23 ms·

Watching an acquirer ruin your company

361 points by kelsus 4y ago

doctor_eval 4y ago
> Make sure you’re convinced that they understand the level of investment needed from them post-acquisition. It’s way more than this. The acquirer also has to share your vision, be willing to let you execute on it without interference, be willing to commit funding for sufficient time for it to grow legs, have deep enough pockets to sustain the investment, and be honest about all of the above. Quite often the acquirer is just as caught up in the heat of acquiring as the acquired is. In my experience, if you are trying to execute on a vision, acquisitions are supremely dangerous.
- csours 4y ago
  > have deep enough pockets to sustain the investment Exactly! I recently saw someone blame Nissan's failure on how Renault ran the company into the ground. Only problem is that Nissan was on their way to bankruptcy when they were acquired. "Beggars can't be choosers". To be fair, Renault has done Nissan dirty, taking out money instead of re-investing
Kaibeezy 4y ago
FFS, if it’s a good idea do it again. I built a satisfying career on a couple of those. Good ideas are for squishing obsessively into the fuzzy pumper until you get an iteration worth sticking in the oven.
- lukemercado 4y ago
  I'm sorry, I can't resist. What is a "fuzzy pumper" in this context?
  - Xeoncross 4y ago
    I assume it means https://en.wikipedia.org/wiki/Fuzzing https://en.wikipedia.org/wiki/Fuzzing which in this context would be trying the idea with multiple input parameters until one works best. Kind of like neural networks.
  - toomuchtodo 4y ago
    Something you shove Play-Doh into and out come different shapes. https://www.youtube.com/watch?v=5MbjOM1xk_s https://www.youtube.com/watch?v=5MbjOM1xk_s
  - phkahler 4y ago
    The Fuzzy Pumper Barber Shop. WTF happened to jingles? This one was dead and buried in my head until just now. Edit: see the sibling comment, they gave a link. Brother need a little off the top.... and I never even had this or most of the crap whose jingles are still in my head.
  - csours 4y ago
    I think they mean their brain.
- ineedasername 4y ago
  I'm a bit confused in the metaphors but maybe the meaning mostly comes through :) My thought on trying it again though is that IP rights could be tied up in the old entity.
  - hinkley 4y ago
    Not sure if metaphors or autocorrect.
    - Kaibeezy 4y ago
      I never metaphor I didn’t like.
thematrixturtle 4y ago
I think it's safe to assume that if your company is acquired, it will be "ruined". Even in the best case, where the product/service stays alive and some of the original team is still working on it, it's going to be somebody else calling the shots and taking it in all sorts of unexpected directions.
- modeless 4y ago
  Yeah even ones that are "successful" like Whatsapp still have the founders unhappy with the direction. Acquisition is almost never a way to achieve any goal other than getting paid.
  - charlesdm 4y ago
    Which is fine. It's fine to get paid. That's the deal -- you are getting a bag of cash (more than you could ever make as an employee) for an asset. You lose all say over it once you have gotten your bag of cash.
- judge2020 4y ago
  Maybe GitHub is different enough? I know FAANG acquisitions are mostly different (but not always[0]), but it seems GitHub started a new focus on features around the time Microsoft was in talks for an acquisition[1]. Even if this you attribute this feature focus to the increased downtime, the features probably outweigh the downtime in terms of value provided to their cloud/enterprise customers. Also, they've kept their own job board (not careers.microsoft.com). 0: https://news.ycombinator.com/item?id=22739839 https://news.ycombinator.com/item?id=22739839 1: https://github.blog/changelog/page/59/ https://github.blog/changelog/page/59/
  - pm90 4y ago
    I think it would be a giant embarrassment if MS were to fuck up Github. GH is too big to fail (also, LinkedIn, Blizzard (soon)) etc.
    - 4y ago
sys_64738 4y ago
le-mark 4y ago
I’ve seen this twice. First time the PE firm installed their CEO who came in and immediately started talking about cleaning house. A bunch of developers left fearing a layoff. That was bad enough, but what he really meant was sales. He gutted the sales team and brought in his guys. Sales tanked, company growth stopped, hard. Features dwindled and bugs grew. This clown and his cronies were gone after two years and the company still struggles today. Second time. A $10B company acquired a $4B company. The parent demanded high margins from the company that had been running on low margins and legacy, near end of life applications. Layoffs ensued and the parent was choking on the acquisition. They’d been sold on a bogus modernization effort that ended as soon as the acquisition closed. That acquisition is a drag on their earnings today, six years later. Getting to see these type of disasters first hand is pretty cool imo.
- Mandatum 4y ago
  MuleSoft?
  - le-mark 4y ago
    Not mulesoft, in this case at least.
- BMc2020 4y ago
  Reminds me a a company I worked at, I can't say it's name, let's just say it rhymes with Dewlett Dackard. 1) Start with a $55 billion dollar company... 2) Hire a new CEO and cronies that are going to make miracles happen with with a very expensive acquisition of another company. 3) 18 months later the miracles have not happened. CEO and cronies are invited to leave with very generous golden parachutes. 4) Start with a $50 billion dollar company...
  - hinkley 4y ago
    “The best way to create a small fortune in X is to start off with a large fortune.”
  - thejosh 4y ago
ineedasername 4y ago
I may be watching a train wreck of an acquisition right now, on the acquisition side no less. It makes little sense and everything I'm involved with over it seems to boil down to "we want it because we want it."
jmyeet 4y ago
As soon as someone hands you the check it's no longer "your" company and you should stop thinking of it as such. Only misery lies on that path. I see this on a smaller scale where ICs leave a company and take a copy of "their" code (ask Sergey Aleynikov [1] if that's a good idea). It's not yours. If you ever use it you could face legal consequences. And there's no code I've ever written that I wasn't convinced I could write better from scratch the next time if it ever came up. Side note: it never has. Don't be that guy who takes the check and then expects control. Don't be that guy who is convinced the new owners are messing it up and then goes out and does the exact same thing.. Move on. [1]: https://en.wikipedia.org/wiki/Sergey_Aleynikov https://en.wikipedia.org/wiki/Sergey_Aleynikov
- kurthr 4y ago
  Often acquisitions are set up with "earn-outs" so that only with the success of the project do you get the full amount of the buy. Even when that's not the case your reputation may well be tarnished by any failure (whether technical or managerial) of the product. I agree with your point though, which is to just walk away with the check unless you're willing to take a significant risks with either of those two other outcomes.
  - robbintt 4y ago
    Do you know where I can read more about the structure of "earn outs"? They seem like just another trap, to be clear.
    - kurthr 4y ago
      I'm not an expert, but I've seen the inside of a couple of deals like this in the $100M range. I saw larger % earnouts than described below (e.g. in the 30-50% range), which were based on milestones (e.g. products going to market on time) and income (e.g. $ customer sales over following several years). It's worth noting that the deals closed in a significant amount of stock so that is also an incentive to keep the buyers price high (but that the earner realistically has limited influence over that). https://news.crunchbase.com/ma/earnout-plan-startup-sale-how-to-use-price/ https://news.crunchbase.com/ma/earnout-plan-startup-sale-how...
gnat 4y ago
Sounds like: If you own the company and you decide to close a product line, you're pivoting and being a good owner. If you sell your company to someone and the acquirer closes a product line, they're ruining your company.
- hinkley 4y ago
  People are always more comfortable volunteering for hardship than having it thrust upon them. Course, to the employees I’m not sure it’s all that much different. Some suit shut it down. A different one than the one who promised us he wouldn’t, but what comfort is that?
PragmaticPulp 4y ago
> As soon as Sphero completed the acquisition, bringing Kelsus in as an app developer, two things happened: 1) Sphero told us they needed fully revamped iOS and Android apps six months later with no schedule wiggle room. 2) Sphero spent the first two of those six months organizing a team on their side and hashing out requirements for the new apps. This exact pattern has preceded every mismanagement disaster I've ever seen: 1) Management gives an unreasonable deadline to developers before defining the deliverables. Clock starts ticking. 2) Management then fails to settle on the requirements for months and/or continuously moves the goalposts while people are trying to work, turning an unreasonable deadline into an impossible deadline 3) Developers start realizing that they're going to receive the blame when impossible deadline isn't achieved, despite not having any control in the matter. They start leaving for new jobs, and the death spiral begins. It's the universal pattern of a management team that doesn't know how to do anything other than make demands and then apply pressure. Unless you can get someone in charge who has real leadership and planning skills, it's not recoverable.
- wdb 4y ago
  Sounds like a typical consultant project lol
- hinkley 4y ago
  > and the death spiral begins. The death spiral becomes visible, really. The gun had already been fired, the body just hadn’t hit the ground yet. I must say these failure modes are much worse than the ones I’ve experienced, which maybe I should be grateful for, I’d have to think about this. Generally I’ve seen a slower burn, where the remaining fiscal year plays out with soothing tones and promises of not changing things, and if money doesn’t magically appear in their accounts, which why would it? Then they don’t give you money for some of the things you usually do and while they technically didn’t tell you not to do them, if there’s no money you don’t get to do them. I don’t know which business school teaches people to say “ah can you smell that fresh mountain air” while they have their hands wrapped tightly around your neck but that’s some gaslighting BS that I hope nobody experiences, but I know people have. Best I can do is tell them to watch out for it. Some places you’re safe until FY+1, and things don’t go fully absurd until FY+2.
paxys 4y ago
All too familiar a story, and the advice at the end ("know your acquirer") is pointless. Simply put, the acquirer isn't ruining your company, they are ruining their company. The contract you signed and the money you exchanged gives them that right. It is foolish to expect that you will get a big payday and will get to keep setting the company direction and calling the shots as you like indefinitely. Here's better advice – the moment you sign the contract start counting the days left in your retention agreement and quit right after.
- matwood 4y ago
  > the advice at the end ("know your acquirer") is pointless Agree. It's impossible to really know your acquirer unless they are a bigger publicly traded company. Every acquirer puts their best foot forward, talks about how awesome their culture is, and how they are going to do all the things to help you grow faster. IME, it never works that way. > the moment you sign the contract start counting the days left in your retention agreement and quit right after. That's a bit too cynical for me. But, you do need to answer some questions, do you want to be an employee? Are you ok not being the one in charge? If you got a decent payout in the acquisition, you have a lot of freedom in the new job if you want to try to keep things going. One other thing to note, is that many times companies can be spun back out. I know multiple founders who have had this happen.
- DennisP 4y ago
  Corollary: don't keep minority ownership. I know a company owner who sold to a PE firm but kept a minority stake and a board seat, so he actually got to watch them wreck "his" company.
joshu 4y ago
yeah, been there. if they aren’t making the leader of the acquired company into VP or higher, it is unlikely that the product will succeed. before acquisition you are an important innovator that has much to teach. after acquisition you are a crazy person who only wants to spend money.
- hinkley 4y ago
  > you are a crazy person who only wants to spend money Do they have a drug to treat this condition yet? Maybe that’s what has been missing from my life.
  - rvba 4y ago
    The classical (and to some degree unfair) view of financial controllers (often wrongly labeled as "accountants") is that they only want to cut costs. Basically there is a very negative view of finance, that they want to cut costs to the bone, optimize everything, dont care about anything else then the numbers etc. In some ways it is a wrong view, but there are tons of people who see most things in a company as "cost centers". So maybe get someone to do cost planning for you and then compare actuals to your budget - often even setting up a budget allows you to understand where the money should go. Other thing is where it actually goes. If you are talking about personal finance then the time cost of properly analyzing where your money goes is high, but even with crude registering you probably can get an overview where most of it goes. Then you can work on biggest positions to try to minimize them. Those personal finance subreddits probably can help you with such analyses. There are also those "frugal" communities. But for most people: the more they earn, the more they spend. Also some of those frugal types are just weird (e.g. run around with a broken phone while you use it every day).
dqpb 4y ago
Maybe founders should stipulate that if the project ever gets discontinued, they get all rights back to the original product.
- smackeyacky 4y ago
  There are always things the acquirer can do to not exactly discontinue a product, but effectively do nothing with it. If you look at the film industry, they are masters of this. Buying scripts and sitting on them etc. A company could buy your widget startup and say they are still selling it, but mail order telephone sales only.
- LurkerAtTheGate 4y ago
  Founders can offer to buy the rights back later. I did this exactly - sold exclusive rights to software and team was hired onto acquiring company, years later acquiring company decides to shut down software arm and terminate existing service agreements. I offered to buy the rights plus our team back (for about 1% of the initial sale - they were going to just shutter it all), and immediately engaged the clients in new contracts. That purchase agreement was a doozy, spent more on lawyers than buying the rights back.
seanp2k2 4y ago
Honest question, does anyone have some examples of an acquired company thriving post-acquisition? It seems like they just all burn out or stop doing cool things. I’m thinking of examples like Nest and Tumblr, but I haven’t noticed any where I think “wow, they’re really doing amazing things now after being acquired”. I get that many are acqui-hires or done for the IP portfolio, or as favors to founders or other investors to make a few people a whole lot of money.
- gkoberger 4y ago
  Yeah, so many. YouTube, Instagram, Github, Android, Slack, Heroku (until recently), etc. And those are just the ones that were left to their own devices. There's also a ton that have lost their brand, but melted into the parent company. It's not obvious from the outside, but the tech (and team behind it) goes on to become a vital feature. Like, look at any acquisition by Stripe. Lastly, companies sell because things are going really well or they're going really badly. This company was closer to the latter, and that has a much smaller success rate – but teams often get continued employment, some get promotions, people make money, etc.
- nunez 4y ago
  Siri?
  - kalleboo 4y ago
    PA Semi
- e-_pusher 4y ago
  PowerPoint originally was an acquisition by Microsoft and by all accounts it seems to have been a “perfect” acquisition.
  - wanderingstan 4y ago
    As was Google docs (originally Writely)
- 4y ago
ncmncm 4y ago
Possibly more common is when the company is bought specifically to shut it down, because the product's success would hurt, or is hurting, sales of their own product. There used to be a category of software called "electronic design automation". It presented an interactive editor where you could enter the schematic diagram of an integrated circuit, and also enter a chip layout, and it would ensure that they matched. It was big business. But "silicon compilers" that needed only the schematic, and generated the chip layout, threatened that business. So, in the mid-to-late '80s the biggest EDA company set about buying up early-stage silicon compiler companies and shutting them down. That was doomed, but bought them several years during which silicon compilers were (therefore) not available for people to use. The company is still in business today, but sells very different things. General Motors bought up more carmakers to, effectively, shut down than probably any other. Sometimes a company can be bought for less than it would cost to hire as many staff as they have. So, they are bought and shut down, and the employees are put to work on various other projects. Google's hiring system is so Byzantine that buying companies, bypassing it, might be their main recruiting method. One might even buy a company because its product has a name they want to use for their own product. The momentary importance of domain names in the late '90s caused a fair bit of that. None of these contradict one another. A company might be bought for any or all reasons at the same time. So when your company is bought, expecting its product to come out the other side is naïve.
- lizknope 4y ago
  I'm curious which companies you are talking about? I design semiconductors and I use EDA software everyday. I know Cadence was formed from a merger in 1988 and they have since bought around 30 other EDA companies. https://en.wikipedia.org/wiki/Cadence_Design_Systems https://en.wikipedia.org/wiki/Cadence_Design_Systems
  - ncmncm 4y ago
    Back then the big EDA outfits were Mentor Graphics, Daisy, and Valid. ECAD became Cadence, embraced silicon compilers, and ate everybody's lunch. Back then, chips were still laid out by pasting up prepared logic blocks, gates, and occasional custom transistors, and routing metal traces between them, all on what we would today call a low-resolution workstation monitor. A million transistors was a lot. These would be output via a plotter to make photomasks for the various doping, glass, and and metal layers. The EDA software of the time, besides supporting manual editing editing of layouts and schematics, would simulate whole chips taking into account capacitance of wires and transistor inputs, propagation delay, and drive capability of output transistors. It would also apply geometric checks to make sure the layout conformed to rules of the target process. Where violated, somebody would need to redraw that bit, which might mean moving stuff out of the way. Somebody would have to make up sequences of values to feed to inputs, and others to check outputs against. So the period when MG was buying and shuttering silicon compiler startups was '85 to '89. I think after Cadence won, Mentor Graphics got more involved in supporting embedded system design and firmware integration, leaving chips to others. Daisy merged with Cadnetix and went bust in 1990, and after twists and turns what was left became part of Mentor Graphics in 1999. Valid was folded into Cadence in 1991. Cadence tried and failed to buy MG in 2008. MG was finally bought by Siemens AG in 2016.
alberth 4y ago
> Watching an acquirer ruin your company Title should be: “ Watching an acquirer ruining their investment” Because it’s no long “your company” the moment you sell it. It’s now their company.
pcmoney 4y ago
I honestly think the BB8 toy killed sphero. They mistook a flash of luck and a fad for PMF. It also made them cocky. Next thing I knew they were calling it a “robot” which while possibly technically true it was more of a neat remote control car that cost a fair amount of money. This was at time when you could by cheap rc helicopters that actually flew for $20.
- aabhay 4y ago
  I always understood the BB8 saga as Disney looking for a toy company to work with then designing a movie character that fit into the company’s capabilities. So it wasn’t luck as much as a single large enterprise contract that swallowed any other focus.
  - HWR_14 4y ago
    I mean it was probably less Disney looking for a toy company and Disneys cEO being a Sphero investor and I believe on the board.
- mdmglr 4y ago
  What is PMF mean in this context?
  - deleted 4y ago
    [deleted]
  - drifkin 4y ago
    product-market fit
  - deleted 4y ago
    [deleted]
formerkrogemp 4y ago
The majority of acquisitions and mergers fail. It should come to no surprise for those whose company or employer is acquired that the acquisition will fail as well.
nobody9999 4y ago
I watched that happen from the inside during the "dotcom" bust, Not a startup, but we'd grown to be a public billion dollar revenue organization when we were acquired by a much larger company (not using names here, as I'm sure there are folks on HN who were also there and would remember this and I don't want to doxx myself). We were very profitable and had an excellent company culture, with almost everyone pulling in the same direction. It was one of the best jobs I've ever had. Until the acquisition. After acquisition, as significant portion of our services were essentially given away to customers buying hardware from the acquirer, and our revenue plummeted. New top management then proceeded to destroy the company culture in an attempt (a guess) to bring it more in line with the acquiring company's culture. It was a disaster, and after a half dozen rounds of layoffs and 3-5 years, the division (that was the original company) was sold off for ~5% of the original purchase price. I'm sure there are situations that make an acquired company better, but that wasn't the case here. And more's the pity.
- jpgvm 4y ago
  For a second there I thought you were talking about EDS. Wouldn't surprise me if it was some other HP acquisition though.
  - nobody9999 4y ago
    >For a second there I thought you were talking about EDS. Wouldn't surprise me if it was some other HP acquisition though. No on both counts, but not bad guesses. :)
yieldcrv 4y ago
Serious question: why do you care? For some of my trades I use capital to purchase shares on the stock market For some of my trades I have a 100% premine of shares and sell them at a higher price until I’m down to 20% left but only because I minted 500% more shares to sell to the PE guys Its no different to me, a trade is a trade
- HWR_14 4y ago
  > For some of my trades I have a 100% premine of shares and sell them at a higher price until I’m down to 20% left but only because I minted 500% more shares to sell to the PE guys I didn't understand your example at all. Care to explain?
  - yieldcrv 4y ago
    When you create a new company, you write down an arbitrary number of shares that it is made of, and give yourself 100% of them at $0.00. From then on, the goal is to sell shares at > $0.00 But instead of selling any of those shares, when an investor comes you create a bunch more shares at $0.00 and sell them, dropping your percent of ownership to < 100% while not incurring a capital gains tax event.
    - anticensor 4y ago
      > When you create a new company, you write down an arbitrary number of shares that it is made of, and give yourself 100% of them at $0.00. Initial capital is a thing, and most jurisdictions have strict requirements on the minimum and maximum size of initial shares.
      - yieldcrv 4y ago
        Initial capital is a thing for suckers. The zero par value jurisdictions allow you to operate everywhere else just as well.
        4y ago
b20000 4y ago
kickstarters do not provide profits. i personally went through a succesful one and it was the same situation. i also think it’s lame the article does not mention the marketing cost to reach the 188k funding. also, building realtime synth / audio apps especially for professional use is a highly specialized job you should not outsource to generic mobile devs. you need to hire people who have been doing that for many years. android has many audio stack related problems and those still haven’t been solved. someone who specializes in audio apps already knows that. i get that the author is frustrated but the real reason people probably didn’t buy the product is that it was not good enough and not a “need”. to really want something it has to be crazy good. i’m surprised they got a deal from apple to distribute a poorly executed product. it sounds like sphero and other parties were wowed by the idea and acquired or partnered with a startup with a prototype that was still far from a real product. i don’t think it’s fair to blame sphero in this case…
happyopossum 4y ago
I think the real lesson is only sell what you’re willing to live without. Even if the initial contract says you get to stay involved, I wouldn’t take that unless I had to. If the money isn’t enough to make me walk away from a project, then the money isn’t enough for you to bug the project.
joyfylbanana 4y ago
It is much more fun to ruin it yourself.
grogenaut 4y ago
Having been on the acquiring side of a few of these, I've seen where the company being bought didn't really understand why they were being bought. It can be hard to to internalize why you're being bought as being bought is a sign of success. Some of the acquisitions I saw we were buying something very specific yet the company had a lot more. People get excited about their future roadmaps when they're often being bought for what they have, it can be hard to turn that off. And lets not get started on the 1-2 year slowdown that an acquisition can put into a team.
langsoul-com 4y ago
Companies that acquire another always change it to suit their vision. They did buy it for a reason, instead of simply partnering and what not
duped 4y ago
It sounds like the acquirer was at much fault as the company. Launching a musical instrument at CES is dumb - you go to NAMM (winter and summer), AES, or even NAB - somewhere where early adopters are, and press that will showcase the product to them. Requiring theory and practice to use an instrument isn't bad design. Compromising creative potential for potential market size just turns it into a toy, not something with staying power. Killing the android version would have been fine. Music apps and tools have been great on iOS since well before Oboe dropped on Android to fix the latency issues. The poster seems to be as wrong a fit for this product as it was for the market. All that said if you make a music tool and find an acquirer for any dollar amount you've succeeded. The market is teeny and people don't want to pay for new things.
- b20000 4y ago
  i think you know very little about the music tech space then.
fithisux 4y ago
This is the cost of simplifying everything to the interface type TransferOwnership interface { exchange(money float64) someAsset } the most disastrous decision of humans. Life is not that simple.
mattbee 4y ago
So this project was started in 2017, raised enough money from backers to get to (some) fruition, and was acquired within 18-24 months? Did its founders get a good payout from that, or were they just grateful to get funding to continue the project with someone else's capital? I can't tell from the article but this seems like a darned flash in the plan. Compare - I sold my bootstrapped company in 2018 after 16 years. It had been my entire career, and had hit a wall basically because of me & my big head not being able to work with my co-founder (and old friend & brother-in-law). Even then I understood the lie you have to tell everyone for the cash - we're very excited, nothing will change, etc. etc. The awful blog post is still up :-O The acquirers insisted on an earn-out based on profit over the next 12 months. And 2 weeks after the acquisition I realised. I called them on Friday and said "so I had started a lot of projects with a payoff in much longer than this time. Nobody at the parent company seems interested in them, I've contacted (long list of people) and had nothing back. Since you were explicit about short-term profit being the goal, I'm intending to start firing 40-60% of staff related on Monday, which should lift profit considerably in the remaining quarters on my contract - there's no risk to operations." I had a pearl-clutching call back from the CFO who was shocked SHOCKED at how I would treat my former company. That's not how they do things at (parent company). He would put his foot down and use his statutory right as a company director to stop me. Then he offered me & my co-founder about 20% of the earn-out cap to leave immediately, and we took it. Of course they fired everyone anyway 3 months later. Maybe I'm just older than the OP was, I was 38 and tired of the whole thing, but (after travelling up a few times to the parent company's offices) I assumed the acquirers would do the worst, most short-term thing possible and I was not disappointed. (A small consolation was seeing the CFO purchasing gobs of his company's own shares at the near-peak share price following the acquisition - it's declined steadily, and now suddenly, and is stands at 40% that peak).
- robocat 4y ago
  > the CFO purchasing gobs of his company's own shares It would be interesting to see how noisy that signal is. I wonder if there is a subset of people that would give a better signal? Maybe an external party that hasn’t drink the kool-aid and has enough inside information - board member? VC?
jeffrallen 4y ago
Three data points: The best econ prof I ever had taught us, "Someone wants to buy your dream? Great! Sell it! You'll have another one." And two start ups I worked for, sold to Microsoft, and destroyed by the absent managers from Redmond. I've got a new dream now, and if the boss sells it, pfft, I'll just keep dreaming.
snarkypixel 4y ago
My startup was acquired and it was fucking hell. Next time I get acquired I'll make sure to have everything in writing and planned for me to get out within one year.
- synu 4y ago
  I think that’s a pretty reasonable plan, and I would do the same. I don’t want to end up with a large stake in something I don’t have a corresponding level of control over. Sticking around to hand things over smoothly makes a ton of sense, but transitioning from founder to middle manager at your acquirer is a nightmare (depending on your personality).
- dahart 4y ago
  That’s a very good takeaway. I’m curious how you ended up being acquired without having everything in writing, and what hell ensued, can you share the story?
- leaflets2 4y ago
  What were the three worst things?
deleted 4y ago
[deleted]
moomoo11 4y ago
Dum question from someone who has no business experience but trying to start a company. If my goal is to build something useful for my customers, is there any harm in converting the company into a co-op or something when I get bored? I have a lot of money (not bragging, because it’s not like millions and millions, but I’m fine) so I’m not motivated by that. Rather I want to solve problems and create an environment where my team can prosper professionally and we are all on the same mission. I’ve worked at companies before where the culture was amazing and it was actually a joy to work. And it’s not like we were some hippie company - I’m talking unicorn status and later an IPO. I want to emulate that sort of environment where people were legitimately happy to be there. Instead of selling to some PE firm to come ruin things, has anyone converted their company into a co-op or is there something better where the remaining employees can be empowered to keep the engine running and steer the ship to new shores?
- spiffytech 4y ago
  Ghost CMS set the company up as a nonprofit: > We set Ghost up as non-profit foundation so that it would always be true to its users, rather than shareholders or investors. Our legal constitution ensures that the company can never be bought or sold, and one hundred percent of our revenue is reinvested into the product and the community. https://ghost.org/about/ https://ghost.org/about/
  - moomoo11 4y ago
    Awesome! Thanks
- robocat 4y ago
  There are reasons why successful co-ops are uncommon and that most successful organisations are top-down structures. A good way to cheaply and deeply learn the reasons for yourself, would be to join some co-op’s (or perhaps charities) in your area. A little experience within a successful co-op and within at least one unsuccessful co-op would go a long way. Good luck!
  - leaflets2 4y ago
lloydatkinson 4y ago
I mean, I can’t see any market value or practical use for magical rings that change colours and play sounds.

361 points by kelsus 4y ago

> Make sure you’re convinced that they understand the level of investment needed from them post-acquisition. It’s way more than this. The acquirer also has to share your vision, be willing to let you execute on it without interference, be willing to commit funding for sufficient time for it to grow legs, have deep enough pockets to sustain the investment, and be honest about all of the above. Quite often the acquirer is just as caught up in the heat of acquiring as the acquired is. In my experience, if you are trying to execute on a vision, acquisitions are supremely dangerous.

csours 4y ago
> have deep enough pockets to sustain the investment Exactly! I recently saw someone blame Nissan's failure on how Renault ran the company into the ground. Only problem is that Nissan was on their way to bankruptcy when they were acquired. "Beggars can't be choosers". To be fair, Renault has done Nissan dirty, taking out money instead of re-investing

Kaibeezy 4y ago

FFS, if it’s a good idea do it again. I built a satisfying career on a couple of those. Good ideas are for squishing obsessively into the fuzzy pumper until you get an iteration worth sticking in the oven.

lukemercado 4y ago
I'm sorry, I can't resist. What is a "fuzzy pumper" in this context?
- Xeoncross 4y ago
  I assume it means https://en.wikipedia.org/wiki/Fuzzing https://en.wikipedia.org/wiki/Fuzzing which in this context would be trying the idea with multiple input parameters until one works best. Kind of like neural networks.
- toomuchtodo 4y ago
  Something you shove Play-Doh into and out come different shapes. https://www.youtube.com/watch?v=5MbjOM1xk_s https://www.youtube.com/watch?v=5MbjOM1xk_s
- phkahler 4y ago
  The Fuzzy Pumper Barber Shop. WTF happened to jingles? This one was dead and buried in my head until just now. Edit: see the sibling comment, they gave a link. Brother need a little off the top.... and I never even had this or most of the crap whose jingles are still in my head.
- csours 4y ago
  I think they mean their brain.
ineedasername 4y ago
I'm a bit confused in the metaphors but maybe the meaning mostly comes through :) My thought on trying it again though is that IP rights could be tied up in the old entity.
- hinkley 4y ago
  Not sure if metaphors or autocorrect.
  - Kaibeezy 4y ago
    I never metaphor I didn’t like.

thematrixturtle 4y ago

I think it's safe to assume that if your company is acquired, it will be "ruined". Even in the best case, where the product/service stays alive and some of the original team is still working on it, it's going to be somebody else calling the shots and taking it in all sorts of unexpected directions.

modeless 4y ago
Yeah even ones that are "successful" like Whatsapp still have the founders unhappy with the direction. Acquisition is almost never a way to achieve any goal other than getting paid.
- charlesdm 4y ago
  Which is fine. It's fine to get paid. That's the deal -- you are getting a bag of cash (more than you could ever make as an employee) for an asset. You lose all say over it once you have gotten your bag of cash.
judge2020 4y ago
Maybe GitHub is different enough? I know FAANG acquisitions are mostly different (but not always[0]), but it seems GitHub started a new focus on features around the time Microsoft was in talks for an acquisition[1]. Even if this you attribute this feature focus to the increased downtime, the features probably outweigh the downtime in terms of value provided to their cloud/enterprise customers. Also, they've kept their own job board (not careers.microsoft.com). 0: https://news.ycombinator.com/item?id=22739839 https://news.ycombinator.com/item?id=22739839 1: https://github.blog/changelog/page/59/ https://github.blog/changelog/page/59/
- pm90 4y ago
  I think it would be a giant embarrassment if MS were to fuck up Github. GH is too big to fail (also, LinkedIn, Blizzard (soon)) etc.
  - 4y ago

sys_64738 4y ago

le-mark 4y ago

I’ve seen this twice. First time the PE firm installed their CEO who came in and immediately started talking about cleaning house. A bunch of developers left fearing a layoff. That was bad enough, but what he really meant was sales. He gutted the sales team and brought in his guys. Sales tanked, company growth stopped, hard. Features dwindled and bugs grew. This clown and his cronies were gone after two years and the company still struggles today. Second time. A $10B company acquired a $4B company. The parent demanded high margins from the company that had been running on low margins and legacy, near end of life applications. Layoffs ensued and the parent was choking on the acquisition. They’d been sold on a bogus modernization effort that ended as soon as the acquisition closed. That acquisition is a drag on their earnings today, six years later. Getting to see these type of disasters first hand is pretty cool imo.

Mandatum 4y ago
MuleSoft?
- le-mark 4y ago
  Not mulesoft, in this case at least.
BMc2020 4y ago
Reminds me a a company I worked at, I can't say it's name, let's just say it rhymes with Dewlett Dackard. 1) Start with a $55 billion dollar company... 2) Hire a new CEO and cronies that are going to make miracles happen with with a very expensive acquisition of another company. 3) 18 months later the miracles have not happened. CEO and cronies are invited to leave with very generous golden parachutes. 4) Start with a $50 billion dollar company...
- hinkley 4y ago
  “The best way to create a small fortune in X is to start off with a large fortune.”
- thejosh 4y ago

ineedasername 4y ago

I may be watching a train wreck of an acquisition right now, on the acquisition side no less. It makes little sense and everything I'm involved with over it seems to boil down to "we want it because we want it."

jmyeet 4y ago

As soon as someone hands you the check it's no longer "your" company and you should stop thinking of it as such. Only misery lies on that path. I see this on a smaller scale where ICs leave a company and take a copy of "their" code (ask Sergey Aleynikov [1] if that's a good idea). It's not yours. If you ever use it you could face legal consequences. And there's no code I've ever written that I wasn't convinced I could write better from scratch the next time if it ever came up. Side note: it never has. Don't be that guy who takes the check and then expects control. Don't be that guy who is convinced the new owners are messing it up and then goes out and does the exact same thing.. Move on. [1]: https://en.wikipedia.org/wiki/Sergey_Aleynikov https://en.wikipedia.org/wiki/Sergey_Aleynikov

kurthr 4y ago
Often acquisitions are set up with "earn-outs" so that only with the success of the project do you get the full amount of the buy. Even when that's not the case your reputation may well be tarnished by any failure (whether technical or managerial) of the product. I agree with your point though, which is to just walk away with the check unless you're willing to take a significant risks with either of those two other outcomes.
- robbintt 4y ago
  Do you know where I can read more about the structure of "earn outs"? They seem like just another trap, to be clear.
  - kurthr 4y ago
    I'm not an expert, but I've seen the inside of a couple of deals like this in the $100M range. I saw larger % earnouts than described below (e.g. in the 30-50% range), which were based on milestones (e.g. products going to market on time) and income (e.g. $ customer sales over following several years). It's worth noting that the deals closed in a significant amount of stock so that is also an incentive to keep the buyers price high (but that the earner realistically has limited influence over that). https://news.crunchbase.com/ma/earnout-plan-startup-sale-how-to-use-price/ https://news.crunchbase.com/ma/earnout-plan-startup-sale-how...

gnat 4y ago

Sounds like: If you own the company and you decide to close a product line, you're pivoting and being a good owner. If you sell your company to someone and the acquirer closes a product line, they're ruining your company.

hinkley 4y ago
People are always more comfortable volunteering for hardship than having it thrust upon them. Course, to the employees I’m not sure it’s all that much different. Some suit shut it down. A different one than the one who promised us he wouldn’t, but what comfort is that?

PragmaticPulp 4y ago

> As soon as Sphero completed the acquisition, bringing Kelsus in as an app developer, two things happened: 1) Sphero told us they needed fully revamped iOS and Android apps six months later with no schedule wiggle room. 2) Sphero spent the first two of those six months organizing a team on their side and hashing out requirements for the new apps. This exact pattern has preceded every mismanagement disaster I've ever seen: 1) Management gives an unreasonable deadline to developers before defining the deliverables. Clock starts ticking. 2) Management then fails to settle on the requirements for months and/or continuously moves the goalposts while people are trying to work, turning an unreasonable deadline into an impossible deadline 3) Developers start realizing that they're going to receive the blame when impossible deadline isn't achieved, despite not having any control in the matter. They start leaving for new jobs, and the death spiral begins. It's the universal pattern of a management team that doesn't know how to do anything other than make demands and then apply pressure. Unless you can get someone in charge who has real leadership and planning skills, it's not recoverable.

wdb 4y ago
Sounds like a typical consultant project lol
hinkley 4y ago
> and the death spiral begins. The death spiral becomes visible, really. The gun had already been fired, the body just hadn’t hit the ground yet. I must say these failure modes are much worse than the ones I’ve experienced, which maybe I should be grateful for, I’d have to think about this. Generally I’ve seen a slower burn, where the remaining fiscal year plays out with soothing tones and promises of not changing things, and if money doesn’t magically appear in their accounts, which why would it? Then they don’t give you money for some of the things you usually do and while they technically didn’t tell you not to do them, if there’s no money you don’t get to do them. I don’t know which business school teaches people to say “ah can you smell that fresh mountain air” while they have their hands wrapped tightly around your neck but that’s some gaslighting BS that I hope nobody experiences, but I know people have. Best I can do is tell them to watch out for it. Some places you’re safe until FY+1, and things don’t go fully absurd until FY+2.

paxys 4y ago

All too familiar a story, and the advice at the end ("know your acquirer") is pointless. Simply put, the acquirer isn't ruining your company, they are ruining their company. The contract you signed and the money you exchanged gives them that right. It is foolish to expect that you will get a big payday and will get to keep setting the company direction and calling the shots as you like indefinitely. Here's better advice – the moment you sign the contract start counting the days left in your retention agreement and quit right after.

matwood 4y ago
> the advice at the end ("know your acquirer") is pointless Agree. It's impossible to really know your acquirer unless they are a bigger publicly traded company. Every acquirer puts their best foot forward, talks about how awesome their culture is, and how they are going to do all the things to help you grow faster. IME, it never works that way. > the moment you sign the contract start counting the days left in your retention agreement and quit right after. That's a bit too cynical for me. But, you do need to answer some questions, do you want to be an employee? Are you ok not being the one in charge? If you got a decent payout in the acquisition, you have a lot of freedom in the new job if you want to try to keep things going. One other thing to note, is that many times companies can be spun back out. I know multiple founders who have had this happen.
DennisP 4y ago
Corollary: don't keep minority ownership. I know a company owner who sold to a PE firm but kept a minority stake and a board seat, so he actually got to watch them wreck "his" company.

joshu 4y ago

yeah, been there. if they aren’t making the leader of the acquired company into VP or higher, it is unlikely that the product will succeed. before acquisition you are an important innovator that has much to teach. after acquisition you are a crazy person who only wants to spend money.

hinkley 4y ago
> you are a crazy person who only wants to spend money Do they have a drug to treat this condition yet? Maybe that’s what has been missing from my life.
- rvba 4y ago
  The classical (and to some degree unfair) view of financial controllers (often wrongly labeled as "accountants") is that they only want to cut costs. Basically there is a very negative view of finance, that they want to cut costs to the bone, optimize everything, dont care about anything else then the numbers etc. In some ways it is a wrong view, but there are tons of people who see most things in a company as "cost centers". So maybe get someone to do cost planning for you and then compare actuals to your budget - often even setting up a budget allows you to understand where the money should go. Other thing is where it actually goes. If you are talking about personal finance then the time cost of properly analyzing where your money goes is high, but even with crude registering you probably can get an overview where most of it goes. Then you can work on biggest positions to try to minimize them. Those personal finance subreddits probably can help you with such analyses. There are also those "frugal" communities. But for most people: the more they earn, the more they spend. Also some of those frugal types are just weird (e.g. run around with a broken phone while you use it every day).

dqpb 4y ago

Maybe founders should stipulate that if the project ever gets discontinued, they get all rights back to the original product.

smackeyacky 4y ago
There are always things the acquirer can do to not exactly discontinue a product, but effectively do nothing with it. If you look at the film industry, they are masters of this. Buying scripts and sitting on them etc. A company could buy your widget startup and say they are still selling it, but mail order telephone sales only.
LurkerAtTheGate 4y ago
Founders can offer to buy the rights back later. I did this exactly - sold exclusive rights to software and team was hired onto acquiring company, years later acquiring company decides to shut down software arm and terminate existing service agreements. I offered to buy the rights plus our team back (for about 1% of the initial sale - they were going to just shutter it all), and immediately engaged the clients in new contracts. That purchase agreement was a doozy, spent more on lawyers than buying the rights back.

seanp2k2 4y ago

Honest question, does anyone have some examples of an acquired company thriving post-acquisition? It seems like they just all burn out or stop doing cool things. I’m thinking of examples like Nest and Tumblr, but I haven’t noticed any where I think “wow, they’re really doing amazing things now after being acquired”. I get that many are acqui-hires or done for the IP portfolio, or as favors to founders or other investors to make a few people a whole lot of money.

gkoberger 4y ago
Yeah, so many. YouTube, Instagram, Github, Android, Slack, Heroku (until recently), etc. And those are just the ones that were left to their own devices. There's also a ton that have lost their brand, but melted into the parent company. It's not obvious from the outside, but the tech (and team behind it) goes on to become a vital feature. Like, look at any acquisition by Stripe. Lastly, companies sell because things are going really well or they're going really badly. This company was closer to the latter, and that has a much smaller success rate – but teams often get continued employment, some get promotions, people make money, etc.
nunez 4y ago
Siri?
- kalleboo 4y ago
  PA Semi
e-_pusher 4y ago
PowerPoint originally was an acquisition by Microsoft and by all accounts it seems to have been a “perfect” acquisition.
- wanderingstan 4y ago
  As was Google docs (originally Writely)
4y ago

ncmncm 4y ago

Possibly more common is when the company is bought specifically to shut it down, because the product's success would hurt, or is hurting, sales of their own product. There used to be a category of software called "electronic design automation". It presented an interactive editor where you could enter the schematic diagram of an integrated circuit, and also enter a chip layout, and it would ensure that they matched. It was big business. But "silicon compilers" that needed only the schematic, and generated the chip layout, threatened that business. So, in the mid-to-late '80s the biggest EDA company set about buying up early-stage silicon compiler companies and shutting them down. That was doomed, but bought them several years during which silicon compilers were (therefore) not available for people to use. The company is still in business today, but sells very different things. General Motors bought up more carmakers to, effectively, shut down than probably any other. Sometimes a company can be bought for less than it would cost to hire as many staff as they have. So, they are bought and shut down, and the employees are put to work on various other projects. Google's hiring system is so Byzantine that buying companies, bypassing it, might be their main recruiting method. One might even buy a company because its product has a name they want to use for their own product. The momentary importance of domain names in the late '90s caused a fair bit of that. None of these contradict one another. A company might be bought for any or all reasons at the same time. So when your company is bought, expecting its product to come out the other side is naïve.

lizknope 4y ago
I'm curious which companies you are talking about? I design semiconductors and I use EDA software everyday. I know Cadence was formed from a merger in 1988 and they have since bought around 30 other EDA companies. https://en.wikipedia.org/wiki/Cadence_Design_Systems https://en.wikipedia.org/wiki/Cadence_Design_Systems
- ncmncm 4y ago
  Back then the big EDA outfits were Mentor Graphics, Daisy, and Valid. ECAD became Cadence, embraced silicon compilers, and ate everybody's lunch. Back then, chips were still laid out by pasting up prepared logic blocks, gates, and occasional custom transistors, and routing metal traces between them, all on what we would today call a low-resolution workstation monitor. A million transistors was a lot. These would be output via a plotter to make photomasks for the various doping, glass, and and metal layers. The EDA software of the time, besides supporting manual editing editing of layouts and schematics, would simulate whole chips taking into account capacitance of wires and transistor inputs, propagation delay, and drive capability of output transistors. It would also apply geometric checks to make sure the layout conformed to rules of the target process. Where violated, somebody would need to redraw that bit, which might mean moving stuff out of the way. Somebody would have to make up sequences of values to feed to inputs, and others to check outputs against. So the period when MG was buying and shuttering silicon compiler startups was '85 to '89. I think after Cadence won, Mentor Graphics got more involved in supporting embedded system design and firmware integration, leaving chips to others. Daisy merged with Cadnetix and went bust in 1990, and after twists and turns what was left became part of Mentor Graphics in 1999. Valid was folded into Cadence in 1991. Cadence tried and failed to buy MG in 2008. MG was finally bought by Siemens AG in 2016.

alberth 4y ago

> Watching an acquirer ruin your company Title should be: “ Watching an acquirer ruining their investment” Because it’s no long “your company” the moment you sell it. It’s now their company.

pcmoney 4y ago

I honestly think the BB8 toy killed sphero. They mistook a flash of luck and a fad for PMF. It also made them cocky. Next thing I knew they were calling it a “robot” which while possibly technically true it was more of a neat remote control car that cost a fair amount of money. This was at time when you could by cheap rc helicopters that actually flew for $20.

aabhay 4y ago
I always understood the BB8 saga as Disney looking for a toy company to work with then designing a movie character that fit into the company’s capabilities. So it wasn’t luck as much as a single large enterprise contract that swallowed any other focus.
- HWR_14 4y ago
  I mean it was probably less Disney looking for a toy company and Disneys cEO being a Sphero investor and I believe on the board.
mdmglr 4y ago
What is PMF mean in this context?
- deleted 4y ago
  [deleted]
- drifkin 4y ago
  product-market fit
- deleted 4y ago
  [deleted]

formerkrogemp 4y ago

The majority of acquisitions and mergers fail. It should come to no surprise for those whose company or employer is acquired that the acquisition will fail as well.

nobody9999 4y ago

I watched that happen from the inside during the "dotcom" bust, Not a startup, but we'd grown to be a public billion dollar revenue organization when we were acquired by a much larger company (not using names here, as I'm sure there are folks on HN who were also there and would remember this and I don't want to doxx myself). We were very profitable and had an excellent company culture, with almost everyone pulling in the same direction. It was one of the best jobs I've ever had. Until the acquisition. After acquisition, as significant portion of our services were essentially given away to customers buying hardware from the acquirer, and our revenue plummeted. New top management then proceeded to destroy the company culture in an attempt (a guess) to bring it more in line with the acquiring company's culture. It was a disaster, and after a half dozen rounds of layoffs and 3-5 years, the division (that was the original company) was sold off for ~5% of the original purchase price. I'm sure there are situations that make an acquired company better, but that wasn't the case here. And more's the pity.

jpgvm 4y ago
For a second there I thought you were talking about EDS. Wouldn't surprise me if it was some other HP acquisition though.
- nobody9999 4y ago
  >For a second there I thought you were talking about EDS. Wouldn't surprise me if it was some other HP acquisition though. No on both counts, but not bad guesses. :)

yieldcrv 4y ago

Serious question: why do you care? For some of my trades I use capital to purchase shares on the stock market For some of my trades I have a 100% premine of shares and sell them at a higher price until I’m down to 20% left but only because I minted 500% more shares to sell to the PE guys Its no different to me, a trade is a trade

HWR_14 4y ago
> For some of my trades I have a 100% premine of shares and sell them at a higher price until I’m down to 20% left but only because I minted 500% more shares to sell to the PE guys I didn't understand your example at all. Care to explain?
- yieldcrv 4y ago
  When you create a new company, you write down an arbitrary number of shares that it is made of, and give yourself 100% of them at $0.00. From then on, the goal is to sell shares at > $0.00 But instead of selling any of those shares, when an investor comes you create a bunch more shares at $0.00 and sell them, dropping your percent of ownership to < 100% while not incurring a capital gains tax event.
  - anticensor 4y ago
    > When you create a new company, you write down an arbitrary number of shares that it is made of, and give yourself 100% of them at $0.00. Initial capital is a thing, and most jurisdictions have strict requirements on the minimum and maximum size of initial shares.
    - yieldcrv 4y ago
      Initial capital is a thing for suckers. The zero par value jurisdictions allow you to operate everywhere else just as well.
      - 4y ago

b20000 4y ago

kickstarters do not provide profits. i personally went through a succesful one and it was the same situation. i also think it’s lame the article does not mention the marketing cost to reach the 188k funding. also, building realtime synth / audio apps especially for professional use is a highly specialized job you should not outsource to generic mobile devs. you need to hire people who have been doing that for many years. android has many audio stack related problems and those still haven’t been solved. someone who specializes in audio apps already knows that. i get that the author is frustrated but the real reason people probably didn’t buy the product is that it was not good enough and not a “need”. to really want something it has to be crazy good. i’m surprised they got a deal from apple to distribute a poorly executed product. it sounds like sphero and other parties were wowed by the idea and acquired or partnered with a startup with a prototype that was still far from a real product. i don’t think it’s fair to blame sphero in this case…

happyopossum 4y ago

I think the real lesson is only sell what you’re willing to live without. Even if the initial contract says you get to stay involved, I wouldn’t take that unless I had to. If the money isn’t enough to make me walk away from a project, then the money isn’t enough for you to bug the project.

joyfylbanana 4y ago

It is much more fun to ruin it yourself.

grogenaut 4y ago

Having been on the acquiring side of a few of these, I've seen where the company being bought didn't really understand why they were being bought. It can be hard to to internalize why you're being bought as being bought is a sign of success. Some of the acquisitions I saw we were buying something very specific yet the company had a lot more. People get excited about their future roadmaps when they're often being bought for what they have, it can be hard to turn that off. And lets not get started on the 1-2 year slowdown that an acquisition can put into a team.

langsoul-com 4y ago

Companies that acquire another always change it to suit their vision. They did buy it for a reason, instead of simply partnering and what not

duped 4y ago

It sounds like the acquirer was at much fault as the company. Launching a musical instrument at CES is dumb - you go to NAMM (winter and summer), AES, or even NAB - somewhere where early adopters are, and press that will showcase the product to them. Requiring theory and practice to use an instrument isn't bad design. Compromising creative potential for potential market size just turns it into a toy, not something with staying power. Killing the android version would have been fine. Music apps and tools have been great on iOS since well before Oboe dropped on Android to fix the latency issues. The poster seems to be as wrong a fit for this product as it was for the market. All that said if you make a music tool and find an acquirer for any dollar amount you've succeeded. The market is teeny and people don't want to pay for new things.

b20000 4y ago
i think you know very little about the music tech space then.

fithisux 4y ago

This is the cost of simplifying everything to the interface type TransferOwnership interface { exchange(money float64) someAsset } the most disastrous decision of humans. Life is not that simple.

mattbee 4y ago

So this project was started in 2017, raised enough money from backers to get to (some) fruition, and was acquired within 18-24 months? Did its founders get a good payout from that, or were they just grateful to get funding to continue the project with someone else's capital? I can't tell from the article but this seems like a darned flash in the plan. Compare - I sold my bootstrapped company in 2018 after 16 years. It had been my entire career, and had hit a wall basically because of me & my big head not being able to work with my co-founder (and old friend & brother-in-law). Even then I understood the lie you have to tell everyone for the cash - we're very excited, nothing will change, etc. etc. The awful blog post is still up :-O The acquirers insisted on an earn-out based on profit over the next 12 months. And 2 weeks after the acquisition I realised. I called them on Friday and said "so I had started a lot of projects with a payoff in much longer than this time. Nobody at the parent company seems interested in them, I've contacted (long list of people) and had nothing back. Since you were explicit about short-term profit being the goal, I'm intending to start firing 40-60% of staff related on Monday, which should lift profit considerably in the remaining quarters on my contract - there's no risk to operations." I had a pearl-clutching call back from the CFO who was shocked SHOCKED at how I would treat my former company. That's not how they do things at (parent company). He would put his foot down and use his statutory right as a company director to stop me. Then he offered me & my co-founder about 20% of the earn-out cap to leave immediately, and we took it. Of course they fired everyone anyway 3 months later. Maybe I'm just older than the OP was, I was 38 and tired of the whole thing, but (after travelling up a few times to the parent company's offices) I assumed the acquirers would do the worst, most short-term thing possible and I was not disappointed. (A small consolation was seeing the CFO purchasing gobs of his company's own shares at the near-peak share price following the acquisition - it's declined steadily, and now suddenly, and is stands at 40% that peak).

robocat 4y ago
> the CFO purchasing gobs of his company's own shares It would be interesting to see how noisy that signal is. I wonder if there is a subset of people that would give a better signal? Maybe an external party that hasn’t drink the kool-aid and has enough inside information - board member? VC?

jeffrallen 4y ago

Three data points: The best econ prof I ever had taught us, "Someone wants to buy your dream? Great! Sell it! You'll have another one." And two start ups I worked for, sold to Microsoft, and destroyed by the absent managers from Redmond. I've got a new dream now, and if the boss sells it, pfft, I'll just keep dreaming.

snarkypixel 4y ago

My startup was acquired and it was fucking hell. Next time I get acquired I'll make sure to have everything in writing and planned for me to get out within one year.

synu 4y ago
I think that’s a pretty reasonable plan, and I would do the same. I don’t want to end up with a large stake in something I don’t have a corresponding level of control over. Sticking around to hand things over smoothly makes a ton of sense, but transitioning from founder to middle manager at your acquirer is a nightmare (depending on your personality).
dahart 4y ago
That’s a very good takeaway. I’m curious how you ended up being acquired without having everything in writing, and what hell ensued, can you share the story?
leaflets2 4y ago
What were the three worst things?

deleted 4y ago

[deleted]

moomoo11 4y ago

Dum question from someone who has no business experience but trying to start a company. If my goal is to build something useful for my customers, is there any harm in converting the company into a co-op or something when I get bored? I have a lot of money (not bragging, because it’s not like millions and millions, but I’m fine) so I’m not motivated by that. Rather I want to solve problems and create an environment where my team can prosper professionally and we are all on the same mission. I’ve worked at companies before where the culture was amazing and it was actually a joy to work. And it’s not like we were some hippie company - I’m talking unicorn status and later an IPO. I want to emulate that sort of environment where people were legitimately happy to be there. Instead of selling to some PE firm to come ruin things, has anyone converted their company into a co-op or is there something better where the remaining employees can be empowered to keep the engine running and steer the ship to new shores?

spiffytech 4y ago
Ghost CMS set the company up as a nonprofit: > We set Ghost up as non-profit foundation so that it would always be true to its users, rather than shareholders or investors. Our legal constitution ensures that the company can never be bought or sold, and one hundred percent of our revenue is reinvested into the product and the community. https://ghost.org/about/ https://ghost.org/about/
- moomoo11 4y ago
  Awesome! Thanks
robocat 4y ago
There are reasons why successful co-ops are uncommon and that most successful organisations are top-down structures. A good way to cheaply and deeply learn the reasons for yourself, would be to join some co-op’s (or perhaps charities) in your area. A little experience within a successful co-op and within at least one unsuccessful co-op would go a long way. Good luck!
- leaflets2 4y ago

lloydatkinson 4y ago

I mean, I can’t see any market value or practical use for magical rings that change colours and play sounds.