[spamizbad]

I'm not a business expert or an entrepreneur, but I've been around this industry long enough to know: Unless your intention is to flip your startup into an acquisition, I would recommend against plays like this.

Specifically, tying yourself up to a closed ecosystem by building what amounts to a (albeit very nice and powerful) super-feature.

I am saying this because I work for a large-ish company where someone did this to a section of our product that was also mediocre. One of our co-founders reached out to the company and actually offered to buy them for, what I felt, was an insanely high amount for what they were building. They rejected the offer so we threw some devs and an awesome designer at the problem, made something just as good, and then shut them out. They ultimately shut down.

[fy20]

It can work the other way around too. Early in my career I was working for a company that provided value added services in the telecommunications space. We grew quite large, working with household name brands in Northern Europe. However everything we did went through a single third party provider - we didn't communicate directly with telecommunications companies.

This provider did an ok job, however at the volumes we were processing it meant we were paying them a pretty handsome sum - which the owners (we were privately held without any outside investment) wanted to reduce to increase their profit margin. We made an offer to buy this provider, but they knew how much we were depending on them, and made a counter offer much higher, which we refused.

We started building out our own platform to connect directly to the telecommunications companies, which if you've ever worked in this space, you will know it's no easy task. Although there are standards, each company does things slightly differently, so each integration is effectively from scratch. To make it even harder, the process of migrating phone numbers etc is effectively turn it off in one place and turn it on in the new place, there is no gradual switch over. After the failed negotiations our provider did not want to cooperate with this (any more than they legally had to) and they gave us a hard deadline after which they would turn off all our services. Any major issues during this migration could take weeks to resolve, and would surely result in large customers leaving which could be the end of our company.

But in the end we did it. The migration over to our platform worked without any major issues, and we were even able to build in extra features that our provider didn't have.

And the icing on the cake: a year or so later we bought that provider. As we were their biggest customer - by a long way - they lost a big chunk of business. What we paid for them was much lower than the original offer we made.

[imtringued]

These revenge stories may sound nice but the sad thing is that people are so petty to begin with.

[spaceman_2020]

But at the same time, if you are bootstrapped, profitable and can iterate fast, building on top of an existing platform is a fantastic way to get customers. You have a captive audience, you can understand the market easily, and can launch products fast since the tech stack is already well defined.

Not every business has to be sold for $100M or be around forever. A well-run bootstrapped startup like the OP’s can make you millions if it survives just 3-4 years.

[ketzo]

Yeah, seriously -- everyone in this thread seems to be talking about this like a story of failure, and I... don't really get that?

There aren't a lot of hard numbers in the post, but it sounds like Checkout X grossed in the high 7-figure to low 8-figure range, in ~four years, while paying (not very many) Eastern European salaries. The founder alone probably came away with a few million dollars!

[altdataseller]

Exactly, and people are forgetting what's the alternative? Doing absolutely nothing, twiddling your thumbs because you CAN'T find another good market opportunity and earning less?

[sjducb]

This guy clearly made several million euros. That’s a massive win.

Sure founding a billion euro company is better, but if you don’t have a billion euro idea then starting a million euro company is worthwhile.

[nolok]

> Specifically, tying yourself up to a closed ecosystem by building what amounts to a (albeit very nice and powerful) super-feature.

Couldn't agree more. It goes something like this :

"What do you offer ?"

"Feature X on top of Y"

"What stops Y from doing it themselves ?"

Either A "Well it's not worth it" (then why do you do it), or B "Well, they haven't so far ..." in which case you have an end date already, you just don't know it yet and it's in the hands of Y.

As you said, planning to be aquired is probably the best move, second one being to plan your independence (imgur to reddit like), because otherwise your company has no real future.

[withinboredom]

Usually it's "C. Because they don't care." It's when you start walking away with millions that they could have had, had they cared, that they will suddenly care.

[adamckay]

> otherwise your company has no real future

That's not necessarily as bad as it sounds, though.

If the future where your company can exist is long enough for you to learn some valuable things and make decent money, it's obviously worth it.

[wes_walke]

The guy made millions of dollars. I'd say it was very worthwhile for him.

[HWR_14]

I feel fairly confident your "insanely high amount" wasn't as high as you feel it was.

[spamizbad]

For a product built by 2 people it was enough for both of them to retire (albeit humbly) or seed a more ambitious company.

Anyway, their best move was to take the money. They gambled that, even after noticing their work and our customer's feedback, we wouldn't turn around make our product better. They lost that bet.

[HWR_14]

That sounds about where I was thinking. You have to imagine that you're not paying as much for the product as a sign on bonus for the talent that has demonstrated the ability to improve the value of your product quite a bit over the four years of being locked in.

[Dylan16807]

Enough money to retire on sounds even more like an "insanely high amount" when I think of it as a sign-on bonus.

[HWR_14]

I assume that means that the offer is the company purchased for just under 2 million dollars. Maybe a bit more, maybe some seed investors take a small percentage. Let's assume each founder takes almost a million dollars. I would understanding feeling weird paying almost 2 million for something that I can get done with 6 man-months. That is a lot of money! Enough to retire humbly or seed their next start up. But it's also something they will only get (or only get most of) over a 4-year vesting period.

So it's a 250k/year boost. That's again a lot. But that difference might also be what they can make at Google instead of a startup salary-wise.

But think about who they are hiring. People who have proven they can find new places to add value.

I'm making up numbers. But the point is that if you think about selling the next four years of your life (and not just the time spent on the company already), it is certainly reasonable and might be a good outcome. But it also might be worth turning down.

But maybe my guesses are totally off. Maybe he meant "retire humbly but continue to live in SF" instead of "take your money and retire to a ranch somewhere"

[adwn]

If it was much higher than what they ultimately spent on reproducing the product, then yes, "insanely high amount" might actually be an appropriate assessment.

[HWR_14]

Considering the "for what they were building." I assume that was the poster's thinking. On the other hand, there is value in acquihiring people who can see a need in your product you overlook and want to make it better. Sure, that feature was cheaper, but that's not all you buy.

[pixl97]

Better than 0 I guess

[varispeed]

Hacker News is a funny place. Few days ago I pointed out something similar - that first thing investors look at is how easily someone can eat your lunch? and got heavily downvoted.

These ideas are only bootstrappable, because nobody is going to put their money into it, apart from founders having a dream, but everyone else seeing that competitor can wipe them by just assigning a team to build that extra feature in their product.

Don't get me wrong - it doesn't mean you shouldn't do it. If you don't care much about money and value experience more, that is an extremely exciting journey to take oneself through and also sometimes dreams come true!

[liquidise]

I had the same thought. There is a a lot of value to be created with moves like this, but it is risky and does not have a long shelf life. Not necessarily a bad business play, but should be expected to be a short-lived one either way.

[emrah]

It's called "platform risk". It can reduce risk to find customers or be the ultimate risk by killing your product (intentionally or unintentionally)

[dasil003]

Sure, that's the conventional wisdom, but it seems sort of out of context here. This guy gambled and won, bootstrapping a €600k MRR business which is still printing money to this day (Shopify killed the growth, not the business). This guys already made more money than the majority of European developers do in their entire career. I fail to see the downside.

[alberth]

Agreed

Apollo fell into this bucket as well (with Reddit).

Never understood why more didn’t realize that.

[notJim]

Apollo had a successful app for years that would never have existed without reddit. It's unfortunate it didn't last forever, but it's not like their efforts were wasted.

[Dylan16807]

How I feel about this depends on what exactly you mean by "shut them out".

[tsunamifury]

What your describe is monopolistic behavior to a T

[notJim]

How so? Shopify has many competitors and is clearly not a monopoly.