5 ms·

founders would ultimately benefit from “a world in which you have six or seven or eight potential suitors” rather than “just one or two.” Real talk Lina

by bix6 1y ago

timr 1y ago
yep. So perhaps don’t block every potential transaction on flimsy pretense? Icing the transaction market seems like a great way to scare off potential competing acquirers in the name of social engineering. I don’t know. All I know is that Lina is out of power, and suddenly we see an upswing in M&A. Coincidence, I’m sure.
- tptacek 1y ago
  I'm not a Khan fan, like, at all, but by the time you're at the point where the FTC is getting involved in your M&A, you've crossed the threshold of success; all the signals to future startups about your path being promising have been sent.
  - Spartan-S63 1y ago
    In fact, if future competition is contingent on successful M&A activity, that’s a sign of such deep organizational rot that you either have to radically transform management or ride the company down. Not everything needs to last and companies that can’t radically transform their management culture to enable innovation and competition deserve to wane until they’re in a steady-state or they go under to allow for a new competitor to rise.
  - elefanten 1y ago
    I agree with your general point, but Khan was excessively trigger happy in a way that highlights exceptions to your observation. E.g. blocking Meta acquisition of Within was nonsense that did nothing to validate the concept of VR fitness as a promising category (anytime soon) Edit: Within, not Withings
    - miguelazo 1y ago
      Just because VR fitness was a flop hardly proves your point. Most people expected that to happen.
  - timr 1y ago
    I disagree. A lot of smaller acquisitions went away during the Khan reign, and from what I was hearing it wasn’t coincidental. Basically the random and aggressive nature of it was having a chilling effect on all M&A. Why would you go thorough the hassle of a small acquisition (as a buyer) if you knew there was a even a 10% chance that the FTC was going to take an interest?
    - snowwrestler 1y ago
      Scrutiny scaled with the size of the buyer. When a top-five tech company is the buyer, it doesn’t really matter how small the purchased company is. Many of the most concerning acquisitions were small… Instagram had 13 employees when Facebook bought it. When a huge company can easily acquire basically any small promising competitor, that is exactly what Khan (and many others of both parties) consider a problem. Chilling those sorts of deals was indeed the point. But if the buyer was, say, the 312th largest tech company in the U.S., the chance of FTC intervention was essentially zero. If buyers in mid-size range were pointing at Khan to explain an M&A slow-down, I personally would not take them at their word.
      - timr 1y ago
        > Scrutiny scaled with the size of the buyer. Maybe, but it doesn't take a lot of scrutiny to scare the crap out of you if you're a major player in some niche industry with a few hundred million in ARR. Which is most public companies. That's the perverse thing about this stuff: the biggest players are probably the least sensitive to the regulatory burden.
        root_axis 1y ago
        > it doesn't take a lot of scrutiny to scare the crap out of you if you're a major player in some niche industry This "scare" characterization isn't how anybody thinks in reality. Everything is a cost benefit analysis, the risk that you'll come under FTC scrutiny is going to be a factor weighed against the potential gains of the acquisition. Companies understand their own place in the market relative to their size and dominance, the overwhelming majority of companies know they basically have nothing to fear from the FTC ever.
  - benreesman 1y ago
    Figma's market capitalization as of the close on Friday is 59 billion and change. Adobe offered 20 billion. Because the shares were sold to the public and now trade at three times what the absolute ceiling on their value would have been, and because everything from early options to later stage RSU equity comp structures will now convert at the full market valuation, the preference ladder and ratchets and all the other ways you can get Windsurf'd as an early employee (sometimes even a founder!) don't kick in, so the rank-and-file equity holder is rich now too. Future founders now have another well-heeled public suitor. If you even remotely believe in Hacker News style "tech startups make people rich and this is good" stuff, then this is a grand-slam home run win by any measure. Maybe time to re-evaluate what you think of Lina Khan's policy agenda in light of data on the outcomes? It's of course possible there is some other data point you have in mind where it went poorly and you keep your opinion. But if that opinion was of the bland "regulation is bad for tech startup people trying to get rich" variety, seems maybe time for a re-think?
- stackskipton 1y ago
  Problem is, by the time she got into power, everyone had consolidated so icing the transaction market was pretty much only outcome. Lina Khan was entering a market that was deeply flawed thanks to decades of bad policy.
  - timr 1y ago
    > Problem is, by the time she got into power, everyone had consolidated so icing the transaction market was pretty much only outcome. That's the talking point, but it doesn't survive even 30 seconds of thought. Yes, the biggest tech companies are very big -- debatably too big! -- but there are easily hundreds of smaller cap companies that you probably haven't heard of who are big enough to acquire startups. If anything those companies are the bulk of the M&A market, and the FTCs actions shut it all down [1]. The problem with the Khan view of the world (IMO) is that it was so fixated on the killing the whales that it didn't realize it was killing the other fish. [1] By way of explanation: just by the nature of software economics, if you're big enough to make acquisitions in some niche industry, you probably own that industry (or are at least a duopoly player) and are therefore concerned that the FTC will target you.
    - stackskipton 1y ago
      What is your argument? That smaller roll ups could not happen and that was bad? Alot of smaller M&A in tech space was bad, it just was not Figma buying Adobe bad. I think startups exiting via M&A is part of the problem. It creates perverse incentives which is basically fuck profits, squash all competition while lighting money on fire and THEN when you are so embedded, sell the company so original investors get their money back and new owners screw over everyone knowing there tunneling out of your really thick walls is going to be extremely difficult. In a model where company had to turn a profit and investors would slowly make their money back, it would probably be net win.
      - timr 1y ago
        > Alot of smaller M&A in tech space was bad, it just was not Figma buying Adobe bad. Yeah, you're gonna have to defend that assertion. > I think startups exiting via M&A is part of the problem. It creates perverse incentives which is basically fuck profits, squash all competition while lighting money on fire and THEN when you are so embedded, screw over everyone knowing there tunneling out of your really thick walls is going to be extremely difficult. I hate to burst your bubble, but the chances of a small startup getting acquired while "lighting money on fire" is basically zero. You have a particularly narrow-focused lens on startups that is driven by a few high profile stories. When you're on that sort of YOLO rocket ship, you're not looking for acquisition -- if it happens, something went wrong. So yes, part of my argument is that smaller roll ups could not happen, and that market looks nothing like what you're describing.
- digitaltrees 1y ago
  Her point is that m&a isn’t the best thing for the economy or founders. Unchecked m&a creates cannibal capitalism where one mega zombie firm scoops up all competition.
  - refurb 1y ago
    Yet there are plenty of examples of monopoly or near monopoly businesses getting their butts handed to them by startups. Yahoo, BlackBerry, Kodak, Nokia, Sears. So it’s clearly not “once you have a monopoly it’s game over for competition”. Markets aren’t stagnant, and as they change it provides opportunities for new competitors to do that “new thing” better than the monopolies.
    - oarla 1y ago
      And how many businesses do you estimate have been killed or eliminated because of unchecked m&a? Expanding the data set to include non-tech industries indicates strongly that it's not always the case that a big monopoly will eventually fail. Healthcare for example is filled with instances of bigger companies acquiring smaller ones and killing the competition to their product, a quick Google search will show you that.
      - refurb 1y ago
        Can you give me a specific example? Last I checked no insurer has more than 30% market share.
    - digitaltrees 1y ago
      With the exception of yahoo (which is still a large company I should note), None of those examples were killed by a start up competitor. They were killed by foundational technology shifts that were orthogonal to the industry. Yahoo, is the closest example with google, but kind of proves Kahns point in that a competitor they tried to buy—-google—- refused to be acquired and then innovated them out of the market. Imagine how much worse the world would have been if yahoo bought google and mothballed it. Blackberry and Kodak were both put out of business by apple which was a computer and software company not a phone or camera company. Sears was bought buy Edward Lampert, an private equity bro that fancied himself the next Warren Buffet but in the end gutted it by selling it for parts to keep the cash for himself
- Thorrez 1y ago
  Lina claims she let the vast majority of deals through. I wonder what the data shows. >While her aggressive stance led to intense criticism from corners of the tech industry, she defended her approach by saying that only a tiny percentage of deals received “a second look”
  - pclmulqdq 1y ago
    Even if "a tiny percentage" is 1%, that's a huge amount more than a normal FTC.
alephnerd 1y ago
Except the majority of the Figma IPO was captured by banks due to it's severe pop. So while everyone made a lot of money, the overwhelming majority went to the underwriters [0]. The founding team at Figma would have gotten a similar amount much sooner if the acquisition was let thru OR if the underwriters didn't screw them over by underpricing at $33. [0] - https://pitchbook.com/news/articles/figma-ipo-pop-spotlight-underwriter-pricing https://pitchbook.com/news/articles/figma-ipo-pop-spotlight-...
- el_nahual 1y ago
  The IPO "pop" is not captured by banks: it's captured by the banks customers that pre-buy at the IPO price. Basically, before an IPO, the underwriters take the company on a "roadshow" in which they pitch the IPO to potential buyers. There's a hierarchy of these: the best are very large buyers that place large orders and trade seldom. Pensions, sovereign wealth funds, etc. Those buyers then make offers ("I'll buy 50MM at $100"), which the bank uses to set the IPO price. The bank then gives them an allocation. If you're a high (10MM+) net worth individual that banks with one of the underwriters, you can often get an allocation in an IPO. The richer you are, the more of an allocation you can get. When an IPO pops, it's these people that get the benefit. The benefit for the company is that the stock is owned by prime people the bank selected: you crucially _don't_ want to just sell to the highest bidder if they are going to dump the stock immediately after the pop (or that's the theory, at least). They have stable shareholders with a vision aligned with management. The benefit to the bank is that they get to reward their customers with access to profitable trades--but the bank itself does not profit.
  - SilverElfin 1y ago
    Seems undemocratic. Everyday folks can’t buy even though they would want to
    - conradev 1y ago
      It’s just a bulk discount: everyday folks simply can’t be relied upon to buy hundreds of millions of dollars the stuff and that’s what the company is selling. Little fish can buy in, but only if the big fish provide liquidity in the first place! In other words: someone needs to be paid to sell it and big buyers need to be incentivized to buy it. Ultimately the IPO price is driven by supply and demand with a limited supply: price will go down (a bit) when the lockout period ends and more supply comes online.
vasco 1y ago
Or in this case, none?
- nl 1y ago
  The point is that Figma is now another one of these suitors.

founders would ultimately benefit from “a world in which you have six or seven or eight potential suitors” rather than “just one or two.” Real talk Lina

by bix6 1y ago

founders would ultimately benefit from “a world in which you have six or seven or eight potential suitors” rather than “just one or two.” Real talk Lina

timr 1y ago

yep. So perhaps don’t block every potential transaction on flimsy pretense? Icing the transaction market seems like a great way to scare off potential competing acquirers in the name of social engineering. I don’t know. All I know is that Lina is out of power, and suddenly we see an upswing in M&A. Coincidence, I’m sure.

tptacek 1y ago
I'm not a Khan fan, like, at all, but by the time you're at the point where the FTC is getting involved in your M&A, you've crossed the threshold of success; all the signals to future startups about your path being promising have been sent.
- Spartan-S63 1y ago
  In fact, if future competition is contingent on successful M&A activity, that’s a sign of such deep organizational rot that you either have to radically transform management or ride the company down. Not everything needs to last and companies that can’t radically transform their management culture to enable innovation and competition deserve to wane until they’re in a steady-state or they go under to allow for a new competitor to rise.
- elefanten 1y ago
  I agree with your general point, but Khan was excessively trigger happy in a way that highlights exceptions to your observation. E.g. blocking Meta acquisition of Within was nonsense that did nothing to validate the concept of VR fitness as a promising category (anytime soon) Edit: Within, not Withings
  - miguelazo 1y ago
    Just because VR fitness was a flop hardly proves your point. Most people expected that to happen.
- timr 1y ago
  I disagree. A lot of smaller acquisitions went away during the Khan reign, and from what I was hearing it wasn’t coincidental. Basically the random and aggressive nature of it was having a chilling effect on all M&A. Why would you go thorough the hassle of a small acquisition (as a buyer) if you knew there was a even a 10% chance that the FTC was going to take an interest?
  - snowwrestler 1y ago
    Scrutiny scaled with the size of the buyer. When a top-five tech company is the buyer, it doesn’t really matter how small the purchased company is. Many of the most concerning acquisitions were small… Instagram had 13 employees when Facebook bought it. When a huge company can easily acquire basically any small promising competitor, that is exactly what Khan (and many others of both parties) consider a problem. Chilling those sorts of deals was indeed the point. But if the buyer was, say, the 312th largest tech company in the U.S., the chance of FTC intervention was essentially zero. If buyers in mid-size range were pointing at Khan to explain an M&A slow-down, I personally would not take them at their word.
    - timr 1y ago
      > Scrutiny scaled with the size of the buyer. Maybe, but it doesn't take a lot of scrutiny to scare the crap out of you if you're a major player in some niche industry with a few hundred million in ARR. Which is most public companies. That's the perverse thing about this stuff: the biggest players are probably the least sensitive to the regulatory burden.
      - root_axis 1y ago
        > it doesn't take a lot of scrutiny to scare the crap out of you if you're a major player in some niche industry This "scare" characterization isn't how anybody thinks in reality. Everything is a cost benefit analysis, the risk that you'll come under FTC scrutiny is going to be a factor weighed against the potential gains of the acquisition. Companies understand their own place in the market relative to their size and dominance, the overwhelming majority of companies know they basically have nothing to fear from the FTC ever.
- benreesman 1y ago
  Figma's market capitalization as of the close on Friday is 59 billion and change. Adobe offered 20 billion. Because the shares were sold to the public and now trade at three times what the absolute ceiling on their value would have been, and because everything from early options to later stage RSU equity comp structures will now convert at the full market valuation, the preference ladder and ratchets and all the other ways you can get Windsurf'd as an early employee (sometimes even a founder!) don't kick in, so the rank-and-file equity holder is rich now too. Future founders now have another well-heeled public suitor. If you even remotely believe in Hacker News style "tech startups make people rich and this is good" stuff, then this is a grand-slam home run win by any measure. Maybe time to re-evaluate what you think of Lina Khan's policy agenda in light of data on the outcomes? It's of course possible there is some other data point you have in mind where it went poorly and you keep your opinion. But if that opinion was of the bland "regulation is bad for tech startup people trying to get rich" variety, seems maybe time for a re-think?
stackskipton 1y ago
Problem is, by the time she got into power, everyone had consolidated so icing the transaction market was pretty much only outcome. Lina Khan was entering a market that was deeply flawed thanks to decades of bad policy.
- timr 1y ago
  > Problem is, by the time she got into power, everyone had consolidated so icing the transaction market was pretty much only outcome. That's the talking point, but it doesn't survive even 30 seconds of thought. Yes, the biggest tech companies are very big -- debatably too big! -- but there are easily hundreds of smaller cap companies that you probably haven't heard of who are big enough to acquire startups. If anything those companies are the bulk of the M&A market, and the FTCs actions shut it all down [1]. The problem with the Khan view of the world (IMO) is that it was so fixated on the killing the whales that it didn't realize it was killing the other fish. [1] By way of explanation: just by the nature of software economics, if you're big enough to make acquisitions in some niche industry, you probably own that industry (or are at least a duopoly player) and are therefore concerned that the FTC will target you.
  - stackskipton 1y ago
    What is your argument? That smaller roll ups could not happen and that was bad? Alot of smaller M&A in tech space was bad, it just was not Figma buying Adobe bad. I think startups exiting via M&A is part of the problem. It creates perverse incentives which is basically fuck profits, squash all competition while lighting money on fire and THEN when you are so embedded, sell the company so original investors get their money back and new owners screw over everyone knowing there tunneling out of your really thick walls is going to be extremely difficult. In a model where company had to turn a profit and investors would slowly make their money back, it would probably be net win.
    - timr 1y ago
      > Alot of smaller M&A in tech space was bad, it just was not Figma buying Adobe bad. Yeah, you're gonna have to defend that assertion. > I think startups exiting via M&A is part of the problem. It creates perverse incentives which is basically fuck profits, squash all competition while lighting money on fire and THEN when you are so embedded, screw over everyone knowing there tunneling out of your really thick walls is going to be extremely difficult. I hate to burst your bubble, but the chances of a small startup getting acquired while "lighting money on fire" is basically zero. You have a particularly narrow-focused lens on startups that is driven by a few high profile stories. When you're on that sort of YOLO rocket ship, you're not looking for acquisition -- if it happens, something went wrong. So yes, part of my argument is that smaller roll ups could not happen, and that market looks nothing like what you're describing.
digitaltrees 1y ago
Her point is that m&a isn’t the best thing for the economy or founders. Unchecked m&a creates cannibal capitalism where one mega zombie firm scoops up all competition.
- refurb 1y ago
  Yet there are plenty of examples of monopoly or near monopoly businesses getting their butts handed to them by startups. Yahoo, BlackBerry, Kodak, Nokia, Sears. So it’s clearly not “once you have a monopoly it’s game over for competition”. Markets aren’t stagnant, and as they change it provides opportunities for new competitors to do that “new thing” better than the monopolies.
  - oarla 1y ago
    And how many businesses do you estimate have been killed or eliminated because of unchecked m&a? Expanding the data set to include non-tech industries indicates strongly that it's not always the case that a big monopoly will eventually fail. Healthcare for example is filled with instances of bigger companies acquiring smaller ones and killing the competition to their product, a quick Google search will show you that.
    - refurb 1y ago
      Can you give me a specific example? Last I checked no insurer has more than 30% market share.
  - digitaltrees 1y ago
    With the exception of yahoo (which is still a large company I should note), None of those examples were killed by a start up competitor. They were killed by foundational technology shifts that were orthogonal to the industry. Yahoo, is the closest example with google, but kind of proves Kahns point in that a competitor they tried to buy—-google—- refused to be acquired and then innovated them out of the market. Imagine how much worse the world would have been if yahoo bought google and mothballed it. Blackberry and Kodak were both put out of business by apple which was a computer and software company not a phone or camera company. Sears was bought buy Edward Lampert, an private equity bro that fancied himself the next Warren Buffet but in the end gutted it by selling it for parts to keep the cash for himself
Thorrez 1y ago
Lina claims she let the vast majority of deals through. I wonder what the data shows. >While her aggressive stance led to intense criticism from corners of the tech industry, she defended her approach by saying that only a tiny percentage of deals received “a second look”
- pclmulqdq 1y ago
  Even if "a tiny percentage" is 1%, that's a huge amount more than a normal FTC.

alephnerd 1y ago

Except the majority of the Figma IPO was captured by banks due to it's severe pop. So while everyone made a lot of money, the overwhelming majority went to the underwriters [0]. The founding team at Figma would have gotten a similar amount much sooner if the acquisition was let thru OR if the underwriters didn't screw them over by underpricing at $33. [0] - https://pitchbook.com/news/articles/figma-ipo-pop-spotlight-underwriter-pricing https://pitchbook.com/news/articles/figma-ipo-pop-spotlight-...

el_nahual 1y ago
The IPO "pop" is not captured by banks: it's captured by the banks customers that pre-buy at the IPO price. Basically, before an IPO, the underwriters take the company on a "roadshow" in which they pitch the IPO to potential buyers. There's a hierarchy of these: the best are very large buyers that place large orders and trade seldom. Pensions, sovereign wealth funds, etc. Those buyers then make offers ("I'll buy 50MM at $100"), which the bank uses to set the IPO price. The bank then gives them an allocation. If you're a high (10MM+) net worth individual that banks with one of the underwriters, you can often get an allocation in an IPO. The richer you are, the more of an allocation you can get. When an IPO pops, it's these people that get the benefit. The benefit for the company is that the stock is owned by prime people the bank selected: you crucially _don't_ want to just sell to the highest bidder if they are going to dump the stock immediately after the pop (or that's the theory, at least). They have stable shareholders with a vision aligned with management. The benefit to the bank is that they get to reward their customers with access to profitable trades--but the bank itself does not profit.
- SilverElfin 1y ago
  Seems undemocratic. Everyday folks can’t buy even though they would want to
  - conradev 1y ago
    It’s just a bulk discount: everyday folks simply can’t be relied upon to buy hundreds of millions of dollars the stuff and that’s what the company is selling. Little fish can buy in, but only if the big fish provide liquidity in the first place! In other words: someone needs to be paid to sell it and big buyers need to be incentivized to buy it. Ultimately the IPO price is driven by supply and demand with a limited supply: price will go down (a bit) when the lockout period ends and more supply comes online.

vasco 1y ago

Or in this case, none?

nl 1y ago
The point is that Figma is now another one of these suitors.