David speaking in Episode #13: Addressing criticism of 37signals (Part 1 of 2) of the 37signals Podcast (transcript):
Everybody is so quick to do to the congratulations game whenever somebody gets acquired: “Oh, that’s so wonderful. You got acquired.” I mean, it is wonderful that somebody made a lot of money, I guess.
But in many ways, we should be offering condolences. Condolences on the future innovation of that product. Condolences to the customers who are just going to be sucked into this thing that is now way more likely to go stale. And condolences to the poor acquirer, who will probably not see a return on investment for this pickup…
I think there are tons of great companies who could have been million dollar companies that get killed in the process, in the pursuit of trying to become a billion-dollar product. And I think that the VCs are part of that. They are part of killing great million dollar companies because they infuse all this money, they blow up the idea way too early…
Everybody wants to be Michael Jordan. We look at Google and eBay, and a handful of vastly profitable billion-dollar businesses and people think that the road to that goes through the VCs. If they want their shot at being the Google, they have to go that path and that is really appealing.
They forget that the odds of that happening are vanishingly small. They forget the fact that they could just aim to be a million dollar business and they’ll probably be a lot better off. They’ll probably have a lot higher odds of success, but it’s just not as sexy.
It’s really sexy to swing for being a billion-dollar business and I can totally see the appeal of that. But just like we don’t encourage schoolchildren everywhere to think they’re going to make it into the NBA, we shouldn’t be encouraging startups everywhere to think they’re going to be the next fucking Google.
Merle
on 10 May 10Or next REGULAR Google!
Aris
on 10 May 10Sorry about that, but i dont find the right place to post that. I find one error on Getting Real, online version, portuguese language. The word “justamnete ” is incorrect, “justamente” is the correct. ty
Wauter
on 10 May 10Getting defensive again, are we? Poor reddit, YouTube, Writely, PowerPoint, viaweb, westwood studios, hotmail… (that’s just from the top of my head) for seeing their products go into irrelevance and out of innovation after being acquired by one of the Big Guys.
Bring on the downvotes.
Kevin Milden
on 10 May 10I agree will David on his controversial thoughts on building a business that lasts and that you have no intention to sell. When you sell people should consider that like a win for the person making the purchase. As for the business that got it acquired, it isn’t a failure but it isn’t a win either. Sort of like playing Golf. You’ve come in second so you get a payment for your effort. You’re not the winner. The buyer took you out of the game is. But your effort was worthy. It should be respected.
Being the biggest comes from being the best at something. Growth is a symptom of success. Sometimes compaines grow by investment rather than merely off of the financial success of the product or service they created. Right or wrong, it happens.
Worry about being the best at something. If it is truly great it will grow your business. Grow orgnaically, through the success of your product and your business will be more sustainable. Scale without the demand and you’ll incur debt.
I still want people to think big. When they do we get Apple, Disney, McDonald’s and Starbucks. Big brands are amazing and you should never limit your dreams. Not everyone will reach these heights in business. Those who will do so because of being the best at something.
Nevermind being big. Try being the best and the rest will take care of it self.
J
on 10 May 10Kevin: McD and Starbucks, for example, didn’t start out with massive dreams. Their businesses grew into massive companies, but they didn’t start that way.
Ugur Gundogmus
on 10 May 10In so many cases, successful companies are successful because they were in the right place at the right time.
That’s why it’s almost impossible to create the next big thing (Google, eBay etc) even when you have billions of dollars in your bank account.
EH
on 10 May 10Wauter: Downvotes? What site are you commenting on?
The exceptions don’t prove the rule. David is not saying that there has never been and will never be an aquisition that pans out for the buyer. The vast vast majority don’t.
Allan
on 10 May 10I like cussing, in fact I do it quite a bit. But dropping the f bomb on the last thought seems like a plea for attention. Almost like college film student write scripts with swears every other word to be trendy like Tarantino rip off. It is sophomoric.
Fuck!
Simon
on 10 May 10@Wauter you get David wrong. He does not say selling its company or raising funds is a “bad” thing.
He says acquisition and VC are over hyped, and following this hype leads to bad choices.
It makes me think about the government encouraging some trends (for example … debt !), which in the end causes harm.
Anyone should always trust his own reason before following the current hype.
EH
on 10 May 10“My land, such language! I do believe I shall take respite upon the sofa until this unpleasantness passes.”
Markus
on 10 May 10Maybe there are entrepreneurs that just want to raise their child to a profitable level, sell it off and be free for the next one. I don’t see any other reason to “get acquired”.
Matthew Higgins
on 10 May 10For the followers of this blog, 37signals is Michael Jordan, not Google. This leads to a different argument:
Even though chewing bubble gum and wearing Nikes was not the reason for Jordan’s success, many made a causal link and imitated their role model’s style. It’s amazing how many copy 37signals without understanding the original motivation behind choices, or falsely believing that every 37signals philosophy must be followed.
JP Richardson
on 10 May 10An acquisition that disappointed me… was Mint. I think they would have kicked the shit out of Intuit. I wonder if there will be anymore innovation in Mint?
-JP
Michael L
on 11 May 10All successful companies focus on the innovation that makes them great. When the focus shifts from this the product or service can become watered down. It is the focus and innovation that must stay relevant.
wauter
on 11 May 10@EH it was a play on a reddit phenomenon having entered common conciousness among tech readers, indicating that it’s a highly relevant product despite having been acquired quite a while ago. Bad joke admittedly :-)
In any case, I think it is wrong to take a stab at acquisition per se, it’s all about how it happens, and I can definitely see some benefits to funky little startup being immersed in a larger, more mature company. If it’s any good they try to keep their teams well-knit, innovative and funky anyway.
In the end it’s all about the product, and for each great startup that saw its drive and innovation halt after the acquisition there’s one that would have had to stop improving the product alltogether had it not been for the extra resources that come with getting embedded within a larger company, and ten more that weren’t worth acquiring in the first place (MySpace anybody?).
Just sayin’, there’s other benefits to being acquired then the pile of cash.
Ian
on 11 May 10Business is about making money. If you want fun, go to Disneyland.
This discussion is closed.