Why I Sold My Startup to Google
In this 2011 acquisition retrospective, @danshapiro reflects on the journey of bootstrapping and successfully selling their business.
Core Principles for Independent Builders:
Unsolicited buyer inquiries versus running a deliberate auction process require very different negotiation leverage.
Bootstrapping for years without external capital provides extreme freedom, but exits are often triggered by energy depletion as much as financial gain.
Retaining ownership of code and operations creates pride, but transitioning to an acquirer requires letting go of absolute autonomy.
Community Debate Themes:
Hacker News peers debated transaction structures (cash vs earnout), founder tax strategies, and life after liquidating a long-term indie asset.
CATEGORY Startup Exits →
HISTORICAL ERA Web 2.0 Genesis (2007–2013)
COMMUNITY SCORE ★ 165 points
TOTAL DISCUSSIONS 69 comments
Congrats on building something people want AND exiting! Thanks for writing about your experience (this was the good kind of post mortem)
I think another consideration for a (good) founder is "what happens to my team". If I had spent 2-3y building a great team, and had normal startup equity distribution (founders had a lot relative to virtually all employees), there would be a bit of a disconnect in motivations.
Selling a company where you own 10-20% for $100mm is life changing, at least for me. Even if it means working for a really shitty acquirer (e.g. Yahoo) for 2 or even 4 years, that might be enough money to make it personally worthwhile. After all, you could kick back and emphasize "work/life balance", especially after years of startups -- maybe work on non-commercial side projects, maybe teach or take classes, do hobbies, etc., while working at a stable job. Then do your own awesome company, self funded (or VC financed on very favorable terms) in a few years.
However, for employees, it might only be $50-500k of equity payout. That still leaves an employee in the "must work for a living" category, and I personally would be a whole lot happier going to work every day for an awesome small team at an independent company, or for a great acquirer or a PE/fund style "hands off" acquirer (where the team/product stays intact), than to get a $50-100k bonus to go work for Yahoo for 2 years.
A lot of the entrepreneurs I respect the most, who have recently done M&A deals, explicitly valued "what happens to the employees and the company" pretty highly. A lot of them ended up selling to companies like Amazon which have kept operations intact at their acquisitions, vs. the Yahoo-style glue factory.
I'd never heard of SparkBuy.com -- how did it get snatched up so quickly by Google? A precursory glance at it's stats shows it as being tagged only a handle of times on Delicious [1] and is ranked 200,000+ on Alexa [2].
[1]: http://www.delicious.com/url/dd6d860947e61d97884bb3719377c7f8 [2]: http://www.alexa.com/siteinfo/sparkbuy.com
It's a great concept, and I think it could fit into Google Shopping quite well. If you haven't checked out Google Shopping, you should -- they do some interesting things by aggregating reviews, doing NLP, and extracting out key terms. An example would be showing you a TV and it's ratings/sentiment analysis for several attributes like "color", "design", and whatever else is relevant for the product. With a more clever UI, they could churn out some amazing product search. I sure wish I had their data.
Tangentially related, I've been working on a similar website in my spare time. If anybody could point me in the right direction in terms of a price comparison API, and/or how to sign up for decent affiliate programs, I'd be quite grateful. Also, Google, if you'd like to hand me the keys to your product database I'd be happy to make a much more useful UI for you.
While I’m not in the position of my good friend Rand, who’s gone on the record saying that his life savings is $25,000, I was not previously wealthy
I continue to be of mixed minds as to whether having personal wealth (or not) leads to a greater or lesser level of risk tolerance - and itchiness to exit.
Sure it's easy for those with a high net-wealth to take bigger risks but we see all the time those with nothing (or even less with nothing, ie college debt) take just a big risks because they have nothing to lose.
I wonder if willingness to take risk is essentially a bi-polar bell graph, which leaves something like $25k in the bank in that sticky middle... not enough money to risk it all but too still much to be lost.
Some people might take away from this the idea that you can just build a cool little prototype and Google will come along and snatch you up.
I'd bet this acquisition happened almost entirely due to relationships and salesmanship. Most hackers who don't already know the right people (e.g. former Googlers) would have no chance of pulling this kind of thing off.
Do not try this at home folks. The only real chance of an exit for most startups is one based on actual success in the marketplace.
Google essentially killed http://www.sparkby.com (Like it killed Gizmo5 in the past: http://www.google.com/gizmo5/ - initially it was "temporary", but then became permanent).
Why does Google do that? Why not allow it to grow and gradually integrate refined pieces of technology into larger project [Google Product Search]?