[HollywoodZero]

Isn't this the typical corporate acquisition process?

* Bring in Deloitte, McKenzie, or other consulting group.

* Gut the acquired company to reduce costs.

* Fold newly acquired divisions into existing mediocre division.

* Service gets run into the ground without the original people who made it great.

* Eventually the service degrades and customers leave, business line stops generating profits

* Company goes through the process again.

[Hokusai]

I have seen that with General Electric.

It's not easy to know when is the right time to jump your old trusted provider. At the beginning of the acquisition not much happens. Things degrade slowly because employees take the burden of doing the job for two people. But nobody can be subjected to the stress for too many years.

Big corporations create nothing, only abuse the good faith of employees and the cost of moving providers of small companies. I have seen that happening in tech. When small innovative companies grew they got enough economic power to not have to innovate anymore. Purchase small good companies and drain them is the new business model.

And it's a shame, there was a time that liked IBM, and others.

[rileyphone]

Gives me the unpleasant thought of how much value is destroyed and lost in these mindless corporate acquisitions. Incentives are broadly misaligned with what we should want as a society, instead investors want a payday as well as founders, and the acquiring corporation wants a fresh coat of paint and has access to the finance that can make it happen and only hurts 10 years later. In the end promising human efforts are destroyed because the rewards for doing so are too great.

[jahewson]

OTOH the average startup is garbage held together with duct tape that naturally falls apart without the founding team who created it. By the time of acquisition it’s usually reached a point of technical debt bankruptcy. This goes hand-in-hand with an over-heated sales team pushing hockey-stick growth that will crash back down when those brand-new customers churn at the next renewal - because the product, while nice-looking, is unmaintainable garbage.

Nice payday for the founding team and the ticking time bomb is paid for out of bigcorp’s wallet. They go on to great new things and the eventual demise of their garbage pile will be blamed on bigcorp.

Not to say that large companies don’t destroy value - they absolutely do, frequently - but that the main error they make is not being able to appraise which startups are smoke and mirrors and which are legit. The rest of us are not so great at it either.

[thomasahle]

> This goes hand-in-hand with an over-heated sales team pushing hockey-stick growth

This seems like just another argument for limiting startup acquires. Perhaps if a big exit wasn't the goal, the company would focus on more long term viability.

Anyway, I don't think they big companies care as much about whether they destroy value, as long as they destroy a potential competitor.

[jahewson]

I see competition often being less about the startup and more about which other competing big tech company could buy the startup to consolidate an existing market strategy. I’d more charitably call it “revenue protection” to preemptively acquire them.

Startup acquisitions, in the absence of astoundingly deep due-diligence should probably be placed in portfolios where a 5:1 failure rate can be tolerated. I’m not sure how such an acquisition would be compensated.

[rtkwe]

It's not just the company internally that want (needs?) those big exits, the whole VC architecture is built around shot gunning out money for the occasional huge pay off.

[belter]

After being on the inside of many of these, can confirm 100%, this post could not be more accurate:-)