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The 'Startup Boom' is a disguised jobs fair for big corporations

zdnet.com

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Re: The 'Startup Boom' is a disguised jobs fair for big corporations

#61

Post by pg »

lallysingh wrote: post #57
pg wrote: post #55

This guy has not done the math. An investor makes so much more from big successes like Dropbox and Airbnb than from HR acquisitions that they'd be acting counter to their own interest to focus their attention on the latter. Far from making out in HR acquisitions, early stage investors generally get screwed in them. We often make zero from an HR acquisition, between the liquidation preferences of later stage investors…

I have to ask, what are the "takes" on different exits? When do founders get the best return on their energy, vs the best return on the potential of their company? When do investors? Edit: basic 3rd grade grammar.

The expected value of turning down the current offer is almost always positive. It's very rare for founders to reject an acquisition offer and then later wish they'd taken it.

The difference between founders and investors is that founders care about more than just expected value. A founder with no assets other than his stock in the company will often prefer to sell now and lock in the current price rather than keep rolling the dice. So to the extent there is a difference between the motivations of founders and investors, it's exactly the opposite of the situation this writer describes.

Re: The 'Startup Boom' is a disguised jobs fair for big corporations

#62

Post by jgarmon »

drblast wrote: post #37
fasteddie31003 wrote: post #31

Earlier quoted context omitted.

Obviously not written by an entrepreneur. Some people can be satisfied by working for someone their whole lives, others can't.

It's not like anyone is forcing these people to sell the company. You have the option. If you're a whole-hearted entrepreneur, then don't sell. Otherwise, a startup is a great way to get some experience, prove your value, and get a great job afterward. If the option to sell to a large company who wants talent didn't exist, the downside to startups would be significantly greater.

The naive assumption here is that the sellout option is the entrepreneur's decision alone. If you've taken VC cash, you're answerable to a board of directors and a group of investors. If the money guys are getting cold feet, and want their cash out now, it's very hard (often impossible) to NOT sell.

If you've raised an A round, the easiest place to get your B round is the original set of investors (not least because it can keep the number of board seats/turnover low). If the A round guys want an acquisition exit and you refuse, not only are you spiting your best option for B round funding, you now have to raise money in an environment when all the other VCs know you ignored the last round of VCs' desires. Good luck getting your B round in that scenario.

Entrepreneurs may not want to be part of a talent acquisition, but often VCs do. If you're determined to never work for a big corporation you don't own, you better bootstrap forever and never take VC cash.

Re: The 'Startup Boom' is a disguised jobs fair for big corporations

#64

Post by pron »

pg wrote: post #61
lallysingh wrote: post #57

Earlier quoted context omitted.

I have to ask, what are the "takes" on different exits? When do founders get the best return on their energy, vs the best return on the potential of their company? When do investors? Edit: basic 3rd grade grammar.

The expected value of turning down the current offer is almost always positive. It's very rare for founders to reject an acquisition offer and then later wish they'd taken it. The difference between founders and investors is that founders care about more than just expected value. A founder with no assets other than his stock in the company will often prefer to sell now and lock in the current price rather than keep r…

The author may very well be wrong about the investors' perspective and the talent-hunt motivation, but he's probably right about who's running the show, and the answer is, invariably, the big companies. Why? Because there just aren't enough successful startup IPOs to keep the entrepreneurs trying. Founders may like risks, but they're not suicidal. The only reason this show is running is that there are plenty of acquisitions at prices that appeal to both entrepreneurs and investors. So if it's big-tech that's running the show, the only question is what's in it for them. The author suggests talent, I think it's market and product research, but one way or another, if big-tech stop acquiring, the startup craze will be over within a day.

EDIT:

I guess you could say that entrepreneurs and investors are all actually working for Google or IBM or whomever, trying to find the next big thing. They're just not getting a salary but working on a commission. And once in a while, some startup may get away, do an IPO and become a real force, but that's just like an agent on commission starting his own competing business. That's a risk any employer takes.

Re: The 'Startup Boom' is a disguised jobs fair for big corporations

#65

Post by mkramlich »

pron wrote: post #41

I think the truth might actually be worse. I don't think that `the startup boom is really a disguised job fair for big corporations`. The dirty little secret is that startup scene is an arena and entrepreneurs are the gladiators. Big lumps of money, that seem imaginary to them are dangled in front of their eyes, and they're introduced to former gladiators that have attained fame and glory and were able to buy their f…

I like your take and think it has a ring of truth to it. However, don't confuse your model with reality. Reality is full of nitty gritty details and variations. And some folks start businesses to get rich, and do, and some start them to gain more control over their lives, or greater fulfillment. It's not all a bunch of duped drones working for The Man, for free. And just because there are some suckers, and some people are not good enough, doesn't mean all are.

Re: The 'Startup Boom' is a disguised jobs fair for big corporations

#66

Post by aridiculous »

lallysingh wrote: post #52
pron wrote: post #41

I think the truth might actually be worse. I don't think that `the startup boom is really a disguised job fair for big corporations`. The dirty little secret is that startup scene is an arena and entrepreneurs are the gladiators. Big lumps of money, that seem imaginary to them are dangled in front of their eyes, and they're introduced to former gladiators that have attained fame and glory and were able to buy their f…

Don't be sorry, it's honestly spot on. It's a wonderful exploitation model of how young men (18-30s) think and feel natively. Big risks, big rewards. Legends, folklore, respect. The model was perfect 2000 years ago and finds new manifestations all over the place. Of course, I'm not sure it's a terrible thing. Nobody actually dies, at worst a few years of hard fighting are expended before a "real job" is acquired. The…

I do think the gladiator metaphor is helpful, but I have to add in that software developers/technical people tend to hold a lot of cards in the modern economy. For example, you can work on a startup, take 2 weeks off on a freelance project, and pay your bills for the next 3 months. Not to mention the startup itself will sharpen your skillset raising your value to future employers.

I think if anyone is getting screwed, it's the inexperienced "business co-founders," who don't have a high hourly rate to fall back on and fall hard for the emotional myth. They still have the resume item of "Founder" that appeals to future employers looking for initiative, but their unfocused skill-set might hurt them.

However, it's interesting that it's self-imposed harm for inexperienced business types, because I imagine that no one is actively exploiting them. Why would they?

Re: The 'Startup Boom' is a disguised jobs fair for big corporations

#67

Post by pg »

pron wrote: post #64
pg wrote: post #61

Earlier quoted context omitted.

The expected value of turning down the current offer is almost always positive. It's very rare for founders to reject an acquisition offer and then later wish they'd taken it. The difference between founders and investors is that founders care about more than just expected value. A founder with no assets other than his stock in the company will often prefer to sell now and lock in the current price rather than keep r…

The author may very well be wrong about the investors' perspective and the talent-hunt motivation, but he's probably right about who's running the show, and the answer is, invariably, the big companies. Why? Because there just aren't enough successful startup IPOs to keep the entrepreneurs trying. Founders may like risks, but they're not suicidal. The only reason this show is running is that there are plenty of acqui…

At a certain point, big companies don't have any choice about whether they do acquisitions. If they want to be in a certain business and some startup already has an unbeatable lead, they have to buy it.

Re: The 'Startup Boom' is a disguised jobs fair for big corporations

#69

Post by pron »

mkramlich wrote: post #65
pron wrote: post #41

I think the truth might actually be worse. I don't think that `the startup boom is really a disguised job fair for big corporations`. The dirty little secret is that startup scene is an arena and entrepreneurs are the gladiators. Big lumps of money, that seem imaginary to them are dangled in front of their eyes, and they're introduced to former gladiators that have attained fame and glory and were able to buy their f…

I like your take and think it has a ring of truth to it. However, don't confuse your model with reality. Reality is full of nitty gritty details and variations. And some folks start businesses to get rich, and do, and some start them to gain more control over their lives, or greater fulfillment. It's not all a bunch of duped drones working for The Man, for free. And just because there are some suckers, and some peopl…

I'm not saying they're all duped drones, but most of them are working for The Man. And, of course, they can't unionize (not that that's been too helpful) because they're competing with each other for The Man's favors. They may take control of their lives, they may achieve fulfillment, but they don't hold real power. And like I wrote in another comment, any sustainable exploitation must be advantageous for the exploitee as well. I'm not saying the system's bad. Just have your eyes open.

Re: The 'Startup Boom' is a disguised jobs fair for big corporations

#70

Post by sbronstein »

Another problem with this article is that only one of the three acquisitions he cites was actually your standard 'acqui-hire'.

Teachstreet was doing great until Google changed their algorithm last year. That apparently killed their traffic and so they started looking for a buyer since their main business was no longer viable. So yes, a talent acq, but not in the way that he suggests.

Lala's technology supposedly formed the basis for iTunes Match and iCloud. I personally think that there may have been a bidding war between Apple and Google (because IMO $85M was ridiculously high for LaLa) but that's just my own hypothesis. Regardless, not a talent acquisition.

Summify was a 'traditional' talent acq. of the type Twitter, FB, and Google have been doing of late. So he is one for three of the examples he chose to cite in his article.

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