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When Your Exit Strategy Dream Is My Customer Nightmare
- smidgeon 1y agoI wish there were more people like this.
- vermooten 1y ago[flagged]
- deleted 1y ago[deleted]
- Hard_Space 1y agoAfter a brutal experience chewed up in one of these opportunistic exit machines, I now assume this is the default position of any new company, particularly those looking to cash in on AI before the legal apocalypse over data provenance takes hold.
- jraph 1y ago> the legal apocalypse over data provenance takes hold I wouldn't hold my breath on this unfortunately, I'm more hoping on things happening on the cash-burning thing side.
- teddyh 1y agoDiscounting those customers who buy something and never use it, virtually all “exits” are a massive betrayal of all the customers who believed that the product they bought would be supported. An ”exit” is only profitable because of the enshittification done by whoever buys it, and the customers are now left holding the proverbial bag.
- diggan 1y agoThat seems one-sided. I'm guessing most users bought a product because they found it useful, or at least thought it was useful. Probably the ones who only bought it to support the company could be counted on one hand. So they still got something for the money they paid, otherwise they wouldn't have paid. If people were donating money to for-profit companies, then you'd have a point in your argument, but that isn't reality as far as I know.
- teddyh 1y agoTo use any software in these modern times, it’s not enough to simply get a snapshot and use that forever. That time has long gone. Users need updates for whenever the inevitable incompatibilities arise, and since switching to some other software is a lot of work, users need to be able to depend on regular, timely updates. Indeed, many people choose what software they use solely on that basis. Therefore, when a company “exits”, they leave all their users in the lurch. This applies more universally if the product is not software, but a service. Or if the software depends on the company’s servers.
- diggan 1y agoBut you don't buy anything today expecting it to work by itself forever, do you? I don't think others do either, most of us are aware that when we buy something, we buy it as-is right now, and if something in the environment changes, where we need to change this purchased thing, we don't expect to get that for free.
- teddyh 1y agoI’m sorry, but in anything you wrote there, I can’t see an argument against anything I wrote. No users are expecting updates for free. But users do expect updates to be available for purchase, which they won’t be if the company has made an “successful exit”. Success for the company is a loss for the customers, and a betrayal of the implicit promise of the initial product.
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- NickNaraghi 1y agohugely agree. exit is usually where the incentive misalignment between platform owners and users begins to diverge. I believe that making everyone an owner of the platform could help to fix this (basically stakeholder capitalism, using well-designed programmable equity structures), and now is a great time to try it.
- pjio 1y agoI sometimes wonder if the best way to dominate a market would be to grow sustainable and wait out the competition until they crash themself with their self sabotaging strategy of unhealthy, exploitive behavior. This article was just, what I needed to read today.
- n4r9 1y agoThat would be sweet. The sad truth is that a big company can coast on unhealthy exploitative behaviours for many years; perhaps decades.
- ozgrakkurt 1y agoThis doesn’t apply to vc funded startups
- n4r9 1y agoNot sure what you mean. Uber scaled from VC funded startup to megacorp despite a raft of exploitative practices.
- ozgrakkurt 1y agoLongevity can be achieved for a company with two devs and no outside investment with 15k/month income so they can live ok. But for a vc funded startup you need way more revenue to keep raising money. This is from what I learned in the startups I worked at. I guess uber is a huge success compared to your median startup right?
- adastra22 1y agoUnfortunately the wait-it-out strategy typically works the other direction.
- mananaysiempre 1y agoFeels like this is a finance-fueled version of the age-old stratagem of dumping, but existing laws against that were not written with it in mind, and in any case would not work fast enough for the good-faith competitors to remain afloat.
- MBAnopassion 1y agoAh, it's our weekly "MBA's have no passion" blog post, but this time in disguise. Yes, yes, I agree, and heard it before: creatives study into art, techies study into engineering, and hollow shells with no love for anything study into business. Blight on society, the lot of them, bears repeating. But I gone a step further. Things won't really change within my lifespan so... I just took to a more pessimistic, and less empathetic outlook. I'll flip back to optimism at some point.
- oldandboring 1y agoI can't get past the fact that you created that account just to write that comment.
- tossandthrow 1y agoIt is not so much the MBA approach than it is about short sightedness. This is just yet another adverse externality that is not priced in - that market does not seem to be able to do it, so regulators will eventually force these things to be priced in. The new tax laws on research and development is a way to encourage long term sustainable businesses.
- closewith 1y ago> It is not so much the MBA approach than it is about short sightedness. It's exploiting the economic system as it exists (which is short-sightedly destroying the planet and causing untold miseries along the way), but from a personal perspective, it's obviously the best option to cash in ASAP and live a happy and varied life away from technology.
- tossandthrow 1y ago> but from a personal perspective, it's obviously the best option to cash in ASAP and live a happy and varied life away from technology. Time will tell - Rich people also need to navigate decaying landscapes. It is more a tragedy of the commons situation - Everybody else are f*king up the common, so you have to too.
- miroljub 1y agoThat's the main reason I avoid using any products from startups. I just know that in a few years, the company will die out or exit, and in both cases product I would rely on will be discontinued, or shittified by the new owner. The only exceptions are open source products with a healthy community, where I can evaluate their possibility of survival after vendor shutdown, or commodity services, where I can count that I could replace them with something similar with a minimal effort.
- jgorn 1y agoAnother issue with startups is pivots. Years ago I went all in with my company on a calculator startup, then they pivoted to an AI-focused solution that was so far from their original value prop that they became useless. Left a gap for our customers and that company doesn't seem to be doing well present day. Stick to what your customers want!
- xandrius 1y agoYeah but if that doesn't pay the bills, can't fault them. I agree with the general sentiment but not everyone is there thinking about multi-milion exit strategies, not everyone is buddy with people in SV or YC to even dream of that. Some people really want to solve a problem and make a living out of it, sometimes that's due to the idea, sometimes to the "customers" and sometimes something else.
- rini17 1y agoAnd where are all the people that do stuff for living, not for exits?
- vlovich123 1y agoBut that’s also generally true of products from established players.
- mschuster91 1y agoDepends on the player. SAP for example is infamous for its ossification. But yeah, it's sad that nothing can be taken for granted, even if you pay through your nose. Greetings to Broadcom...
- hschne 1y agoIt's simplistic, but I think there's two ways you can approach building a product company. Either you focus on creating a great product that customers love. As a consequence, you'll hopefully make some money. Or you focus on making a truckload of money as quick as possible, and building a product is merely a means to an end. As OP said, there's far too few companies choosing the first approach, and far too many choosing the second one.
- treyd 1y agoThis shouldn't really be that surprising. There's a stronger incentive to do the latter than the former. If it's plausible enough to take the latter strategy that the expected value of the strategy is higher, then that will be the strategy preferentially taken.
- hschne 1y agoI think that's a misconception. It's quite possible that the expected value for most companies over, say 10 years, is overall higher. I obviously have no data, call it a hunch We just don't hear enough about companies growing steadily and profitably over the years, but over report on the unicorns and smash hits.
- treyd 1y agoInvestors do have that data, and they clearly seem to disagree through their investment strategies, and it seems to be turning out well for them enough for that strategy to be consistently profitable, so your hunch may be wrong.
- danaris 1y agoInvestors are pushed to care about this quarter's revenue, and discouraged from caring about anything else, by a host of warped and unintentional incentives. I don't think we can use their behavior as an indicator of what's optimal over the long run.
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- deepandmeaning 1y agoWhat a wonderful article/anecdote. I have and will always be an advocate of human connections. My experience of working across a number of agencies and startups has been the best focus on that (though it can be hard to sustain). I would love to work with people and at places that understand and realise the value of this.
- acron0 1y agoI see this sentiment in my colleagues, my friends, my children, everywhere, and it makes me so sad. I want to say something witty and sharp about "neoliberal global capitalism" or something... Weren't the successful economic foundations of the west built on hard-working, honest businesses who, in a lot of cases, did it because they felt some connection to their craft and the customers they served? Maybe that's just a romantic illusion.
- PeterStuer 1y agoI remember at a big client, a certain product for part of the tech stack (sry for being this vague) was declined as a contender as 'the (EU) company behind this product only has 200 employees'. For the US reader: from a European perspective, a 200 person EU software company is not exactly a fly by night operation as we do not have the VC space the US enjoys. Also, very early in my career, I got burned on a project by building on what IBM at the time touted as their next future platform for the SME space, only to see it discontinued the next year. Glad I payed my learning cost this early on a relatively small project.
- brunoarueira 1y agoThe worst experience for me is changing directors/C-level to maximize the exit profit, between the lines of "disagreements over company policy" can be many things, but one major pain is culture changes which drives down everything, once the company stimulating the healthy place and then creates a disturbed one where we can't grow and deliver our better solutions only for money.
- TrackerFF 1y agoI’ve concluded that products/services which feel too good to be true, are probably just that. Just a mater of time until VC/PE money want to collect their pound of flesh, and the enshitification begins. Either that, or the startup just ceases to exist - after a M&A has taken place.
- Esophagus4 1y agoMaybe this is just my read of this, but it seems like the author is extrapolating a lot of intent from very little here… Is it possible the project has few employees and little revenue precisely because they don’t want a massive exit? Or is it possible they declined his request not because they’re chasing growth-at-all-costs and instead because they thought of this random LinkedIn message as simply another distraction from a developer who (statistically for random reach outs) might have wasted their time long term? Even if you fund it, it still might not be worth it for the developers, might be a distraction for their roadmap, might be a low value feature, random-LinkedIn-man may withdraw funding in the future or be a nightmare to work with… seems like there are more possible reasons he got a no than just “they’re obsessed with an exit.” I’m open to being wrong here, but I see a guy who is mad that a startup declined his feature request.
- actionfromafar 1y agoMy thoughts exactly! That interpolation could be right, or wrong. As a story, it works, because this happens all the time. It's true, in the same way that Atlantis is true. (As a vehicle to put a spotlight on and discuss something.) For this particular instance, this company, who knows what the story is.
- draga79 1y agoI'm the author of the post. While I haven't shared all the details for various reasons, I can confirm the private contact wasn't made via LinkedIn (I also get tons of spam!). The author is aware of who I am. My aim wasn't to ask for anything strange; the software is perfectly okay as it is, and that's great! I was simply trying to ensure it will be supported and that I don't propose a solution to my customers that lacks a long-term plan.
- em-bee 1y agomay i ask which OS you wanted support for?
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- DougN7 1y agoI agree with a lot, but maybe not his specific case. I have a Windows software product. If someone said they wanted it for the Mac, I’d say no without a second thought. Sure, he THINKS he’s going to fund it with his sales, but that is actually very unlikely. I’ll have to hire engineers and QA that know the Mac ecosystem. That new code base will then have to be maintained, supported and updated for many years. He doesn’t sound like he was going to be making a long term guarantee of $200K per year in sales. All the risk and initial expense is on me (or the company in question) and he might follow through and be a customer for a few years when the software is ready. So although the CEO just deleting the message without responding was rude in my opinion, not jumping at someone’s idea doesn’t mean the company is short sighted or doesn’t care.
- BrenBarn 1y agoThis is why almost all businesses should be small, and all should start small. The article mentions an example of a business that seemed to be succeeding small, but this was perceived as failure. That's rather surprising to me, but in some sense it's at least heartening because had the owners been less drunk on kool-aid, they might have continued and had an actually successful business. Too often it's a different situation: it's taken as given that the business cannot succeed on a small scale, and exponential growth isn't just an "exit strategy", it's the only means of survival. In my view the perverse mindset lamented in this article is something that needs to be explicitly counteracted. We need laws and policies that deliberately punish businesses (and individuals) for seeking "exponential growth" rather than moderate, sustainable success.
- nektro 1y agosurprised at the response here given this was posted on the Startup website i agree small profitable companies are good though. sustainability is a virtue