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Facebook, TipJoy, the Deal that Didn’t Happen and the Hire that Did

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Re: Facebook, TipJoy, the Deal that Didn’t Happen and the Hire that Did

#52

Post by trapper »

pg wrote: post #28
startingup wrote: post #11

Basically it appears like Facebook made the rational calculation that hiring the developer at retail is a lot cheaper than buying the company wholesale. That is consistent with what I have argued in HN comments: with the glut of start-ups (50 from YC alone this year?) prices will drop towards replacement value. The replacement value of a start-up amounts to a hiring bonus for its developers. This is likely true even…

Note to the reader: don't believe every plausible-sounding explanation of events you read on a comment thread.

I'd like to know why you think this isn't close to reality. There are tons of startups out there with no path to independent viability. Why wouldn't potential acquirers simply wait until the founders run out of what little money they have on hand then snap it up for a pittance? Or simply hire the developer?

If someone can get something to market in three months the first try, it's going to be much quicker on the second try, especially if they don't have to deal with all that "other" stuff (marketing, business dev, launch plans etc).

Re: Facebook, TipJoy, the Deal that Didn’t Happen and the Hire that Did

#54

Post by pg »

adrianwaj wrote: post #43
pg wrote: post #26

Earlier quoted context omitted.

Facebook didn't do anything wrong. Tipjoy was out of money. They'd been talking to several potential acquirers, including Facebook, but those deals all fell through. So the Tipjoys were going to have to get jobs somewhere. Since they were worried about money and Ivan admired the hackers at Facebook, I asked FB if they'd offer him a job, and they did. It doesn't portend anything for the future of startups, as this sto…

I wonder if they fell through, because in Kirigin's words: "We strongly believe that social payments will work on a social network, provided that they’re done within the platform and not as a 3rd party." So at that realization the acquirers decided to build rather than buy.

No.

Re: Facebook, TipJoy, the Deal that Didn’t Happen and the Hire that Did

#55

Post by pg »

trapper wrote: post #52
pg wrote: post #28

Earlier quoted context omitted.

Note to the reader: don't believe every plausible-sounding explanation of events you read on a comment thread.

I'd like to know why you think this isn't close to reality. There are tons of startups out there with no path to independent viability. Why wouldn't potential acquirers simply wait until the founders run out of what little money they have on hand then snap it up for a pittance? Or simply hire the developer? If someone can get something to market in three months the first try, it's going to be much quicker on the seco…

I'd like to know why you think this isn't close to reality.

Because I was there in person when reality took place.

Re: Facebook, TipJoy, the Deal that Didn’t Happen and the Hire that Did

#58

Post by ghshephard »

pakafka wrote: post #40
mattmaroon wrote: post #39

Earlier quoted context omitted.

This is my favorite online "journalism" technique ever. When someone you want a scoop from won't comment, just make a bunch of crap up and then when they get angry say "hey feel free to comment".

What part is made up?

"Some basic, undisputed facts: ... he and his wife are shutting TipJoy down and returning what’s left of the $1 million they had raised to their investors."

Do you have any sources, documentation or other reason to believe that TipJoy raised $1 million?

Re: Facebook, TipJoy, the Deal that Didn’t Happen and the Hire that Did

#59

Post by startingup »

pg wrote: post #55
trapper wrote: post #52

Earlier quoted context omitted.

I'd like to know why you think this isn't close to reality. There are tons of startups out there with no path to independent viability. Why wouldn't potential acquirers simply wait until the founders run out of what little money they have on hand then snap it up for a pittance? Or simply hire the developer? If someone can get something to market in three months the first try, it's going to be much quicker on the seco…

I'd like to know why you think this isn't close to reality. Because I was there in person when reality took place.

These are what outsiders know: a) Facebook and many acquirers looked at the company and passed b) Company ran out of money c) Facebook hired the developer, who also posts in the blog that his idea would work far better as part of Facebook or Twitter. I am not asserting that (a) and (c) are directly connected. It is perfectly possible that the people who looked at the acquisitions aren't the same ones who made the hire and the two sets of people may not even have talked to each other.

However the one thing no one outside Facebook can really know is why they passed on the acquisition. My reasonable guess is that they figured it would be cheaper to hire (some, not necessarily the same) developers and do it themselves. Are you asserting that it is outside the realm of possibility for them to have thought that way? Or that future acquirers, facing similar choices, would not calculate that it would be cheaper to hire developers after they run out of money?

Re: Facebook, TipJoy, the Deal that Didn’t Happen and the Hire that Did

#60

Post by ghshephard »

startingup wrote: post #59
pg wrote: post #55

Earlier quoted context omitted.

I'd like to know why you think this isn't close to reality. Because I was there in person when reality took place.

These are what outsiders know: a) Facebook and many acquirers looked at the company and passed b) Company ran out of money c) Facebook hired the developer, who also posts in the blog that his idea would work far better as part of Facebook or Twitter. I am not asserting that (a) and (c) are directly connected. It is perfectly possible that the people who looked at the acquisitions aren't the same ones who made the hir…

If Facebook thought there was value, then $5mm for the company + founders, particularly in a stock deal, wouldn't have caused Facebook to make a decision not to buy.

The reality is that Facebook has a fairly large engineering contingent, and that writing a tipping application for the Facebook platform, will likely be a "from scratch" exercise - so there is little value in the codebase IP from TipJoy.

The actual architecture/algorithms associated with a tipping application are probably not so complex as to make Facebook believe they needed to purchase a company to get that knowledge. TipJoy has no patents that I could find on online tipping. And, Facebook wants to leverage its own social network - TipJoy just never really established enough momentum to develop their network and traffic volume to the point at which other organizations saw value that they wanted to acquire.

But, with all that said - it's true that _one_ of the reasons why Companies will purchase other companies is to acquire their engineering staff in one fell swoop. In the case of TipJoy, their small size worked against them. There wasn't much of an engineering staff to be acquired.

At the end of the day, this story probably repeats itself more often than you would imagine - as PG implied when he noted there are other YC alumni working at FaceBook - the only reason we're noticing it right now is that TipJoy is relatively high profile, and it became public knowledge that at least one of the founders is now working there soon after the startup shut down.

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