5y ago
  [deleted]
- nunez 5y ago
  Yeah but those employees benefit from exits as well
  - reaperducer 5y ago
    Some of the employees may benefit from exits sometimes. There is no shortage of exits that screwed the employees.
- adamsb6 5y ago
  When I've joined startups in the past they've been up front about their exit strategies during interviews. Everyone knows that they're making a risky bet that might end with the company folding or might result in a big windfall.
- tick_tock_tick 5y ago
  > as a founder, you acquire a deep moral and ethical ... responsibility to the wellbeing of your employees No, everyone knows what they are getting into this is a horrible concept and should be pushed back against at every turn. If you want someone to be responsible for another adult petition the government to do it.
dzonga 5y ago
something that is missing is a bunch of VC companies these days are built to be sold. they don't have to have sustainable business meant for the long run. here's PG > Our startup, Viaweb, was built to be sold. We were open with investors about that from the start. And we were careful to create something that could slot easily into a larger company. That is the pattern for the future. - http://paulgraham.com/bubble.html http://paulgraham.com/bubble.html and given YC is the arguably the largest and most influential accelerator - hence why most startups are build to sell to FAANG
JumpCrisscross 5y ago
It also screams their weakness: Facebook and its employees are so universally reviled that it’s politically tenable, perhaps even popular, to do things with them that one couldn’t with others. Ordinarily, a British regulator telling two American firms what they can and can’t do would create backlash from the U.S. In this case, that would be shocking.
dheera 5y ago
Well good. Now get rid of GIF and make it H.264y. There is literally zero reason to use GIF anymore in 2021.
- colejohnson66 5y ago
  Giphy wasn't even GIF based. They were WEBP(?). The name comes from public perception: a short animated clip is a "gif", not a "two second video file with no audio track". "Gif" as a word has been redefined to mean more than the file format.
- pawelk 5y ago
  GIF is just a concept here, but if you upload an animated .gif to just about any large image sharing platform, they will convert it to a video format and serve in a <video> element to save on bandwidth. I'm not sure who was the first to do this, perhaps imgur with their invention of ".gifv" url suffix? [1] However right-click -> save image as... on "gifs" ceased to be an option long ago. [1] https://blog.imgur.com/2014/10/09/introducing-gifv/ https://blog.imgur.com/2014/10/09/introducing-gifv/
adamsb6 5y ago
There are many problems in the world that only a handful of companies have. You could make money joining those companies and helping them solve the problem as an employee. You could potentially make much more money by creating a company that solves that problem and then selling it to one of those bigger companies.
- deleted 5y ago
  [deleted]
sam0x17 5y ago
As an entrepreneur this gives me absolutely zero pause. I don't care if the fed splits up the thing that acquires me once I get acquired. I just want to get acquired. It's on meta to decide if they are flying too close to the sun.
deleted 5y ago
[deleted]
1vuio0pswjnm7 5y ago
What does Giphy sell. They certainly do not sell GIFs. Looks like they sometimes buy (license) them. Giphy does not produce the GIFs. It is someone else's work. Thus the only thing Giphy could sell is its "service" of running a server on the internet that serves GIFs. How much is that service worth. But they are not selling that either. They are collecting (meta)data about users. Maybe they inject ads. What an incredible business model. Produce nothing, use other people's work as "bait", collect data, get an inflated valuation and sell the "business". This is almost as good as patent trolling. Now, with this amazing model, how much revenue does Giphy produce, how much profit. Not even enough to pay for the server costs. It is funded by investors. This is a game. And regulators can spoil it.
- deleted 5y ago
  [deleted]

notahacker 5y ago

Ironically, that statement is the strongest argument in favour of blocking the acquisition I've heard. Any company so arrogant about its market dominance it assumes that the only way for an entrepreneur to succeed in building a company in its market is to sell to them deserves to be broken up.

paulcole 5y ago
I think that's the only way for a gif hosting/copyright infringing platform to succeed. https://medium.com/@pasql/giphy-is-stealing-from-artists-689177b20c08 https://medium.com/@pasql/giphy-is-stealing-from-artists-689... Other companies that exchange money for goods and services might have better luck.
Spivak 5y ago
Or ya know, that startups talk about having an exit that's either getting bought by someone or an IPO. Nobody in the startup world seems terribly interested in building a lifestyle business.
- dd36 5y ago
  The media only talk about companies with investors. Investors want exits. Investors influence the media to talk about companies they’re invested in.
  - jimnotgym 5y ago
    Or the intermediary making money out of the investors want exits, and only get paid when a deal moves through. For many investors they need neither exits, dividends or anything other than capital growth.
    - dd36 5y ago
      The intermediary is effectively invested, right? If you mean like a banker. IME, investors want a way to get their cash out. A private but successful lifestyle business isn’t going to get publicity.
- willcipriano 5y ago
  Back in my day, businesses that made income by selling goods or services to customers were just called businesses, not lifestyle businesses.
  - BrianOnHN 5y ago
    Another crazy old idea: Businesses that prioritize people over capital.
    - lotsofpulp 5y ago
      Or governments take care of people, businesses focus on selling products and services.
      - actually_a_dog 5y ago
        Or, maybe.... just maybe... both businesses and governments consider and prioritize the humans in the equation.
        deleted 5y ago
        [deleted]
        Pxtl 5y ago
        Businesses that don't prioritize winning in the market will be outperformed by businesses that do. Let the government do the job of setting the boundaries on the market so they can do what's best for humans, and let businesses do the job of optimizing for victory within the market. That's where their respective incentives lie, so that's what they do best at. tl:dr; don't hate the player, hate the game.
        deleted 5y ago
        [deleted]
        actually_a_dog 5y ago
        Ok. That's what your economics textbook thinks. What do you think? Competition is not the only way to get things done. Humans are definitely capable of collective action. You may recall a few weeks ago where hundreds of millions of Americans just said "fuck 2 AM, it's now 1 AM" early one Sunday. How would you harness that?
- deleted 5y ago
  [deleted]
- CivBase 5y ago
  Yeah, that's one thing that's always bugged me about startups and VC. There seems to be general agreement that two big problems we're facing in the economy are 1) a slow consolidation of businesses into a handful of mega-corps which span across many markets and 2) an obsession with short-term gains to appease investors and shareholders. Yet the startup world seems to be fixated on "exit strategies" which perpetuate those two problems.
  - Spivak 5y ago
    Because founders and early stock-holding employees want to get paid out, move on to something else, and let someone else handle the long-tail maintenance of the business. This is valuable work in the economy because you want people who are good at starting businesses, proving markets, getting investors, yada yada to be doing that and people who are good at running businesses to do that once it has roots. The intractable problem is that corporations with loads of capital are the ones equipped to run businesses long-term. I would love a world where an exit is turning the business over to the employees and a newly hired CEO in exchange for a payout from the business itself but massive corporations will pay more, have cash on hand, and won't default.
    - XMPPwocky 5y ago
      "This is valuable work in the economy because you want [...trimmed...] people who are good at running businesses to do that once it has roots." In my experience, things tend to get dramatically worse for users when a business is acquired or sold, not better. Long-term sustainability also seems to be significantly decreased by acquisitions, not increased- even when the business isn't closed outright (e.g. Pebble). And, from your second paragraph, it seems like you recognize this too. So, yeah, you might want people who are good at running businesses to do that - but selling a business does not seem to put people who are good at running businesses in charge of it. If anything, it's the opposite.
- notahacker 5y ago
  There are markets where one potential acquirer being unable to do so doesn't completely scupper your chances of any exit though. If the antitrust regulators came down on Microsoft again, I don't think we'd see their lawyers argue that there's no other route for B2B software vendors to cash out except to sell to them.
- mikepurvis 5y ago
  Isn't there a selection bias going on here? The only entrepreneurs allowed in the club who don't fit the go-for-broke mold are those who make it there by being celebrities in other ways (thinking Fried/DHH or someone like Maciej Cegłowski).
frankfrankfrank 5y ago
Not to sound too obvious, but that is precisely the current state that is also ever increasing. As with seemingly most things, we are witnessing a reemergence of a system similar to what existed before the American Revolution, the feudalistic, aristocratic, monarchical system where you must show fealty to your vassal lord corporation. Even the subject supposed effort to prevent monopolization is not understanding the underlying issue, that competition (a form of freedom) has for all intents and purposes been totally subverted because rather than monopolizing an industry or sector, today's monopolists/cartels realized they should just totally supplant the whole market so people have no choice but to kiss their royal ring. That is something that has effectively been accomplished and society may just have not understood yet what's going on, or likely those who would be expected to ward this off were also totally compromised and corrupted ($$$). What we need is reinstatement of conditions that lead to are allow competition. That may take on several different forms, e.g., (not to pick on Apple, but to use a recent example) that Apple must provide the same access to core integration (based on reasonable technical specifications anyone can meet) that AirTags utilize to competitors like Tile, including the whole apple device network (AirTags are real reason that SARS-CoV-2 "contact tracing" was snuck in to save us all, btw). Another example; Apple and Google, may not block or ban any user or any app that meets its general and public technical specifications and are not a violation of law and human rights like free expression, whether out vassal lord corporations like what users have to say or if an app is a competitor or does something they don't like or not. The alternative should simply be that Apple and Google can just build their own internet if they wish to violate people's rights on the public internet and communications … at the very least.
- random314 5y ago
  > As with seemingly most things, we are witnessing a reemergence of a system similar to what existed before the American Revolution, the feudalistic, aristocratic, monarchical system where you must show fealty to your vassal lord corporation. This is not something new, but has always been the case. Capitalism is the 2nd iteration of feudalism. When the French revolution threw feudalism into jeopardy, the feudal lords - conservatives who sat in the right wing of the French parliament- hoped capitalism would rescue feudalism and help maintain social hierarchies. Democracy is seen as anti feudal and anti capitalist in its genesis, by giving everyone one vote independent of wealth. Earliest proposals for elections were only for Male land owners. The founding fathers were capitalists for the most part.
asdfman123 5y ago
Yeah, now that you say it it does seem to be very close to "plata o plomo." (Translating as literally "silver or lead": take this money or take a bullet)
viro 5y ago
This is how the entire VC market works either get bought or IPO.
- londons_explore 5y ago
  Option 3 is to become very profitable and give big dividends back to those VC's... Few take that route though...
  - swiftcoder 5y ago
    I think you'll find that VCs aren't in it for dividends. If they were content with 10% per annum they'd play the S&P 500... You can certainly build a long-term profitable business, but you wont find VC funding for that.
    - londons_explore 5y ago
      But some businesses that take VC funding could pay out 1000% dividends every year, especially businesses that don't take much initial funding and manage to become a monopoly in some small niche market and decide not to expand further.
      - swiftcoder 5y ago
        It's certainly possible in niche cases, but if you tell a VC that is your plan, I thin you are likely to find a luke-warm response. Aiming at an acquisition is in many ways a surer bet that aiming for niche market dominance with outlandish returns
  - jensensbutton 5y ago
    Because that's not what VCs want.
  - danudey 5y ago
    Option 3 is to become very profitable and then have Facebook create its own competitor and integrate it into their own apps, killing your business overnight.
Aunche 5y ago
There isn't any other way to make money from something like a gif hosting platform. Plenty of new companies get started all the same without being acquired.
parasense 5y ago
It's not ironic at all, nor is it very persuasive. It's pretty well established truism by now that start-ups are a business model where the founders and angel investors become wealthy once the business sells. It would be interesting to see the breakdown of how many start-ups sellout, continue as an independent entity, or completely fail. Regardless, just because Facebook recognizes the business culture in the SF Bay area is not a persuasive argument for why they should be broken up.
- notahacker 5y ago
  > It's pretty well established truism by now that start-ups are a business model where the founders and angel investors become wealthy once the business sells. It's a pretty well established truism that startups in most markets would have absolutely no difficulty at all in selling their business via many different exit routes if one particular player wasn't able to go through with an acquisition for any reason. If it was too early to go public the could sell to Instagram Inc or WhatsApp PLC, or a private equity firm that wants to get into a sector where many, many firms have become stable and profitable. Facebook's statement that if they're not allowed to buy, entrepreneurs [in their market] won't be able to sell [to anyone else] is a truism specific to the social media market Facebook dominates, and a direct consequence of it having the sort of monopoly power that gets them scrutinised by the Competition Commission.
danudey 5y ago
Too many people are trying to create a startup with short-term success in order to get acquired. Get that $500m acquisition in the bag and then retire. Boom, done.

BurningFrog 5y ago

This feels like a wilful misunderstanding. FB doesn't claim selling the company is the only reason to start one. But it is a top 3 "exit strategy" for startups, so limiting it would have a chilling effect on startup formation. How big that effect would be is probably a better avenue for counter arguments.

djbusby 5y ago
Where is the limit though? There are literally 1000s of other places to sell the company. It's only blocking one HUGE company from this one deal.
- jonas21 5y ago
  Do you have a few examples of those other places? I'd imagine that anyone interested in buying Giphy would fall into one of two categories: 1. Large tech companies for which the same antitrust arguments would apply. 2. Companies that can't afford to pay anywhere near $400M for a GIF sharing service.
  - deleted 5y ago
    [deleted]
  - Apocryphon 5y ago
    Imgur? Reddit?
    - fuzzer37 5y ago
      > Imgur? Reddit? Both of which fall under arguments 1 and 2
  - legostormtroopr 5y ago
    > Companies that can't afford to pay anywhere near $400M for a GIF sharing service What makes a free GIF sharing service worth $400M dollars - apart from the data harvesting Facebook can do to better target users with ads. We don't need to outlaw these sales, just outlaw the integration of data from purchased services, and then you'll see what the true value of the company is.

lvs 5y ago

> making money by selling something useful. This one weird trick venture capitalists hate!

stuaxo 5y ago

Meta and Giphy are nothing like startups, try a better argument.

ludamad 5y ago

You can also sell them to the public. The real crux is that Facebook was the highest bidder, so it does lower potential valuations not being able to be purchased. All well in my books. I'm still salty about Red Hat optimizing the short term and becoming an IBM arm

mrkramer 5y ago

But sometimes you need to sell your company because simply you do not have enough resources to fulfill your mission and vision.

globular-toast 5y ago
That's what the stock market is for.
- Hamuko 5y ago
  Or just funding rounds.
  - globular-toast 5y ago
    Yes, but the stock market would be better as it would allow the public to invest. Funding rounds are just a way to let the rich and privileged get even richer.
    - oblio 5y ago
      No, you're wrong. They're still taking risks. You see, when you have 1000 million and you invest 500 million in chunks of 1 million into 500 different companies, practically guaranteeing a return of >500 million [1], then you're taking a huge risk! Almost like the Average Joe/Jane investing on the stock market :-) [1] Since it's supremely unlikely all 500 companies fail, and it's much more likely that at least 1 of them comes up with a decent return on investment.
thesuitonym 5y ago
Traditionally we would call that a failed business.
- mrkramer 5y ago
  Instagram and YouTube were failed businesses? They sold to big companies in order to scale to billions of users and millions of SMBs because they didn't have knowledge nor human and financial resources for such task.

lordnacho 5y ago

Indeed, you have to wonder if the world might be a better place if mergers were just not allowed. There's a famous Adam Smith quote about people in the same business coming together to screw the consumer. Mergers are perhaps the ultimate collusion. For instance, what if the default position was that mergers were banned, except where you could convincingly show that everyone is better off? For instance in dying industries where scale is necessary.

lotsofpulp 5y ago
A lot of money (including taxpayer money) would be spent on lawyers and courts figuring out how to "convincingly show that everyone is better off".
- abduhl 5y ago
  Probably less in aggregate than is currently spent on lawyers figuring out how to structure these deals.
- hallway_monitor 5y ago
  A lot of money is spent on useless things. This would be completely worth doing and may be the change in corporate law that we need.
ethbr0 5y ago
It's an interesting point, and ultimately kind of boils down to "Is a more profitable company good for consumers?" To which the answer seems inarguably "Sometimes." Scale that reduces production costs (and therefore prices), yes. Or prices could be maintained and the increased profits given to shareholders, in which case no. I think the broader question is "What systemic features exist that make giant companies more efficient than a network of smaller, independent companies?" And to that, I'd argue that in the 21st century, not many. The market and communication B2B inefficiencies that drove conglomeration in the 20th century have most been reduced to zero. The only reason to have a hyperscale company these days is to deploy capital at scale in loss-making enterprises in hopes of capturing market share... and I'm not sure that's something that's been healthy in aggregate?

caturopath 5y ago

This is a catchy take, but a silly one. The quote didn't say that the only purpose of a new company is to get acquired, it just said that it's chilling to have one option less available, which isn't wrong.

libertine 5y ago
We're deprived from options on a daily basis thanks to these monopolies, so I guess we can live well with one less option.
- caturopath 5y ago
  That viewpoint makes sense, but I don't think really works against what I was saying. It seems like the OP was saying "this cost is fake/gross" and you're saying "this cost is worth paying".

Angostura 5y ago

If the regulator habitually stopped sales, I think Facebook would have a point. But I think the regulator makes a good case for why there are very specific factors that suggest that this particular takeover is not a hood idea. Full statement here: https://www.gov.uk/government/news/cma-directs-facebook-to-sell-giphy https://www.gov.uk/government/news/cma-directs-facebook-to-s...

Hamuko 5y ago

It's not even correct because you'll still be able to sell companies, just not to form monopolies.

klelatti 5y ago

Meta argued that the regulator was “sending a chilling message to start-up entrepreneurs: do not build new companies without a viable business model because you will not be able to rely on a competition harming sale to a dominant market player for an exit.” More realistic interpretation.

viro 5y ago
You understand that the goal of most VC-funded businesses is to get bought, right?
- klelatti 5y ago
  > "a competition harming sale to a dominant market player" Fine except for those that rely on this.
  - viro 5y ago
    what constitutes a market? Giphy hadn't generated any revenue it was operating off the $20 million of VC money. Or are you just trying to say big American tech companies shouldn't be allowed to buy companies?
    - Nextgrid 5y ago
      The advertising market. Giphy has plans to make an advertising network which would compete with Facebook and force the latter to be more competitive (which at least may result in better outcomes for end-users of both products).
      - kevinventullo 5y ago
        I’m pretty sure Facebook is more worried about competition from Snapchat than Giphy. Which is to say, not at all.
    - matheusmoreira 5y ago
      > Or are you just trying to say big American tech companies shouldn't be allowed to buy companies? Exactly. Not only should futher consolidation be prohibited under anti-trust, big tech should be forcibly broken up into several businesses.

jonplackett 5y ago

How is it the UK reg has the power to do this? I thought Giphy was a US company. Shame they didn’t have the balls to stop ARM getting bought originally too.

M2Ys4U 5y ago
> How is it the UK reg has the power to do this? I thought Giphy was a US company. Because both Facebook and Giphy are active in the UK market. If they don't want to be subject to UK regulation then they're free to stop doing business in the UK.
- native_samples 5y ago
  This is an unsustainable position that will simply retard free trade, cause companies to refuse to hire people outside their home country, to the loss of everyone. It also breaks the moment two different countries decide they want mutually contradictory things (which happens all the time), and would result in people being forced to use non-innovative and poorly executing local clone companies instead of the best available services.

ldehaan 5y ago

That's a moronic HN type of idea, most people build businesses to help the people around them, this crowd does it, lies, cheats and steals to con people into working with them and then turn around and stab every employee in the back so they can get rich... it's weird to see a comment dissing the very existence of HN at the top, guess the mods haven't gotten here yet.

mbg721 5y ago
I thought people built businesses because they had to eat, and selling something useful was an effective and morally acceptable way to obtain food-money. Sure, most people aren't sociopaths, but businesses don't exist primarily out of philanthropy.

rchaud 5y ago

> This overlooks the traditional and perhaps now unpopular reason to start a company: making money by selling something useful. Was Giphy even set up to be a business? It's just a database of gifs converted to video, for use in social media posts or Slack channels. Who would ever pay for that, besides a social media behemoth?

detaro 5y ago
They had some advertising thing, and getting paid by social media behemoths for integrations is what now gets them into trouble in a way?
Nextgrid 5y ago
It's been set up to collect personal data and either build an advertising network (unsure how successful it would be) or sell to a highest bidder. If this failed acquisition discourages future advertising/data collection companies it will be a major win for society.

gwelson 5y ago

Agreed. I also think that once you grow beyond one employee (yourself) as a founder, you acquire a deep moral and ethical (although not legal) responsibility to the wellbeing of your employees. The very notion/term "exit" has always made my skin crawl, at least in the context of "serial entrepreneurs". Treating a company - a thing that often dozens, hundreds, or even thousands of people depend on for their livelihoods - as nothing more than an assert that can be bought and sold at the whims of a founder is fundamentally gross to me. Sure, not every acquisition leads to layoffs, but many (most?) do and I think that's abhorrent. I know it's how the world works, but I don't think the culture of starting a company to get acquired for a nice "exit" should be celebrated and I think policy measures that can stop or diminish this culture are fundamentally good.

deleted 5y ago
[deleted]
nunez 5y ago
Yeah but those employees benefit from exits as well
- reaperducer 5y ago
  Some of the employees may benefit from exits sometimes. There is no shortage of exits that screwed the employees.
adamsb6 5y ago
When I've joined startups in the past they've been up front about their exit strategies during interviews. Everyone knows that they're making a risky bet that might end with the company folding or might result in a big windfall.
tick_tock_tick 5y ago
> as a founder, you acquire a deep moral and ethical ... responsibility to the wellbeing of your employees No, everyone knows what they are getting into this is a horrible concept and should be pushed back against at every turn. If you want someone to be responsible for another adult petition the government to do it.

dzonga 5y ago

something that is missing is a bunch of VC companies these days are built to be sold. they don't have to have sustainable business meant for the long run. here's PG > Our startup, Viaweb, was built to be sold. We were open with investors about that from the start. And we were careful to create something that could slot easily into a larger company. That is the pattern for the future. - http://paulgraham.com/bubble.html http://paulgraham.com/bubble.html and given YC is the arguably the largest and most influential accelerator - hence why most startups are build to sell to FAANG

JumpCrisscross 5y ago

It also screams their weakness: Facebook and its employees are so universally reviled that it’s politically tenable, perhaps even popular, to do things with them that one couldn’t with others. Ordinarily, a British regulator telling two American firms what they can and can’t do would create backlash from the U.S. In this case, that would be shocking.

dheera 5y ago

Well good. Now get rid of GIF and make it H.264y. There is literally zero reason to use GIF anymore in 2021.

colejohnson66 5y ago
Giphy wasn't even GIF based. They were WEBP(?). The name comes from public perception: a short animated clip is a "gif", not a "two second video file with no audio track". "Gif" as a word has been redefined to mean more than the file format.
pawelk 5y ago
GIF is just a concept here, but if you upload an animated .gif to just about any large image sharing platform, they will convert it to a video format and serve in a <video> element to save on bandwidth. I'm not sure who was the first to do this, perhaps imgur with their invention of ".gifv" url suffix? [1] However right-click -> save image as... on "gifs" ceased to be an option long ago. [1] https://blog.imgur.com/2014/10/09/introducing-gifv/ https://blog.imgur.com/2014/10/09/introducing-gifv/

adamsb6 5y ago

There are many problems in the world that only a handful of companies have. You could make money joining those companies and helping them solve the problem as an employee. You could potentially make much more money by creating a company that solves that problem and then selling it to one of those bigger companies.

deleted 5y ago
[deleted]

sam0x17 5y ago

As an entrepreneur this gives me absolutely zero pause. I don't care if the fed splits up the thing that acquires me once I get acquired. I just want to get acquired. It's on meta to decide if they are flying too close to the sun.

deleted 5y ago

[deleted]

1vuio0pswjnm7 5y ago

What does Giphy sell. They certainly do not sell GIFs. Looks like they sometimes buy (license) them. Giphy does not produce the GIFs. It is someone else's work. Thus the only thing Giphy could sell is its "service" of running a server on the internet that serves GIFs. How much is that service worth. But they are not selling that either. They are collecting (meta)data about users. Maybe they inject ads. What an incredible business model. Produce nothing, use other people's work as "bait", collect data, get an inflated valuation and sell the "business". This is almost as good as patent trolling. Now, with this amazing model, how much revenue does Giphy produce, how much profit. Not even enough to pay for the server costs. It is funded by investors. This is a game. And regulators can spoil it.

deleted 5y ago
[deleted]