14 ms·

Unfortunately that's exactly why so many startups get bought. Not to become part of the parent company's business, no, just not to become a competitor later. Wo

Unfortunately that's exactly why so many startups get bought. Not to become part of the parent company's business, no, just not to become a competitor later. Would stronger (and enforced) anti trust laws be a solution? I believe businesses would just lie and say they are going to be part of the business but then just bury them anyway.

berkes 3y ago
Even if they'd lie, that's still a lot more effort and a lot more risk than not having to lie in the first place.
tivert 3y ago
> Would stronger (and enforced) anti trust laws be a solution? I believe businesses would just lie and say they are going to be part of the business but then just bury them anyway. Stronger anti-trust laws would just block many of these sales in the first place (e.g. identify that Goodreads competes with Amazon's existing dominant user book-review feature, and kill the acquisition for that reason).
- deleted 3y ago
  [deleted]
ljm 3y ago
One version of that even got its own jargon: acquihire. One incredible journey later and the product is already on the sunset.
fsckboy 3y ago
> I believe businesses would just lie and say they are going to be part of the business but then just bury them anyway. That's where my pet antitrust solution succeeds where others fail: ban all M&A. Companies only engage in mergers to consolidate market share, but their market share consolidation (i.e. monopolization) not only decreases competition, but also comes at the expense of employees and customers of the acquired businesses. Nobody wins except the monopolist, and monopolies are already bad, so why help them? (I think of monopoly and market concentration on a gradient scale, from a little bit monopolized to completely monopolized, so don't get stuck on a monopoly being a single entity)
- enriquec 3y ago
  Nothing about this would succeed. Do only monopolies perform mergers?
  - fsckboy 3y ago
    > Do only monopolies perform mergers? companies merge to concentrate market share, i.e. eliminate competition, i.e. increase prices, i.e. monopolize. Let's not ban just monopolies, let's also ban monopolize.
    - ethbr0 3y ago
      Companies also acquire and merge to vertically integrate.
      - gAI 3y ago
        Lazy, entitled companies should pull themselves up by their bootstraps and build their own supply chains from scratch. Maybe if they had some work ethic, they wouldn't need all that hard-earned tax money - corporate welfare queens. All joking aside, supply chain shenanigans are a nightmare.
      - fsckboy 3y ago
        So, for example Coca Cola has saturated the drinks market, and they vertically integrate by buying bottling companies... which means their competitor Pepsi can no longer buy from that bottling company because Coke has decreased competition in that market? Here's what they teach in business school: if you have a cloud computing business, and you have an advertising business, and your cloud business wants to advertise its services, should the cloud business get a discount on the ads, maybe the ad business has some surplus capacity you could soak up for free? Nope. The cloud business taking advantage of "free" ads from your ad business will make the health of the cloud business look better than it is. It will cover up overcapacity in the ad business, hiding the poor way it is being run. To properly assess your two businesses so you can make internal investing decisions, you need a clear picture of how those two businesses are operating in their respective markets. If a competitor is selling ads cheaper than you are, your cloud business should buy them. So, if this is how managers and cost accountants are trained to think rationally, well guess what, that's what markets are good at. Vertical integration is part of the monopolization problem.
hinkley 3y ago
A lot of my disillusionment with startups come from this. Being lied to repeatedly by different owners about how selling should be our goal to really start to win, only for the purchase to be the moment where we really start to lose. It breaks something precious.
- florbo 3y ago
  Well, the owners win. That's usually who they're referring to when they say "our", "us", etc.
  - hinkley 3y ago
    And every spring, there's a new batch of suckers who haven't learned what 'we' means. Old programmers are discriminated against because they point out when you're taking managerial shortcuts or, as in this case, outright lying.
ameister14 3y ago
We don't need stronger laws - just the enforcement part.
dexterdog 3y ago
Which is why founders should have a network where one creates good reads and sells to Amazon and then one of the others starts a better good reads right away. Then when founder A's handcuffs come off he goes and makes a new version of the most recent thing that sold to one of the FAANGs.
- smcin 3y ago
  Not really because any acquisition is going to have a non-compete to prevent that obvious scenario. Goodreads' Otis Chandler in 2021 invested [0] in BookClub [1] ("building actionable learning cultures through books, for teams"). And Elizabeth Khuri [2] and Chandler both also invested in Looped [3] (a more engaged and interactive livestreaming event service for concerts, comedy and other entertainment) [0]: https://www.crunchbase.com/person/otis-chandler https://www.crunchbase.com/person/otis-chandler [1]: https://www.crunchbase.com/organization/bookclub https://www.crunchbase.com/organization/bookclub [2]: https://www.crunchbase.com/person/elizabeth-khuri https://www.crunchbase.com/person/elizabeth-khuri [3]: https://www.crunchbase.com/organization/looped-6aae https://www.crunchbase.com/organization/looped-6aae
  - Qwertious 3y ago
    >Not really because any acquisition is going to have a non-compete to prevent that obvious scenario. This applies even without the non-competes - it takes time to set up a new company and gain marketshare, so even without non-competes the monopoly is successfully kicking the can down the road. And every extra year of monopoly is another years' worth of price-gouging profits, so repeatedly buying out competitors can be worthwhile.
    - smcin 3y ago
      Sure, but if you combine the overall time and market-share advantage due to the non-compete, golden handcuffs/earn-out clauses and non-hireaway, the acquirer gets a big first-mover advantage. I wondered why noone else had since tried to do a book discovery engine at an industrial-scale to compete with Amazon. Here's one 2019 list of book-discovery sites: "Broke By Books: 20 Great Book Websites for Finding What to Read Next" [0] and here's one analysis [1] of the key things Goodreads added value for Amazon: Kindle integration (social, ratings), a storefront that lets them push Kindle as the preferred version for purchases (or else Audible, or Prime and Kindle Unlimited subscription programs), data that can be mined from user reviews and ratings to power ML for better recommendations, understanding users' book- and reading-habits, rich content to increase interaction and hold user attention... I also wondered why the Goodreads cofounders hadn't gone and founded other companies, in other sectors. But essentially Amazon dwarfed other online book retailers, then moved on to much bigger and more profitable sectors (Kindle, digital music, streaming, Alexa, AWS itself, and tons more). [0]: https://brokebybooks.com/20-great-book-websites-for-finding-what-to-read-next/ https://brokebybooks.com/20-great-book-websites-for-finding-... [1]: "Who owns Goodreads?" https://bookriot.com/who-owns-goodreads/ https://bookriot.com/who-owns-goodreads/
afterburner 3y ago
> that's exactly why so many startups get bought. It's also why so many startups get started in the first place. Buyout being the goal.
ethbr0 3y ago
> Would stronger (and enforced) anti trust laws be a solution? Stronger employee control and delayed decision-making would be a solution. To take a spin at it: - Any business that merges would be subject to two binding votes (x+2 & x+5 years) with "We wish to remain merged" or "We wish to spin off," voted upon by anyone who has been employed in the merged business at any time between the merger and vote (subject to some voting power apportionment, but resolutely not using share ownership) - The federal government is obligated to perform an x+5 & x+10 year review of the merger's effect on the competitive landscape, with the power to forcibly unwind the merger It would decrease valuations of M&A-targets, and decrease M&A activity, but I don't think anyone would argue that's intrinsically a bad thing in the modern competitive landscape.
carlosjobim 3y ago
> Unfortunately that's exactly why so many startups get bought. Everything that gets bought gets sold as well. The founders of the companies are willfully and eagerly selling the companies they created. Who are you to ban it? Then you have to chain them to their desks and force them to try to dedicate the rest of their lives to the business.
- ClumsyPilot 3y ago
  > Who are you to ban it? this is a terrible argument. Some people sell their kidneys. Some people sold their own children. Some people even sold themselves into slavery. Who are you to judge?
  - carlosjobim 3y ago
    What are you talking about? If you ban people from selling their business they will just shut it down if they don't want to continue. Who is better off from that? Or you have to force people to continue with their businesses, which is akin to trying to force an artist or athlete to continue to be at top level. You can't force that, no matter how many hackers agree with you.
reaperducer 3y ago
Unfortunately that's exactly why so many startups get bought. Unfortunately that's exactly why so many startups are founded. I can't say what things are like today, but in Seattle in the 2010's, it seemed like 90% of the startups existed solely to get bought by Microsoft.
hbarka 3y ago
After the acquisition has there been any other startup trying to duplicate the value prop of GoodReads? What are the barriers to entry for them?
- saghm 3y ago
  Network effects, I assume? It would be hard to get everyone to move over without having some sort of draw, and I guess nobody had a successful enough idea for what that would be to get it to happen.
hgsgm 3y ago
That's also why many employees get hired! Talent denial.
yankput 3y ago
[flagged]
HWR_14 3y ago
> I believe businesses would just lie and say they are going to be part of the business but then just bury them anyway. There are two main parts of this. Antitrust laws don't typically concern themselves with bury vs incorporate. Even if Goodreads had been incorporated into Amazon, it still would have accomplished their major goal (prevent them from partnering with another company). And keeping them alive would have been just another part of Amazon's cost of acquisition. I wonder if it would have resulted in a lower offer. Secondly, the government doesn't take companies at their word. When, for instance, Microsoft promises that Activision Blizzard titles will remain on Playstation for at least a decade, the government gets that in an enforceable contract.
- quxbar 3y ago
  Regardless of our understanding of them, antitrust laws are powerless without enforcement. It seems the only entities with standing to prevent these actions by massive corporations are other massive corporations.
TheSpiceIsLife 3y ago
It’s exactly why many startups are conceived of in the first place.

berkes 3y ago

Even if they'd lie, that's still a lot more effort and a lot more risk than not having to lie in the first place.

tivert 3y ago

> Would stronger (and enforced) anti trust laws be a solution? I believe businesses would just lie and say they are going to be part of the business but then just bury them anyway. Stronger anti-trust laws would just block many of these sales in the first place (e.g. identify that Goodreads competes with Amazon's existing dominant user book-review feature, and kill the acquisition for that reason).

deleted 3y ago
[deleted]

ljm 3y ago

One version of that even got its own jargon: acquihire. One incredible journey later and the product is already on the sunset.

fsckboy 3y ago

> I believe businesses would just lie and say they are going to be part of the business but then just bury them anyway. That's where my pet antitrust solution succeeds where others fail: ban all M&A. Companies only engage in mergers to consolidate market share, but their market share consolidation (i.e. monopolization) not only decreases competition, but also comes at the expense of employees and customers of the acquired businesses. Nobody wins except the monopolist, and monopolies are already bad, so why help them? (I think of monopoly and market concentration on a gradient scale, from a little bit monopolized to completely monopolized, so don't get stuck on a monopoly being a single entity)

enriquec 3y ago
Nothing about this would succeed. Do only monopolies perform mergers?
- fsckboy 3y ago
  > Do only monopolies perform mergers? companies merge to concentrate market share, i.e. eliminate competition, i.e. increase prices, i.e. monopolize. Let's not ban just monopolies, let's also ban monopolize.
  - ethbr0 3y ago
    Companies also acquire and merge to vertically integrate.
    - gAI 3y ago
      Lazy, entitled companies should pull themselves up by their bootstraps and build their own supply chains from scratch. Maybe if they had some work ethic, they wouldn't need all that hard-earned tax money - corporate welfare queens. All joking aside, supply chain shenanigans are a nightmare.
    - fsckboy 3y ago
      So, for example Coca Cola has saturated the drinks market, and they vertically integrate by buying bottling companies... which means their competitor Pepsi can no longer buy from that bottling company because Coke has decreased competition in that market? Here's what they teach in business school: if you have a cloud computing business, and you have an advertising business, and your cloud business wants to advertise its services, should the cloud business get a discount on the ads, maybe the ad business has some surplus capacity you could soak up for free? Nope. The cloud business taking advantage of "free" ads from your ad business will make the health of the cloud business look better than it is. It will cover up overcapacity in the ad business, hiding the poor way it is being run. To properly assess your two businesses so you can make internal investing decisions, you need a clear picture of how those two businesses are operating in their respective markets. If a competitor is selling ads cheaper than you are, your cloud business should buy them. So, if this is how managers and cost accountants are trained to think rationally, well guess what, that's what markets are good at. Vertical integration is part of the monopolization problem.

hinkley 3y ago

A lot of my disillusionment with startups come from this. Being lied to repeatedly by different owners about how selling should be our goal to really start to win, only for the purchase to be the moment where we really start to lose. It breaks something precious.

florbo 3y ago
Well, the owners win. That's usually who they're referring to when they say "our", "us", etc.
- hinkley 3y ago
  And every spring, there's a new batch of suckers who haven't learned what 'we' means. Old programmers are discriminated against because they point out when you're taking managerial shortcuts or, as in this case, outright lying.

ameister14 3y ago

We don't need stronger laws - just the enforcement part.

dexterdog 3y ago

Which is why founders should have a network where one creates good reads and sells to Amazon and then one of the others starts a better good reads right away. Then when founder A's handcuffs come off he goes and makes a new version of the most recent thing that sold to one of the FAANGs.

smcin 3y ago
Not really because any acquisition is going to have a non-compete to prevent that obvious scenario. Goodreads' Otis Chandler in 2021 invested [0] in BookClub [1] ("building actionable learning cultures through books, for teams"). And Elizabeth Khuri [2] and Chandler both also invested in Looped [3] (a more engaged and interactive livestreaming event service for concerts, comedy and other entertainment) [0]: https://www.crunchbase.com/person/otis-chandler https://www.crunchbase.com/person/otis-chandler [1]: https://www.crunchbase.com/organization/bookclub https://www.crunchbase.com/organization/bookclub [2]: https://www.crunchbase.com/person/elizabeth-khuri https://www.crunchbase.com/person/elizabeth-khuri [3]: https://www.crunchbase.com/organization/looped-6aae https://www.crunchbase.com/organization/looped-6aae
- Qwertious 3y ago
  >Not really because any acquisition is going to have a non-compete to prevent that obvious scenario. This applies even without the non-competes - it takes time to set up a new company and gain marketshare, so even without non-competes the monopoly is successfully kicking the can down the road. And every extra year of monopoly is another years' worth of price-gouging profits, so repeatedly buying out competitors can be worthwhile.
  - smcin 3y ago
    Sure, but if you combine the overall time and market-share advantage due to the non-compete, golden handcuffs/earn-out clauses and non-hireaway, the acquirer gets a big first-mover advantage. I wondered why noone else had since tried to do a book discovery engine at an industrial-scale to compete with Amazon. Here's one 2019 list of book-discovery sites: "Broke By Books: 20 Great Book Websites for Finding What to Read Next" [0] and here's one analysis [1] of the key things Goodreads added value for Amazon: Kindle integration (social, ratings), a storefront that lets them push Kindle as the preferred version for purchases (or else Audible, or Prime and Kindle Unlimited subscription programs), data that can be mined from user reviews and ratings to power ML for better recommendations, understanding users' book- and reading-habits, rich content to increase interaction and hold user attention... I also wondered why the Goodreads cofounders hadn't gone and founded other companies, in other sectors. But essentially Amazon dwarfed other online book retailers, then moved on to much bigger and more profitable sectors (Kindle, digital music, streaming, Alexa, AWS itself, and tons more). [0]: https://brokebybooks.com/20-great-book-websites-for-finding-what-to-read-next/ https://brokebybooks.com/20-great-book-websites-for-finding-... [1]: "Who owns Goodreads?" https://bookriot.com/who-owns-goodreads/ https://bookriot.com/who-owns-goodreads/

afterburner 3y ago

> that's exactly why so many startups get bought. It's also why so many startups get started in the first place. Buyout being the goal.

ethbr0 3y ago

> Would stronger (and enforced) anti trust laws be a solution? Stronger employee control and delayed decision-making would be a solution. To take a spin at it: - Any business that merges would be subject to two binding votes (x+2 & x+5 years) with "We wish to remain merged" or "We wish to spin off," voted upon by anyone who has been employed in the merged business at any time between the merger and vote (subject to some voting power apportionment, but resolutely not using share ownership) - The federal government is obligated to perform an x+5 & x+10 year review of the merger's effect on the competitive landscape, with the power to forcibly unwind the merger It would decrease valuations of M&A-targets, and decrease M&A activity, but I don't think anyone would argue that's intrinsically a bad thing in the modern competitive landscape.

carlosjobim 3y ago

> Unfortunately that's exactly why so many startups get bought. Everything that gets bought gets sold as well. The founders of the companies are willfully and eagerly selling the companies they created. Who are you to ban it? Then you have to chain them to their desks and force them to try to dedicate the rest of their lives to the business.

ClumsyPilot 3y ago
> Who are you to ban it? this is a terrible argument. Some people sell their kidneys. Some people sold their own children. Some people even sold themselves into slavery. Who are you to judge?
- carlosjobim 3y ago
  What are you talking about? If you ban people from selling their business they will just shut it down if they don't want to continue. Who is better off from that? Or you have to force people to continue with their businesses, which is akin to trying to force an artist or athlete to continue to be at top level. You can't force that, no matter how many hackers agree with you.

reaperducer 3y ago

Unfortunately that's exactly why so many startups get bought. Unfortunately that's exactly why so many startups are founded. I can't say what things are like today, but in Seattle in the 2010's, it seemed like 90% of the startups existed solely to get bought by Microsoft.

hbarka 3y ago

After the acquisition has there been any other startup trying to duplicate the value prop of GoodReads? What are the barriers to entry for them?

saghm 3y ago
Network effects, I assume? It would be hard to get everyone to move over without having some sort of draw, and I guess nobody had a successful enough idea for what that would be to get it to happen.

hgsgm 3y ago

That's also why many employees get hired! Talent denial.

yankput 3y ago

[flagged]

HWR_14 3y ago

> I believe businesses would just lie and say they are going to be part of the business but then just bury them anyway. There are two main parts of this. Antitrust laws don't typically concern themselves with bury vs incorporate. Even if Goodreads had been incorporated into Amazon, it still would have accomplished their major goal (prevent them from partnering with another company). And keeping them alive would have been just another part of Amazon's cost of acquisition. I wonder if it would have resulted in a lower offer. Secondly, the government doesn't take companies at their word. When, for instance, Microsoft promises that Activision Blizzard titles will remain on Playstation for at least a decade, the government gets that in an enforceable contract.

quxbar 3y ago
Regardless of our understanding of them, antitrust laws are powerless without enforcement. It seems the only entities with standing to prevent these actions by massive corporations are other massive corporations.

TheSpiceIsLife 3y ago

It’s exactly why many startups are conceived of in the first place.