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Exploiting Silicon Valley For Profit (and Maybe Fun)
- chrisyeh 14y agoSad, but true.
- doug_ludlow 14y agoThis is easily one of the most honest and true posts I've read about Valley culture in a long, long time. Having been through this exact process, I can assure you that this is how it really works.
- gruseom 14y agoWould be interested in hearing about your process if you'd care to tell us.
- rudiger 14y agoIf you look at all the people making 6 million dollar paydays, is this really how it works? I suspect not, but I don't have the data to back that assertion.
- kokey 14y agoThe strange thing is it reminds me of the late 90s, the GooBook back then were companies like Cisco.
- tptacek 14y agoSo I liked this, like everything else Diego writes, but this graf doesn't ring true to me: Joe and Wayne work on building something they know GooBook could acquire without looking stupid. Something they might be able to do in-house, except their most talented engineers are desperately working on ways to extract more money out of ads, or to reduce the costs of their gargantuan infrastructure. Some are stationed in Antarctica building a self-cooling datacenter; others are diverted from creative projects into the new 99.9999999999% uptime initiative: one second of downtime costs a million dollars. Forget that stupid 18% free-time web app project, and come help make some mon-ay. The quarterly report must look good. Shareholders demand it! Working on self-cooling data centers sounds awesome to me, & also penguins. But more importantly: the 99.9999999999% uptime initiative that saves a million dollars for every second rescued sounds awesome to me. Developers are rarely so privileged as to work on problems that are simultaneously hard, well capitalized, and easily quantifiable. "Mon-nay"? This paragraph reminds me painfully of how mouthy I was when I was 24 and had just had the company where I was an early employee be acquired by a BigCo.
- bengl3rt 14y agoAlso, $6m really isn't that much these days. Might get you a nice house in the Silly Valley and a few years of living expenses, but that's not "set for life" money if you're in your 20s.
- vertr 14y agoAre you serious? $6m sounds like more than enough to retire on at any point for most people.
- seiji 14y agoDisturbingly accurate. • Make a sufficiently shiny, yet imminently disposable product. • Hoard employees (each one bumps your valuation by ~$1.5 million), be loud, get acquired. • Kill product. (You never cared about it anyway -- it was just a vehicle for ego and attention. Now that you've got your $5 million, you don't need the validation of all those silly pawns/customers anymore.)
- vertr 14y agoIf new startups agreed that they wouldn't leave their users out to dry if they got acquired would you be more likely to trust them and use their service?
- seiji 14y agoGetting a future promise from a startup CEO is as trustworthy as a politician's promise during election season. The only sane approach is open data. Leave everything available for export so some other feature company can pick up where you left off. You could venture into an insane realm where startups enter into a Startup Insurance™ league. When a company gets acquihired, instead of shutting down the product, a separate foundation runs the product (or figures out a way to open all the data for export).
- jaggederest 14y agoNo, because how would they enforce that? If your company is acquired, all that goes out the window anyway.
- repsilat 14y agoKeeping the product alive could be one of the terms of the acquisition, but it seems unlikely - it could lower the offer, and it's unlikely startup founders would throw away money on a matter of principle unless the community promise was somehow legally binding. In a sense the promise is a "non-credible threat" in game-theoretic terms. It would attract users if they carried it out, but because acquisition happens after the user-attraction stage they don't have an incentive to carry it out. This means they won't rationally carry it out, which means they don't attract rational users. This situation can be avoided if they "tie their own hands". http://en.wikipedia.org/wiki/Non-credible_threat http://en.wikipedia.org/wiki/Non-credible_threat
- maxko87 14y agoThis is exactly why people consider the valley to be a huge bubble. This kind of "innovation" isn't sustainable at all.
- dsrguru 14y agoBut what makes it not sustainable? As long as there exist a few GooBooks, won't acquisitions continue to be sought?
- maxko87 14y agoYeah, but only until the GooBooks realize that they are just paying a huge premium for acquiring talent (and a worthless product).
- dsrguru 14y agoThat assumes that the product is worthless and that they have alternative ways of acquiring equally valuable talent. The author of this article asserts that neither of those is true. The opportunity cost of developing the product in house is often comparable to or greater than the cost of the acquisition, and the talent acquired is not only really skilled but also already familiar with GooBook's way of doing things since they worked there to begin with.
- hkarthik 14y agoThe linchpin to the whole thing is the easy VC money. It's what makes both the few startups turning into GooBooks and the many startups turning into ZombiePlatypus possible. As soon as the smart money that's currently focused on VC finds decent returns in other, less risky investment vehicles, the VC money train will stop. It's just a matter of time.
- dsrguru 14y agoThat certainly would cause the bubble to start losing air so-to-speak, but I'm not sure it would pop. If you think about it, Google and Facebook happen to be specific examples of companies that could have become billion dollar companies without VC investment. Other companies like Amazon and Tesla Motors are not.
- gregholmberg 14y agoGoogle, Bing and HN Search all think that "Hacker Noise" is a neologism.
- gruseom 14y ago"GooBook" and "SoSoMa" are pretty funny, but "Hacker Noise" is brilliant. A direct hit!
- rudiger 14y agoExcept this isn't how people are making 5+ million dollars in practice.
- jconley 14y agoThe acquihire is just the Dot Com Ferrari signing bonus of the new age. Except now you have to prove you can actually take risk and get shit done before they give you the Ferrari. Seems reasonable.
- mck- 14y agoIs this the real story (and motivation) behind IndexTank?
- villagefool 14y agoA bit ironic that he sarcastically referees to HN as "Hacker Noise" but then at the end invites people to discuss the post on it.
- graue 14y agoI didn't interpret that as a dig at HN, any more than "GooBook" is a dig at Google and Facebook... He just changed the names to make it clear his story is fictional.
- Estragon 14y agoI'm curious, is the name "ZombiePlatypus" a reference to any specific recently acquired startups with monsters and animals in their names?
- gregholmberg 14y agoZOMGPOP would be close.
- corford 14y agoHahah I've been wondering the same thing but can't come up with anything.
- SkyMarshal 14y agoZynga, Plants vs Zombies, and Minomonsters is what came to mind for me.
- smattiso 14y agoAnybody have any firsthand knowledge on how prevalent things like this happen? Seeing as how his company was acquired by LinkedIn, is he admitting this was his strategy?
- endlessvoid94 14y agoa lot.
- wildmXranat 14y agoConcise, compelling and rich,- would read again. But honestly, that sort of stuff rarely gets transcribed into Internet ink.
- jhandl 14y agoYou think he started a search as a service company because he was targeting LinkedIn? Flaptor (the name of the company, IndexTank was the product) was a search consulting company five years before becoming a startup. I know, I was there.
- villagefool 14y agoBy the way, how much of this post is IndexTank's own story?
- jcc80 14y agoBy now they have some traction: hundreds of thousands of users, some of whom are even real. I wonder what percentage of users are generally fake and how much some startups goose this number. Maybe adding in 5% worth of fake users increases an acquisition price. I'd imagine it varies by the type of app (CRM, social, etc) but that you'd probably have to get your next funding from the Salvation Army if/when you get caught.
- seiji 14y agoThere exist companies where you pay $100 and get 1000 to 10,000 people (read: south east asians) to sign up to your service. CEOs have been invited to conferences to speak about their "sudden rapid growth." They never admit they are cheating. You can usually tell who does it because their traffic will abruptly stop once they realize the 100,000 one-time-login users in Singapore aren't virally spreading or clicking on ads.
- acoyfellow 14y agoI've never been so glad I'm on the other side of the country..
- Nikkki 14y agoAs long as all the parties profit from this kind of business there is nothing wrong with it. See for example Android. Whoever thought it would be what it is for Google today for Google?
- EternalFury 14y agoSometimes someone says something true. When that happens, it has to be veiled in the appearance of a satire because no one wants to admit the world really works that way.
- mark-r 14y agoI nearly burst out laughing when I read "Hacker Noise".
- ema 14y agoIf that is the price the world has to pay for the occasional google so be it.