Acquisitions Archives - Serious Startups

WhatsApp Acquisition: A New Definition of Success?

Days later, we’re all still talking about it.

Of course we are! It was the largest freaking startup acquisition in history. Twitter’s been full of “you could be X for the cost of WhatsApp” tweets. We got in that game with some surprising facts about the WhatsApp acquisition.

Judging from all the tweets, Facebook updates, and blog posts, no one’s quite sure how they feel about it yet. There’s a little awe, a lot disbelief, and more than a lot of jealousy.

For many people, news of the deal came out of nowhere. The founders aren’t exactly tech startups’ poster boys. More than a few people on Twitter didn’t even know what the app did, and suddenly Facebook is paying $19 BILLION for it?!

Remember the good ol’ days when we were shocked by the $1 billion Instagram acquisition? Doesn’t that seem quaint now.

If $19 billion is the new high water mark, where does that leave the other unicorns? Is this the creation of a new class of success–the super unicorn? The pegasus?

The Comparison Trap

With $19 billion as the new high number, what should the rest of us should be shooting for? Will startups be happy with the mere $1 billion they’ve been dreaming about for the last few years?

In the Wall Street Journal today, Box CEO Aaron Levie said that he expects the deal to spur an increase in acquisitions, with every tech giant willing to pay higher and higher prices for startups challenging them.

“It makes you depressed if you’re not selling at $20 billion,” the WSJ quotes him as saying. “I have a lot more work to do.”

Aaron Levie. Whose enterprise-focused cloud storage company will IPO this year in what’s expected to be a multi-billion dollar fashion. Who was named Inc’s Entrepreneur of the Year.

Aaron Levie is now looking at his measly $2 billion company and feeling like things aren’t quite right.

How We Measure Success

The thing about $19 billion deals is that they are very, very rare. (This the first actually.) Maybe M&A deals are only going to continue to grow, and maybe the average acquisition will increase. But in the long run, it’s probably safe to say that 99.99999% of companies will never sell for $19 billion.

WhatsApp built the right product, in the right way, grew in the right areas, at just the right time to make them the perfect acquisition for Facebook. The chances of tons of other companies doing that are slim.

And that’s okay.

Startups are about money. We’re all kidding ourselves if we think the majority of founders are starting companies but don’t care about the money they’ll make doing it.

But how much is enough? And are there other measurements of startup success to consider along with money?

For example, if your software startup sells for enough money to make you, your cofounders, and your first employees multimillionaires, is that enough?

If you build a legacy business that employs hundreds of people and provides outstanding salaries for all of them, will that bring happiness?

Or is it enough to remain a lifestyle business that supports you and maybe one other person for as long as you want it to?

These are questions we all have to ask ourselves. No one can answer them for every founder in the world. The WhatsApp deal should make us all stop and think, “Will I be happy, even if that’s never me?”

Because chances are good it won’t be.

Asking the Right Question About the WhatsApp Acquisition

From Benedict Evans

Facebook just bought WhatsApp, paying $16bn in cash and stock and $3bn in RSUs. WhatsApp has 450m active users, of which 72% are active every day. It has just 32 engineers. And its users share 500m photos a day, which is almost certainly more than Facebook.

This is interesting in all sorts of ways – it illustrates most of the key trends in consumer tech today in one deal.

First, it shows the continued determination of Facebook to be the ‘next’ Facebook. It’s striking to compare the aggressive reaction to disruption shown by Google, Facebook and other leading web companies today with how some of their predecessors a decade ago stumbled and lost their way.

Second, the winner-takes-all dynamics of social on the desktop web do not appear to apply on mobile, and if there are winner-takes-all dynamics for mobile social it’s not yet clear what they are. There are four main aspects to this:

Apple’s Potential Acquisitions Show a Tech Company Growing To New Heights

From SFGate

Adrian Perica is a very busy man. Over the past 18 months, the mergers and acquisitions chief at Apple has been scouring the globe looking for deals, snatching up everything from search engines and data analytics to mapping software and motion tracking chips.

Such a buying spree has ignited fierce speculation in tech circles and on Wall Street about Apple’s future ambitions, especially as smartphone and tablet sales start to slow. Most of that speculation has centered on wearable technology or perhaps a souped-up upgrade of Apple TV.

But Apple is thinking bigger. Much bigger.

A source tells The Chronicle that Perica met with Tesla CEO Elon Musk in Cupertino last spring around the same time analysts suggested Apple acquire the electric car giant.

Branch Sells to Facebook for “Around” $15 Million

Want to know how quiet your critics?

Well, you buy them up of course!

This morning The Verge broke the story that Facebook is acquiring New York-based startup Branch for $15 million. While early reports indicated that the Branch team expected to be building out their product at Facebook, a Techcrunch update clarified that a Facebook rep says the acquisition is for talent only.

Branch is (was?) a link-sharing service that allowed you to have conversations about anything on the Internet, then publish those conversations on a blog or website. Most recently it launched Potluck, an iPhone app that allowed you to discover news bites and talk about them with friends in-app.

Last year, Branch CEO Josh Miller wrote a popular post on Medium calling Facebook an “irreversibly bad brand.” He pointed to the fact that his teenage sister makes a point to visit the social network as little as possible. Our CEO Nick Tippmann had a similar experience with younger siblings, where he was informed that “Facebook is for old people.”

A few weeks ago, however, Miller wrote that he was “bullish on Facebook.” Still, bullish or not, the post offered some–ahem–healthy criticisms of his future employer on things they could do to improve the News Feed. There’s little doubt, given the length of time it takes to make an acquisition, that Miller wrote the more recent post while in talks with the social network.

Fair enough. Even after a $2 million raise, Miller and his cofounders are most likely experiencing their first day as millionaires today, and they have nice jobs at Facebook to add to the deal.

Branch isn’t the only startup trying to disrupt the way we consume news. Quibb is another popular (if exclusive) service that allows industry professionals to share links and discuss them. And then, of course, there’s always Twitter, which seems to work well for everyone. Branch is hoping to bring Facebook back to the news game.

Perhaps we’ll be seeing fewer cat memes in 2014?

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Great Examples Of Good Tech Companies Destroyed After Being Acquired?

Businesses buy out other businesses. It’s a dog-eat-dog world out there, and acquisitions are part of the grand game of business baccarat. Amongst the main benefits of an acquisition are:

Increased plant capacity
Product diversification
Reduced financial risk
Bigger share of the market
Acquisition of research, development and market expertise

If all goes according to plan, the newly acquired company ought to increase in value as investors see cost savings and revenue increases ensue.

But it doesn’t always go according to plan. There are often problems that only become apparent after the deal has gone through. Integration plans can be demolished by white collar turf wars and culture clashes. Brand dilution, incompatible processes and systems and lack of knowledge about the acquired company’s business methodology can all have an impact in the successful marriage of two corporations. Such failings may have an irreversible impact on shareholder value and see the stock price of the acquiring organization plummet. The ship sinks with all hands, and there’s not a lifeboat to be seen.

It’s a particular problem in the world of dotcoms. Corporate quicksand lies in wait to suck even the most seemingly healthy companies to their doom. Here are just a few examples of the good tech companies that have gone bust following their acquisition.

sixdegrees.com

This was the original social networking site and granddaddy of them all. Andrew Weinreich founded the company in New York while the dotcom boom was rumbling on, and it was later taken over by Youthstream for over $130million in stock. Within six months it was shut down. The legacy of sixdegrees however was awareness of the vast potential of social networking, and the likes of Linkedin and other SN platforms took up the baton and ran with it.

Danger

Danger was the creator of the T-Mobile Sidekick. Microsoft acquired the company in 2008. They actually prototyped a new product but then completely scrapped the development and platform in favour of the Windows Phone 7, leaving the product team in, as they say, a right old mess amidst a flurry of contradictory goals. The Kin was eventually launched and proved a total flop, and the original development team was dispersed to the tech winds. Just to finish the demolition job off, Microsoft shortly afterwards lost just about all of its Sidekick customer data late in 1999.

Lala

Apple bought up Lala, an online music store, for over $80million in December 2009 and a few months later shut the site down. They seem to have done nothing with the acquired technology and nor have they replaced it.

Goowy Media

Goowy Media, a Californian-based widget software firm, was acquired by AOL/Time Warner in 2008 and everything was fine until AOL split off from TW, when everything went haywire. According to Goowy staff, the TW staff whose office they shared barely acknowledged their presence and they were not assigned work for long periods of time. About a year after the acquisition Goowy was shut down, despite having a basically good product.

Flawed system

It’s worth mentioning that acquisitions and mergers often fail because of a focus on short-term gains by the acquiring company. What they’re mainly interested in is seeing the acquisition run smoothly and after that they often don’t much care about how the acquired company performs. This attitude seems to be inherent in the business world and may often be the fault of no one in particular.

Author:
Carlo Pandian worked at Adzuna, a tech start-up based in London. He is currently writing a tutorial on QuickBooks (accounting software for entrepreneurs), and has previously published for Techli, Killer Startups and Under30CEO. Connect with him on Twitter @carlopandian.