For startups, getting acquired usually serves as a memorable landmark. In most cases, being bought out by Apple, Google, Yahoo! and the like is an event that has long been aspired to by the young companies in question.
For CEOs, getting an offer that is 100 times more than what they invested in their companies would, after all, be ideal. But then there are some cases where the implications of getting acquired aren’t so straight forward.
In certain instances, it might seem on the border of sacrilegious to see a startup get sold and give up control to a bigger, more established company.
There are contemporary examples of this, too: blockbuster deals that have attracted as much praise as criticism and have involved one very busy social network.
When Facebook CEO Mark Zuckerberg shocked the tech world by buying the mobile messenger WhatsApp in February for $19 billion, and then provided a not-too-dissimilar shock in acquiring virtual reality company, Oculus, last week for $2 billion, there was a term being thrown around that was hard to ignore amidst all the adulation for both acquisitions: sell-out.
For those who had been following WhatsApp for years, and had come to love their vocal dislike for advertisements and apparent passion for providing a product that focused on the user, CEO Jan Koum and cofounder Brian Acton deserved to be questioned for the way in which their actions seemingly contradicted their words.
Their detractors’ main gripe? That despite reassurances that the company would remain independent under Facebook, WhatsApp had essentially gone from being a company that was all about not selling out their users, to being acquired by a company that has done that to the fullest.
“Whatever promises of autonomy the founders are giving to users right now mean little – the 450 million+ WhatsApp users are now part of the Facebook empire,” wrote Forbes contributor Tarun Wadhwa. “The same entrepreneur who once said that ads are “insults to your intelligence and the interruption of your train of thought” is now on the board of a company that has built one of the most invasive advertising platforms in history.”
As for Oculus, the criticism levied their way comes down more to the feel of the business founder Palmer Lucky and CEO Brendan Iribe rather than any spoken mantras.
Oculus, which became Facebook’s third, billion dollar acquisition after WhatsApp and Instagram, started out as a company that received its first bit of substantial funding from the crowd-funding platform KickStarter.
The mega deal that was sealed last week, which brought Oculus into the clutches of Facebook, was one that defied the startup’s meek and humble roots.
Furthermore, the idea that the company had sold out was only exacerbated once one of their biggest Kickstarter contributors sounded off on the deal.
“Facebook is not a company of grass-roots tech enthusiasts. Facebook is not a game tech company. Facebook has a history of caring about building user numbers, and nothing but building user numbers.
People have made games for Facebook platforms before, and while it worked great for a while, they were stuck in a very unfortunate position when Facebook eventually changed the platform to better fit the social experience they were trying to build,” wrote Markus “Notch” Persson, designer of the popular game, Minecraft.
Persson said he pulled the plug on plans to bring his game to the Oculus Rift headset once he’d gotten news of the deal.
And while Persson did concede that Oculus could very well do great things under Facebook, he also ended his semi-rant with a remark that likely captured the frustrations of many Oculus’ Kickstarter backers.
“And I did not chip in ten grand to seed a first investment round to build value for a Facebook acquisition,” Peterson said.
In both cases outlined above, the acquisitions are huge wins for Facebook. WhatsApp will be crucial to Facebook’s plans to “connect the world,” while grabbing Oculus puts Mark Zuckerberg’s foot firmly in the door of the futuristic era of gaming.
For the CEOs of both startups, though, in regards to what they have stood for in the past, there has been serious questioning of their integrity.
And while both companies may well go on to stay true to their roots without having to give up their values, there is a larger point to be made about the nature of acquisitions: There is a sense, however large or minuscule, of soul-selling when it comes to startups getting bought out.
The vision that a founder, or group of cofounders, set out for a startup from the beginning is subject to another party’s digression once it is acquired by a bigger company.
The direction, the whole purpose and the future of employees that formed the foundation of a young company are up in the air after selling.
“Once you sell your company – to Facebook or anyone else – you can no longer make promises as to what it will or will not do,” said PandoDaily’s Paul Carr, who has been “involved” in three acquisitions.
And whilst the end game of any good business is the accumulation of wealth, there is an undeniable tie that some entrepreneurs form with their companies that can make cashing out difficult, no matter how large the check.
It would be naïve, after all, to expect otherwise of the same dedicated businessmen and women who go on about the importance of sleepless nights and the necessity of pouring everything they have into their companies.
And for those people, who are so closely tied to the visions they have for their creations, getting acquired may not always be a dream scenario.
*Original Article by Jospeph Milord: http://elitedaily.com/money/to-sell-out-or-not-to-sell-out-the-real-politics-of-getting-your-startup-acquired/