What happens after Yahoo acquires you (2011) | Hacker News Reader

What happens after Yahoo acquires you (2011)

37signals.com

225 pointsph0rque112 comments

Maybe I'm insane, but when someone says "is the cash worth it to these founders?" when they presumably have the ability to do another startup AND they now have enough money to finance 100 startups and 3 generations of their family, I have to say a very strong yes.

The examples discussed in the article are in the 1-2 figures $millions range. The Tumblr deal is two orders of magnitude of that.

The article is perfectly justified in asking that question of those acquisitions - I have no idea how much cash the Flickr founders walked off with in the end (after VC and early employees got their shares), but there's a reasonable scenario in which they would have made it much bigger on their own.

Exactly. You have to look at your current income, expected future income, and what you would do after a sale. Could you catch lightning in a bottle again? How long would that take? Would you be OK going back to being just an employee somewhere? It may sound kind of odd, but a low million(s) isn't nescesarily a lot of money if you intent on retiring in a certain lifestyle.

You're not insane, and I often wonder about how others can criticize someone for accepting such a colossal life-changing offer. If a company were offering me a billion (or $35 million) dollars for my startup provided I delete all user accounts and data and shut down the entire service forever, I'd still take that deal. People will moan about it for days, but a year out they'll have found some other service and I'll be driving around Rome in my r8 dressed as Da Vinci eating as much of the world's best pizza as my stomach can handle, for the rest of my life.

I think this is especially true for a startup that makes little to no money, and where the users pay $0. If the users complain, just offer a refund. :)

I think that depends on what your startup is. If it's some silly app solving a first world problem that will honestly be replaced by something else in a year, I couldn't agree with you more.

On the other hand, if it's something that really matters, that you really care about, and your goal isn't to make money but to somehow change the world, I can't see anyone taking the same perspective.

That being said, I haven't really seen any startups that do have a goal or mindset like this recently (other than perhaps watsi). That's a totally separate discussion, but still makes me sad.

I don't think this is correct. Google, which is world-changing, would have sold out if the prices being offered were higher.

http://www.paulgraham.com/googles.html

Additionally, most large, "world-changing" companies (GE, GM, ExxonMobil, etc.) are public, which is selling out to an extent (usually with good reasons, but it's still selling shares in the company).

Your comment is based on the assumption that it's impossible for a founder to really care about a silly app that solves some first world problem. I think more to the crux of the issue here is what the founder wants to do. If they want to make a buck, then I doubt they'd ever regret the buyout. But if they have any emotional attachement at all, regardless of how silly or world-changing the actual product is... well, then whether or not you want to take the money is a valid question.

I can't say for sure what I'd do in that situation, but I do know that the devil I know (me) is far better than the devil I don't (the company trying to purchase my company). I'd like to think that if I was still interested in the company I'd roll on along on my own. (If I wasn't, however, that's an entirely different story.)

Really good response, and you're totally right. I was applying my own personal bias to the comment, and that wasn't fair.

For what it's worth, go further south to Naples for better pizza... :)

This puts very uncomfortable dynamics between users and startups. Done repetetively it could cause startup fatigue with end users.

Sounds like you're on the 'deferred life' plan. Drop the startup, get a job in Rome, and start enjoying the pizza. You can't have the fancy car, but you'd get bored of that in a month anyways.

But as I alluded to, at that point, when you're bored, start something new with the new capital and connections you have.

A truism of life:

If you drive an R8 around, eat the best pizza you can and dress as Da Vinci, people will call you crazy and lock you up.

If you drive an R8 around, eat the best pizza you can and dress as Da Vinci when you $35,000,000 in the bank, people pleasantly refer to you as eccentric and like having you around.

Eccentrism is by no means the sole privilege of the rich. Emperor Norton was a famously broke, yet grandiose fellow who was beloved throughout the city of San Francisco in the late 1800s.

http://en.wikipedia.org/wiki/Emperor_Norton

You can draw any line you like through a single data point. But you also kind of missed the original reference.

I suppose having my deferment rubbed in my face like that might rankle

> get a job in Rome

and therein lies the problem - you have to have a job. which kinda precludes you from doing the rest of what you want to do (which mostlikely takes up time and money, for not very much profit, if any at all).

As someone who bought his cheapest dream car about 6 years ago, don't blame the car for getting bored. :P

One one hand, you're right. On the other hand, chasing dreams like that is far riskier without substantial cash in the bank.

If it truly is his life dream, then sure - go for it without the money. But a lot of dreams turn out to not be so much fun after a month after all, and the big difference the cash makes is that you don't need to commit. Dreams change? Big deal. Dip into the savings and move/do something entirely different next month.

If you have the money you are free to chase "dreams" that you are a lot less serious about.

This is the same way I feel, or at least how I think I feel right now. I am absolutely passionate about Fogbeam Labs and what we're doing (applying social-networking, machine learning, semantic web, etc. to enterprise software to improve productivity, knowledge sharing, learning, etc.), BUT... if somebody offered me enough money to where I could legitimately walk away with "FU money" it would be damn hard to say no.

I mean, if it was legitimately life-changing money, I could take the buyout, spend a year or two traveling, relaxing, exploring, enjoying the "good life" and looking for a six foot tall redheaded supermodel with a Scottish accent to be my girlfriend... and then, when I got bored with that, I'd have seed money for the next venture already in hand.

OTOH, how do you see your baby? When you pour blood, sweat and tears into something to that point that it's basically your life, how can you just walk away from that with some cash?

So I dunno... which is why I say I think I'd take the buyout, but I can't necessarily swear to it.

Your response feels very real. You can do the things you want to do AND THEN start a company that is more in tune with what you want to do then versus when you started your old startup. Sure you don't have your old startup anymore, but you have something newer and more exciting.

> Sure you don't have your old startup anymore, but you have something newer and more exciting.

or with the newly found money, create a competitor to the startup you just sold! And this time, you don't need to sell out, because you already did on the previous one, and have FU money to truely realize your vision...

That might be possible but a competent buyer will have you agree to a non-compete for a given amount of time (likely a couple years) before a sale is finalized.

knowing that's how you feel, why would I (or anyone) use anything you make?

Down vote all you want, I'd still like a rational answer.

The OP suggested 1 billion rational answers. Or 35 million. Or one of those values divided by whatever amount of money it'd take for you to live comfortably for the rest of your life.

It's easy to condemn people for being realistic about their reaction to such a sum of money. Perhaps your scruples would prevent you from taking a massive payment to leave behind something you've created, but I think it's more likely you're trying to take a moral high ground that's not grounded in reality.

It is a rational decision by the founder, however grandparent asked from a users perspective. Not only do you have to factor in switching costs but also likely hood of needing to switch.

I think you're missing the question. A billion or multimillion exit for a site operator is not a reason to use that site, which is what GP was asking about.

Not condemning anyone for wanting to sell, simply asking why would I choose to use any product this guy makes when he tells me he'd be willing to "delete all user accounts and data and shut down the entire service forever" if that were a condition of sale. How is that in my best interests as a product user?

Lets make it a real life situation: delete all the accounts (in 14 days) and shut down the site forever. Plenty of companies do this.

Do you still feel the same way?

Human nature is weird in a way, we feel better about someone telling us they will note sell a service, even if untrue, than someone coming out and being honest about it.

Maybe what he was selling would be useful to you? If I want to make money, and I want to do it by selling a product I thought made a positive difference to people, would it matter if I also built the company for an acquisition exit as well?

Well in both cases you have to look at the relative options. I would assume at this point the Tumblr founders have taken some money off the table (though perhaps not) or at least could in another big round of financing. Money has diminishing marginal utility. A few hundred million is a lot of money, but if you've already taken 10 or 20 or 50 off the table, is it life-changing anymore?

Tumblr is the sort of success that could probably not be replicated. How many people have founded more than one company that does that well?

So I think there's a valid argument that the extra money is not worth the risk of no longer getting to work on such a huge project. I'm sure the founders thought about that. I certainly couldn't criticize them for either decision.

Pretty much the same as, "everyone has their price," right? Not everyone does, though, and I'd even venture that 37S has had purchase/buyout/merger interest along the way.

Though following that logic, these companies could have just not offered the right price. Assuming that people are unwilling to sell at any price because they haven't sold yet is a bit of a fallacy.

What Would Elon (Musk) Do? That's your answer to the options that having large amounts of cash provides. He can literally go to the Moon, or Mars, seeded by the cash he got from eBay and Zip2

Perhaps the point is that it shouldn't be such an easy decision for you, and that if it is you're probably not as passionate about your startup as you should be. To me, it sounds like you're passionate about money. That doesn't make you insane, but it might make your startup less likely to succeed.

That's were we can see some or most entrepreneurs are not like real artists. (Not saying they should be...)

Take the same choice, but apply it to a musician: I am Universal, I propose to give you a lot of money but I buy your past and future music, and I buy your band name. I'll tell you a lot of nice things: you will be my prefered musician, I'll promote your work everywhere, you'll do concerts, and all that.

But in fact I'll just promote another musician instead, and I bought you only to let more room for this other one.

Don't laugh, that's what happens in the music industry. I have been a sound engineer in a previous life, and saw it with my eyes.

Then, if you are a real musician, you would be nauseated and will regret taking the money, because what you really care about is making music and having people listening to your work.

It is not a dissimilar as one could think. If a software is considered by its maker as a work of love, art and craftmanship, then the said maker should consider it twice before selling it to a big company: it is likely, very likely indeed, that this piece of work will just be diluted, butchered, or simply forgotten in a dark corner, without you being able to do anything about it.

The money is power, it is the power of those who have the most of it, and I think it is very naive to think big corporations can be easily fooled into some transaction that is not in their own interest.

I do not say that Tumblr or whatnot should be understood as works that should be protected against the big fish, but other projects are: If Google bought Firefox, if Linus sold Linux or git to MicroSoft, if Ubuntu became a subdivision of Amazon, then I think there would more at stakes than only money, not matter how high the pile.

It's not really useful to look at a bunch of (relatively) small acquisitions made by a Yahoo run by very different people almost a decade ago and try to extrapolate anything from it today. I don't think anyone would disagree Yahoo has been horribly mismanaged over the years. That at least may not be the case now.

More useful is to look at large, more recent purchases like Alibaba and Right Media which are doing quite well. A company is far more likely to let a $35m acquisition slip down the drain than a $1b one.

I agree, but the writer wasn't extrapolating to today. The article is more than 2 years old. Bartz was still running Yahoo!

True, but whoever posted it to Hacker News right after it was announced Yahoo is buying Tumblr certainly was.

Right - my thought, too. Especially coming from one of those companies that was acquired after the article was published. It hasn't all been roses, but we haven't been left to wither, either.

Writer wasn't, but was the submitter?

Even still, there had been numerous CEO changes at that point. Koogle, Semel, Yang, Bartz. And even with the same CEO, there's a difference between a $30m acquisition and a $1b.

Someone buys my house, but asks me to live in it and care for it. I then live it in like I've lived for years. One day they show up and chop down the tree I planted with my child when they were young, and change the color of the paint.

"What are you doing?! Do you know how much passion I've put into this property?"

"Who cares? It doesn't belong to you anymore, and you've got a pretty decent chunk of change in the bank."

Beautiful analogy.

That's a poor analogy. The goal of a business is ultimately to make money. The goal of a family home is completely different.

You sell your business because you believe the exit represents some version of reaching your goal running the business (if your goal is to run the business, just don't sell it). I don't see any analogous reason to sell your family home (you might be forced to for financial reasons, but that's not why either of the mentioned start-ups sold, nor is such a sale likely to leave you with much money in the bank).

The goal of a business is to make money. However, individuals have their own goals. Sometimes a cofounder's goal is simply to create value by making a product or service that people enjoy.

The home was bought, but the occupants still want to see the home flourish.

The goal of a business is no more to make money, than breathing is the goal of a human.

Now that's an interesting analogy.

The goal of a business is ultimately to make money.

Meh... that seems to be the "received wisdom" around here, but I think that is either flat out wrong, or - at least - overly pedantic. A business needs to make money to stay in business, but I see no reason a business can't have other goals, where "making money" is simply a means to an end.

I don't intend to build in order to have clients; I intend to have clients in order to build. -- Howard Roark

In a company which is still owned by the founders, the "goal of the company" is implicitly the same as the goal of the founder(s) and it certainly may be more than just "making money". Take my startup... we have a very specific mission statement[1] that isn't just something we cooked up because "you're supposed to have one". It represents the mission and goals of the company, beyond simply making money. Now we obviously have to make money at some point or shut down. But we can certainly make decisions that prioritize fulfilling those items from our mission statement, in favour of optimizing profits down to the last cent.

[1]: http://www.fogbeam.com/mission_values.html

Well, I figured that this place more than most accept the definition of "making money" as "creating value, and capturing some of that value".

Fair enough. I might argue that a company can still have broader goals than just that, but I certainly admit that a company must make money at some point and to some degree! And clearly things do change somewhat if you're talking about a company with outside investors or a public company.

In our case, we are privately held by just the founders, so we only have to focus on "make money" to the extent that that supports out other goals. But we don't have to be the stereotypically ruthless, greedy, evil capitalist pigs who ruthlessly chase every cent they can grab, even it it means stealing from babies and old people, or whatever. :-)

The path to that end has many solutions, and the methods to obtain that value are overdetermined. Long term or short term outlooks and nuances between. Cost-benefit analysis paired with changing technology and political landscapes, along with different definitions of what value is and how to go about creating it.

The goal of a business is ultimately to make money.

The purpose of business is to create and keep a customer. - Peter Drucker

A customer is defined as a person who pays a business for goods and services.

Presumably in that scenario you would have a contract specifying these things. So, in that instant you've either got what you signed up for, to have a breach of contract on your hands.

Even more so with selling businesses to businesses. I am assuming they would at least consult a lawyer. If not have the whole deal directed by a team of lawyers.

You'd have to be mad to take an offer like that. On the other hand, you'd have to be mad not to take an offer for way more than the house is worth if you aren't actually very attached to it.

I don't understand how entrepreneurs expect to sell their business and reap the rewards while not expecting the acquirer to make modifications to their own benefit.

At the risk of getting slammed by everyone, the evidence goes against starting a company, yet people still do it. The evidence goes against selling to a big co, yet people still do it to pay back investors and for the founders to release some cash. I know 37 Signals advocate not strapping the VC bomb to your back but once you have, your options are limited and if Yahoo offer the best deal I guess you take it...

Hacker News founder Paul Graham (pg) wrote in August 2010 about his experiences after his company Viaweb was acquired by Yahoo in 1998.

http://paulgraham.com/yahoo.html

He makes an explicit comparison between Yahoo and Google in his essay. Anyone looking at the strategy of large companies acquiring smaller companies might want to look at pg's essay as one more set of data points about what could happen after an acquisition.

Note this little nugget in the footnotes:

[2] In theory you could beat the death spiral by buying good programmers instead of hiring them. You can get programmers who would never have come to you as employees by buying their startups. But so far the only companies smart enough to do this are companies smart enough not to need to.

I think often times large companies purchase smaller ones because they cannot come up with new ideas on their own. Not that they are stupid but that the bureaucracy is too heavy for an idea to germinate into something big.

That same layer of bureaucracy and deadweight that keeps ideas from forming will also crush a new acquisition. The people at the large company are good at maintaining; not growing or inventing. Their nature fights new ideas and new methods.

Definitely. The large company I work for talks and talks about innovation, but the truth is very little actually happens. The big flexibility that comes with a new company is what creates disruptive technologies.

It's worth remembering that large companies don't always ruin their purchases. There will inevitably be a painful culture merging process after an acquisition (normally at the expense of the purchased company), but sometimes that process doesn't kill the purchased company. The resources and experience that a large company have can often take an almost-product the extra lengths required to be marketed.

Though I am as sad as anyone that Yahoo! effectively killed several good companies (Flickr and Delicious top my list of unfortunate casualties), I'd like to point out a couple of things.

First of all, when Yahoo, Google or any large company acquires a product, they don't necessarily do it for the product, but possibly for other technology. The goals of the acquiring company, the founders and the users are not necessarily aligned. This doesn’t mean the acquisition is bad for the company or founder, just bad for the users of the product or possibly for the founders if it goes in a direction he or she didn't like.

Second of all, founders leave for all sorts of reasons. It seems like some of these founders were frustrated by Yahoo!, but I have a feeling that founders in general would be frustrated by working for anyone in general. There's a personality that starts companies and there’s a personality that works for them.

And thirdly, Yahoo did not force any of these companies to sell to Yahoo. Yahoo made an offer and they accepted.

Flickr killed?

Flickr is dead? Not quite. There's a Flickr press event in NYC happening later this afternoon (5 EST), so expect some announcements. Live stream @ http://screen.yahoo.com/yahoo-event-155000760.html

Is there actually any hard evidence that the event has any relation to Flickr?

Flickr was essentially killed. Yahoo is now trying to bring it back to life. Based on a completely unscientific survey of my friends it seems to be working.

(2011) should be added to the title.

I was not aware of the "Exit Interview"[1] series of posts and, so far, there has been some good content.

[1] http://www.google.com/search?q=%22Exit+Interview%22&site...

Of that list, I'd say the Alibaba + RightMedia acquisitions were worth it. They're huge portions of the remaining value of the company.

However, in general I agree with the post: Yahoo's corporate development group and its management teams over the years have spent billions of dollars on acquisitions that have largely not panned out. That this resulted in founder defections and shuttered products is not entirely surprising.

If you are your business, the likelihood that your business will be lost in a conglomerate is relevant. On the other hand, what happens to you as a person after Yahoo acquires your business is an entirely different matter.

Those mentioned in the article have had a life after Yahoo acquisition. A little Googling provides anecdotal evidence that getting purchased had a significant long term impact. Likewise, passing through a Yahoo buyout helped create the arc of Paul Graham's career.

And it's worth pointing out, Paul Graham's product is still around and/because it made a lot of money for Yahoo over the years.

http://store.yahoo.com

Unlike Fliker or Tumblr, the monetization strategy was obvious.

This article is two years old, sure. But now Mayer, who I respect a lot, is at the helm. So what's happened to these older, still-viable acquisitions? Virtually nothing. A new iOS app here and there. Flickr and Delicious are wasting away.

I can't help but think that Yahoo's destined-to-fail social network is in the wings. Instead of a @ or + name, it'll be a ! name. Marissa's there, but is there any real progress happening?

Maybe they'll call it "Bang!"

Well, if they want to stay with the ! theme how about something along the lines of !AnotherStagnantProductFailure

Yahoo sold delicious 2 years ago: http://techcrunch.com/2011/04/27/yahoo-sells-delicious-to-yo...

And killed their social network about 4 years ago: http://en.wikipedia.org/wiki/Yahoo!_360°

And they tried a Facebook partnership that kinda went sour after Yahoo attacked them with patents last year: http://techcrunch.com/2012/07/06/yahoo-facebook-patent/

> after Yahoo attacked them with patents last year

While that statement is true, worth noting that the Y! CEO who did attack Facebook was fired shortly after and one of Marissa's first moves was to make amends with Facebook.

You take the money and create a fantastically successful startup/incubation/seed funding program? Sounds good to me.

And yet, you can't always swap a startup built with one's own hands with a bunch of others, just as one's child is not tradable for a bunch of other kids. Some founders might view their startups as pure investments, but I'd wager that more often than not, they view it as their child.

Startups are businesses intended to make money. Kids are kids. While you may feel an attachment to the former, there may come a time when selling is the best strategy. With kids, that's generally frowned upon.

But this time its Marissa Mayer and i expect some good results from her. Finger Crossed X.

What happened to Informix, BEA, SUN, ...? There is nothing special in the Yahoo acquisitions. Large companies buy marked-share, mind-share, users. The actual product or service often is of little interest to them.

I feel as though some of these acquisitions represent not the purchase of something worth $x to Yahoo but rather the imperialism of traffic that costs $x to them, which are really the same thing but are rather different when viewed through the lens of shutdowns and stagnation. Yahoo is a content company, and content elsewhere means traffic elsewhere which is a loss for them. Facebook's purchase of Instagram, even if Instagram is shut down and loses all of its users is still worth the money if viewed through the lens of owning the traffic regardless.

"And customers are left holding the bag."

Ok, let's dial down the drama here. I'm trying to understand the point, other than Yahoo has historically been a poor acquiring company. Shocker!

Let's see...Delicious, MyBlogLog, Flickr, Upcoming. How many of these services had customers as opposed to users?

I'm pretty sure we can substitute names of large tech companies and their acquisition lists here and have the article read the same way.

It seems fairly clear that Yahoo needs to not mishandle Tumblr in this way, and that Mayer is totally aware that this is a large factor on which she will be judged.

Maybe it's naive to think that a new CEO can cut through cultural and corporate cruft well enough to make this happen, but I think Mayer commands respect in a manner radically different to all but a few CEOs - especially among developers.

Please add (2011) to the title. It's really important to understand this wasn't written to contextualize this ac.

This article misses the big point that there is a new CEO who may make different decisions regarding how to integrate a new company. Having a new CEO is enough to change the direction of a company (look at Apple), whether for good or bad.

Of course, Mayer has yet to prove what difference she can make.

As of today, the first point in this post is already invalid.

If Marissa Mayer keeps going like how she is, I suspect that this post will be fully invalid in 5 years.

We would very well be witnessing the 2nd greatest tech turnaround after Apple - with Mayer.

can you please quote the 'first point in this post'?

The point of the first heading " Flickr was acquired by Yahoo in March ‘05 for $35M" - was to show that Flickr has been a failure ever since Yahoo bought it.

Given the recent reboot and redesign, I doubt that will continue to be the case - hence my statement.

If you define text color, you should define background color as well. Otherwise you are making unfounded assumptions about the user's default background color.

Of course I can always override the stylesheet.

The following list is even more fascinating http://en.wikipedia.org/wiki/List_of_acquisitions_by_AOL

I think the redesign of flickr unveiled today makes this argument obsolete. It was true under the old Yahoo! ... this one is far more aggressive.

Are there any success stories - when a service is acquired and then developed and grown properly and come out in the black?

I can think of only blogger.

Reddit has been pretty un-fucked-around-with by Conde Nast's parent company since its acquisition. (It's been split off from CN as a separate business entity, but even during CN's stewardship, the messing around was very minimal).

It's debatable exactly how much money Reddit makes, and whether it could be considered "in the black." But it's a success story in as much as the site's userbase and traffic have grown, and the core service has not been tampered with.

It's not profitable, at least it wasn't six months ago, and very likely is not today.

http://www.reddit.com/r/blog/comments/12v8y3/now_is_the_time...

Youtube

It could be worse. You might be acquired by EMC!

You don't know pain and dissatisfaction until this happens to you.

Mayer is a product person, so it will be interesting to see how things work out.

Anyone wanna speculate on what Yahoo's going to do with Tumblr?

Finally, an INTERESTING article about the Yahoo/Tumblr thing.

Except this isn't about Yahoo/Tumblr... this was written years ago. It might still be relevant, but given the new leadership at Yahoo, it might not apply anymore. At least, one can hope.

Well, why was it posted to HN in the first place? Because of the Yahoo/Tumblr sale. That makes it relevant.

Its a relevant story, but the conclusions may not be relevant to the Tumblr purchase. Why? Because the context that was written in has shifted. Yahoo is a different place with different management now. A significant amount of time has passed, so things might be different now.

The only question is: is Yahoo different enough to not screw this up? And that's not something that can be answered any time soon.

Given how they've treated things so far, it seems like they've learned some lessons from the (ahem) 'successes' of their prior acquisitions.

In 2011, that was a different Yahoo.. Without Marissa as CEO

different time, different management via ex-googler.

Agreed, it would be more instructive to look to the acquisitions that shaped Marissa and board members like Max Levchin, Maynard Webb (Yahoo), and Roelof Botha (Tumblr)- YouTube, PayPal, perhaps Instagram. Surely top of mind and a big reason why Tumblr is staying independent.

There is also a story here about Yahoo's loss.

Yahoo...where the internet goes to die

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