Friday, May 24, 2013

When you sell your startup, you can't expect to retain "ownership"

The venerable Dave Winer (a guy I respect a lot) recently wrote about Marissa Mayer and Yahoo's acquisition of Tumblr.  I don't have a lot of insights to add about that deal, but I did want to comment on what Dave had to say about selling your company in general:
"All this is to say that the promises execs make on acquisitions are meaningless. They own the thing, they will do what they want to with it. It doesn't matter how many nice sounds Mayer makes on the deal. At the core she cares not one bit what the users of Tumblr think. She's saying what she needs to say to make the deal happen.

I have some intuition about this myself, because I sold a company. We were bought because we had a presence in the Mac market, which was highly coveted at the time. I negotiated for myself a role as the "Chief Architect of Symantec's Mac strategy." A few weeks after the deal I made a presentation to the exec staff about what our Mac strategy would be. Only one person showed up, the president of the company, Gordon Eubanks. He watched a couple of slides and thanked me for the input. I asked What about my chief architect role? He told me that was something they told me to get me to do the deal.

He left the room. What was I going to do? What could I do? Nothing, that's what. :-)

Moral of the story: When you sell your company, no matter what promises were made, you sold it. It's theirs now. They will do what they want to with it. Promises don't matter."
In my experience, Dave is 100% correct.  Just think of all the companies that the Yahoos and Google of the world have bought and killed.  It's happened to some of my investments as well.

I don't begrudge my founders the opportunity to make a ton of money.  I'm as greedy as the next guy.  But you need to recognize that the only way to retain real "ownership" over the business (not just a financial interest) is to stay independent.

Until the deal closes, you're being recruited.  But once you sign, you lose all your leverage.  Keep that in mind when you're negotiating to sell your company.

1 comment:

ranndino said...

I thought this was obvious. As in duh! Amazes me how many otherwise intelligent people lack common sense and have idealistic, unrealistic expectations. If you sell a car you don't expect to keep driving it once in a while and the owner can push it off a cliff 10 sec after the sale. Everyone seems to get that. Why is it different with companies?