[majani]

Buddy exits like this one and the Hunch exit are very demoralising. They make startups look like some sort of game. As you indicated, Loopt was clearly dying ( http://www.google.com/insights/search/#q=loopt.com&cmpt=... ) and yet people still got rich off of it.

Product + Hype -> Big Exit is starting to seem like a perfectly legitimate business plan nowadays.

[webwright]

I think calling this a "buddy exit" isn't really fair. Same with Hunch. That's like calling Next selling to Apple a "buddy exit". If Square went south, what kind of exit could they command based on Jack and his team? If Facebook was dying, what would Zuck and his team be worth?

Sam and Chris are both brilliant guys and great BRANDS. Not Steve Jobs great-- but great nonetheless. Guys like this attract A-players and attract PR. Could Sam and his group have $43M in impact for the buyer? Surely.

Listen, success is just a big multiplication formula. If your "leadership brand" number is high enough, you just about can't lose. But that holds true for any other number in the formula (product awesomeness, timing, marketing, business model, etc).

[underwater]

> Sam and Chris are both brilliant guys and great BRANDS [...] Guys like this attract A-players and attract PR.

What about the minor things like, you know, making money? They took 17 million in funding and failed. But that's OK because they're buddies with the VC's and can try, try again.

[webwright]

You should consider your tone here. It's unwarranted. You literally know nothing about what went on here, know nothing about the value that they're are getting (patents? team?).

Is it okay/smart for Facebook to buy/hire a team of 4 engineers for $8M or is that because they are buddies with VCs? I assume Loopt had an engineering team of 20+. Is it that out of bounds to think that that (plus patents and perhaps some tech) could have an eventual financial impact of more than $43M?

[underwater]

I question your original assertion that these two guys deserve success because they are great brands and can attract PR.

Their job was to grow Loopt and make money. They failed to do that. So either they're not as brilliant as you say or that stuff isn't as important as you make it out to be. Result matter. Whether you're a great brand shouldn't.

[blasterford]

If the team were worth that much, then they would have made Loopt astoundingly profitable in the last 7 years, and we'd all be using it.

Judge people on their success/failure. Not on what other people think of them.

Loopt was a flawed, quickly obsoleted idea. That was pretty obvious from the outset.

[webwright]

"If the team were worth that much, then they would have made Loopt astoundingly profitable in the last 7 years, and we'd all be using it."

Great teams can attack crappy markets or just get the timing wrong. The leadership team that brought Apple back from the brink was the same team that built NeXT. Next wasn't astoundingly profitable and none of us were using it.

[coffeemug]

Plenty of great teams never see the light of day, and plenty of mediocre teams have huge successes. Luck matters.

[nitrogen]

Note to blasterford: it looks like your subsequent comments after this one are [dead], possibly due to repeated flagging.

[nitrogen]

[responding to myself since both child comments are [dead] -- I hope you see this]

blasterford2 2 hours ago | link [dead]

Thanks hackernews for silently banning my account for posting a couple of non-abusive, pretty well backed up opinions.

Well done! Censorship at its best.

Hacker news used to be good. What the hell happened.

Be careful what you say on HN. If it goes against the agenda of YC or is critical of past YC funded companies, you'll be banned.

I think it's just that the anti-spam/anti-troll algorithms have become very sensitive to flagging and/or downvotes. I think I heard that greater weight is given to flags and downvotes by highly respected users (the list of which which is probably also algorithmically determined). Some of those weighted users are bound to be human and (over)react to criticism of their friends-of-friends' companies with flags or downvotes.

An example: a while ago I reluctantly clicked "flag" on a comment that really didn't belong, to the extent of warranting more than a downvote (which I also do incredibly rarely). I must have been among the flags+votes that pushed the comment over some algorithmic threshold, as the comment immediately became [dead]. Your second account, created for this comment, probably met the same fate due to the comment's reactionary nature.

I know what it feels like to worry about being cut off from a community. A few weeks ago I read about another account that got auto-killed, and the user didn't figure it out for quite a long time. I ran a couple of tests on my account to see if I was "slow banned" and accidentally scared myself by not realizing that the HN delay setting has an upper bound of 10m. My delay setting was 20m, so it took me a couple of days to figure out why my posts started out [dead] for 10m. I eventually found the original thread where pg explained the delay setting, the only place where the 10m max delay is mentioned, and realized what was going on.

I do agree that some topics on HN elicit more downvoting and flagging than they should. I ardently avoid commenting on any Apple-related articles, for example. Most of the risky topics can still be addressed by wording one's comments more carefully, but sometimes even the most insightful comment will be met with downvotes.

I used to get my intellectual discussion fix from the Off Topic thread on Groklaw. I discovered Hacker News when someone posted a link to YCombinator and slowly became converted. I finally left Groklaw when I realized that it achieved its S/N ratio in large measure by aggressive human intervention and moderation (and... getting face-slapped by Peter H. Salus, who had (has?) a lot of sway on Groklaw, certainly helped my decision to leave). I'm a technology lover to the core, so I'll take HN's touchy human-guided anti-spam algorithms over a 100% human-driven system any day.

I haven't found any place quite like Hacker News. It's not quite as nice as it was when I first joined (back then the existing HN regulars joined forces to fill the front page with articles about esoteric programming languages like Erlang to drive away a recent influx of new traffic, of which I was a part -- those articles convinced me to stay). However, the comment quality on most of the articles I read still exceeds anything I've found anywhere else. Try reading a comment thread on Ars Technica, for example -- full of trolls, shills, and overreactions.

I'm in no way connected to HN or YC, apart from unsuccessfully applying to YC quite a while ago. I've just sort of taken it upon myself to find [dead] accounts that I don't think deserve to be so and post comments like this one. As such I hope you'll give HN another chance (adjust your commenting strategy, and maybe try e-mailing someone at YC about your existing account -- tracking down such an e-mail address is left as an exercise for the reader). [I also hope I'm not upsetting pg or the YC alumni who serve as moderators by posting these comments - please say so if you'd like me to stop]

[pg]

I know you meant this to be a nasty remark, but do you realize you're actually saying something very nice about VCs? You're saying that they're driven by loyalty to their friends rather than by profit.

That isn't really true. The main reason most VCs are friends with people is because they think they can make money out of them in the future. But it shows how far into falsehood you've leaned in your attempt to be nasty when you end up unintentionally implying something so nice it isn't true.

[freshhawk]

I think you're missing his point here.

That VC money is investor money. These aren't angels being nice with their own money, these are VC's playing fast and loose with their investors money and it's not ethical behaviour.

[jarek]

I'm not seeing where GP indicates they don't realize that VCs' loyalty to their buddies can easily bring them in profit in the long term.

[pg]

Loyalty to their buddies only brings the VCs profit in the long term if their buddies are good, which is exactly the point of webwright's that underwater is trying to contradict.

[jarek]

That boils down to the efficient markets claim. Unfortunately we've seen a lot of counterexamples for that. As just one popular example, Wall Street - the people that, among others, underwrite tech IPOs that go on to pop 50% and 100% - is profitable in the long term for people in the front office, and buddy-based for people in the front office. Would you say most people's buddies there are "good"?

[anon808]

"Could Sam and his group have $43M in impact for the buyer?"

what do you mean by impact? how can this even be measured?

"If your "leadership brand" number is high enough, you just about can't lose. "

again, what does leadership brand mean? And what does it have to do with building a business that earns money/makes profit (revenue - expenses). Just because something/someone has market or exchange value, doesn't mean they have use value. If the goal is to sucker some large corporation out of a small chunk of cash (small for the large corp) be upfront about it. But saying there's some higher form of value that 'brands' bring that has nothing to do with building profitable businesses is disingenuous. Steve Jobs built companies that earned money (from business operations, not financial market operations). HUGE difference.

[webwright]

"But saying there's some higher form of value that 'brands' bring that has nothing to do with building profitable businesses is disingenuous."

Where the heck did I say that? I said building profitable businesses is a formula and leadership/brands are a multiplier in that (very complex) formula.

I'm saying that A-Players with great brands have value. It's pretty hard to unravel that value. What's the financial impact of bringing Jobs back to Apple? What was the financial impact of Google buying Android? What would the financial impact be if I was running Square instead of Jack Dorsey? There's no way to know. But you can't disregard the impact of great people because you can't precisely measure it is wrong.

[anon808]

you said success is a formula, and because you were talking about an exit for an unprofitable company as being a success, it seemed logical to me that you ranked ceo 'brand' value over business profitability.

People have value (in general), calling some people A-players is trying to ascribe value to some, and as you say, that's hard to unravel. I agree ranking and valuing people is hard/impossible, why should we try . . . why are you trying? Why not let people show their own value by doing great things. I don't disregard the value, i just admit that we don't know it, the only thing we do know is if a business made money or not. It doesn't mean the person that started a shitty business is also shitty, but it also doesn't mean they're a success if all the sudden someone bestowed a crown of exit on them.

[richcollins]

Next was profitable. OS X and iOS are Next. Care to make a long bet on how much of Loopt tech is still around in 5 years?

[webwright]

Next was profitable? Do you have a source for that? They raised hundreds of millions of dollars and sold 50,000 units. In '93, Canon plowed a second investment in to keep them afloat. Even with the new $, they laid off 300 of 540 employees. They couldn't sell their hardware operations and went pure software. I'm not saying they toss out all of the tech, but calling NeXT profitable is just plain false. It was a failed company with great leadership. Certainly there was some technical value in the deal, but much of the $429M paid was for Jobs and the people he had working with him.

[philwelch]

Profitable, but underwater. NeXT sold to Apple for half a billion when over a billion in funding had been pumped into it (let alone valuation).

NeXT alone was never going to do what Apple has done. Apple had a sustainable hardware business (after being fixed up a little with sexy designs) that gave them enough manufacturing leverage to do iPod, and iPod gave them enough operations leverage and economy-of-scale to do what they're doing now.

[Alex3917]

"Care to make a long bet on how much of Loopt tech is still around in 5 years?"

More of it than is around now. Location based apps are just getting started.

I think there is sort of a last mile problem for data, in the same way that there is a last mile problem for hardware. As much people come to see the world this way I think we will end up with more and more possibilities for local social than we can currently even imagine. I think this acquisition will be a good opportunity, as Loopt will effectively be able to use these financial tools as bait to get more people into their system.

[cft]

Blogger was sold to Google for $5mm, not as buddy exit, but as a regular exit. I guess Loopt has eight times more potential.

[temphn]

Sales is part of doing a startup. Selling the company is the biggest sale. You have to give them props for finding the people willing to buy.

Additionally, Loopt (being founded in 2005) did a ton of work that was obsolesced by the iPhone and ubiquitous GPS. Their timing was off, but you really can't fault them for giving it the college try. At a minimum GreenDot's internal engineering capacity has been massively upgraded.

[bitterfounder0]

Demoralizing indeed.

Google's acquisition of Slide for $100m crushed me. Myself and several others built more successful companies. We had 10x the userbase, larger profits (assuming this based on userbase), and fewer employees (team of 3 here). The difference was I was bootstrapped and working in stealth.

Lesson's learned: avoid bootstrapping. Raise venture capital from well networked investors. Do not work in stealth mode. Do a lot of PR. Be loud!

This ensures that the failure of your company will be an embarrassment for your investors. The louder the better. They will be inclined to have a friend buy you out to save face.

Disclaimer. I'm not saying that should be your primary goal. Goal number one should be passionately building a product you love. A buddy exit is simply a safety net.

[anon808]

don't be demoralized, and don't let others decide how you should run your business or what you should value. if you have a profitable business be happy with your success and build on it. lottery winners happen every day, don't let that ruin building great products and businesses for you. the problem with outside investors (any investors, VCs, angels etc.) is that your business automatically inherits their values, and if their values are different enough from yours the friction could destroy your business and/or destroy your values.

[sbov]

At some point, depending upon why they're buying, I think having fewer employees is a bad thing. It means whoever is acquiring you has to do more work to turn it into a fully fledged business. At least that's the sentiment I heard when our startup sold (4 employees total).

[drusenko]

It's no secret that the "going rate" for startups that are successful and get acqui-hired is $1-2M per engineer.

It's hard for big companies to find talented engineers, and so when they acqui-hire, they can just instantly shuffle those smart people out of the project they're working on and onto something else.

The bet is that each smart engineer will provide at least $1-2M of value to the company in the long-run.