After Twitter had announced on October 28 that it would be discontinuing the video looping app Vine, which it acquired in 2011, Vine co-founder Russ Yusupov expressed on Twitter his regret in selling the startup. By simply tweeting ‘Don’t sell your company,’ the entrepreneur made it clear that he felt selling the video app was a mistake, which got our team of RPRNmag newsmagazine thinking. Do all startups regret selling their small company to a corporate giant or is Vine co-founder Yusupov a rarity and do digital entrepreneurs see a buyout as one of their primary business goals?
Do all startups dream of selling out to a huge tech company?
For those with entrepreneurial spirit starting a business is an exciting venture, making the right decisions to make it a success and grab the attention of long-established tech giants is usually part of the process. In this digital age, there are thousands of tech start-ups created each year, some creating groundbreaking and life-changing technology and others that struggle to get their feet off the ground. For large tech corporations buying a startup is a no brainer, they can add to their digital skillset and capitalize on someone else’s creative ideas.
However, how does this affect the founders of these startups?
As with all business decisions, there are positive and negative implications and each entrepreneur will tell a different tale of massive business growth or their downfall of their company. Someone who doesn’t regret selling out to a social media giant, unlike Yusupov, is Garrett Gee, founder of Scan, a QR code scanner. Gee sold his startup to SnapChat in 2014 for a huge $54 million:
“I kept looking at [my bank account], then looking away, then looking at it to make sure it was still there and that this was all real. I took screenshots for my journal.” – Garrett Gee, founder of Scan
For him, the money meant that he could change his family’s life which was enough. However, someone who agrees with the Vine co-founder’s opinion is Dodgeball co-founder Dennis Crowley. Back in May 2005, Google acquired dodgeball.com, a system that allowed users to tell their friends what bar or eatery they are at via text messages.
After working at Google for two years, he posted on Flickr about his departure from Google and his startup Dodgeball: “It’s no real secret that Google wasn’t supporting dodgeball the way we expected.” The whole experience was incredibly frustrating for us – especially as we couldn’t convince them that dodgeball was worth engineering resources, leaving us to watch as other startups got to innovate in the mobile + social space.”
And while it was a tough decision (and really disappointing) to walk away from dodgeball, I’m actually looking forward to getting to work on other projects again.”
Perhaps one of the most positive outcomes from a startup sale is the success of photo-sharing app Instagram being taken under the Facebook wing. With just 13 employees in 2012 and after just two years in business, Instagram was purchased by Facebook for $1 billion – a huge deal that Instagram founder Kevin Systrom and Facebook founder Mark Zuckerberg concluded over just three days.
In a blog post the Systrom wrote explaining why he sold the app just two years after being in business he shared: “Every day that passes, we see more experiences being shared through Instagram in ways that we never thought possible. It’s because of our dedicated and talented team that we’ve gotten this far, and with the support and cross-pollination of ideas and talent at a place like Facebook, we hope to create an even more exciting future for Instagram and Facebook alike.”
This isn’t the first time that Facebook have acquired a tech startup and kept the relationship with its founder on a positive note. In 2014 the social media leader purchased messaging app WhatsApp for $19 billion in cash and Facebook stock, this deal remains the biggest transaction carried out by two companies backed by venture capitalists.
Founder of WhatsApp Jan Koum feels that working with Facebook is the right choice for his tech start-up: “If you look at what Facebook is doing and what we are doing, you will see that we have similar aims. We want the world to be connected and the people to be able to communicate with their friends and get the information from them easily. It does not matter where you are based in the world; you should have a chance to make this world smaller and feel your family and friends are beside you.”
However, even though Facebook have managed to keep two of their largest start-up buyouts happy, this is something that tech company Nest has struggled with.
Google-owned Nest bought Dropcam, known for their WiFi video streaming cameras, in June 2014 for $555 million, however, founder Greg Duffy has since expressed his regret in selling his startup. After Nest’s CEO Tony Fadell expressed his concern that many of Dropcam’s staff members “were not as good as we hoped.” Duffy wrote a blog post explaining his regret in selling: “I would almost find such blatant scapegoating amusing if it weren’t so insulting to the team. Given that, I feel compelled to set the record straight.…our investors and team actively didn’t want to sell (it was my mistake to sell — but that’s a story for another day).”
It’s not all black and white.
Even though the opinions expressed in this article are at opposite ends of the scale, it’s not all black and white with selling your tech startup. Most entrepreneurs see their business and creative ideas as something that they want to look after and protect when selling your business this is often the thing that business owners worry about.
However, as expressed by Gee above, having the funds from a buyout means that entrepreneurs can completely change their lives and even begin another business venture, or several. The real decision lies with each entrepreneur and of course, what the proposed ideas are from the tech giant who wants to buy your startup.
What are your thoughts? Do you have a startup that is on the market for a buyout? Or do you want to hold on to it? Share your thoughts with us.