Exploiting Silicon Valley For Profit (and Maybe Fun)

[seiji]

Disturbingly accurate.

• Make a sufficiently shiny, yet imminently disposable product.

• Hoard employees (each one bumps your valuation by ~$1.5 million), be loud, get acquired.

• Kill product. (You never cared about it anyway -- it was just a vehicle for ego and attention. Now that you've got your $5 million, you don't need the validation of all those silly pawns/customers anymore.)

[DanielRibeiro]

Heard this recently, with a little more background history, and little less humor: http://www.youtube.com/watch?list=LL1tJgy-O6EgwisFV559z43w&#...

[ryanlchan]

What worries me, more than the accuracy of the story or not, is the overwhelming level of agreement from commentators. There's a pervasive sense of cynicism blanketing the tech start up world, but for some reason we're all still in the game.

There's a certain amount of hypocrisy you have to accept. We do this to ourselves. No one on HN would think worse of themselves for achieving a $5M exit, yet we are happy to vilify those who do.

Where are the founders of the next GE? The next IBM? Those who seek to solve the fundamental problems society faces? I'm not asking about space ships and world hunger. I'm just talking about solving real, concrete, long term business problems. The ultimate filter on this is simple: If your product were to disappear, would your customers' quality of life significantly decrease?

[vertr]

If new startups agreed that they wouldn't leave their users out to dry if they got acquired would you be more likely to trust them and use their service?

[tptacek]

So I liked this, like everything else Diego writes, but this graf doesn't ring true to me:

Joe and Wayne work on building something they know GooBook could acquire without looking stupid. Something they might be able to do in-house, except their most talented engineers are desperately working on ways to extract more money out of ads, or to reduce the costs of their gargantuan infrastructure. Some are stationed in Antarctica building a self-cooling datacenter; others are diverted from creative projects into the new 99.9999999999% uptime initiative: one second of downtime costs a million dollars. Forget that stupid 18% free-time web app project, and come help make some mon-ay. The quarterly report must look good. Shareholders demand it!

Working on self-cooling data centers sounds awesome to me, & also penguins. But more importantly: the 99.9999999999% uptime initiative that saves a million dollars for every second rescued sounds awesome to me. Developers are rarely so privileged as to work on problems that are simultaneously hard, well capitalized, and easily quantifiable.

"Mon-nay"? This paragraph reminds me painfully of how mouthy I was when I was 24 and had just had the company where I was an early employee be acquired by a BigCo.

[diego]

Of course it's awesome to work on those problems. The point I was trying to make is that in this case the company has to choose between innovating for the long term, and solving urgent problems that mean lots of $ in the short term. Internal venture projects tend to be put on the back burner when your best engineers could save 50M by optimizing the hell out of your backend.

[seiji]

I think the key point was diverted from. The employees aren't doing what they want anymore, so some stable "we can always get acquihired by google again when we fail" startup is attractive. As employee 3, they will walk away with a huge 0.5% of the exit while the founders walk away with 35% each.

how mouthy I was when I was 24

Welcome to The Bay Area: where self worth is measured by frat-like posturing and manipulation to level up at any cost.

[bengl3rt]

Also, $6m really isn't that much these days. Might get you a nice house in the Silly Valley and a few years of living expenses, but that's not "set for life" money if you're in your 20s.

[jconley]

The acquihire is just the Dot Com Ferrari signing bonus of the new age. Except now you have to prove you can actually take risk and get shit done before they give you the Ferrari. Seems reasonable.

[jcc80]

By now they have some traction: hundreds of thousands of users, some of whom are even real.

I wonder what percentage of users are generally fake and how much some startups goose this number. Maybe adding in 5% worth of fake users increases an acquisition price. I'd imagine it varies by the type of app (CRM, social, etc) but that you'd probably have to get your next funding from the Salvation Army if/when you get caught.

[seiji]

There exist companies where you pay $100 and get 1000 to 10,000 people (read: south east asians) to sign up to your service.

CEOs have been invited to conferences to speak about their "sudden rapid growth." They never admit they are cheating. You can usually tell who does it because their traffic will abruptly stop once they realize the 100,000 one-time-login users in Singapore aren't virally spreading or clicking on ads.

[smattiso]

Anybody have any firsthand knowledge on how prevalent things like this happen? Seeing as how his company was acquired by LinkedIn, is he admitting this was his strategy?

[jhandl]

You think he started a search as a service company because he was targeting LinkedIn?

Flaptor (the name of the company, IndexTank was the product) was a search consulting company five years before becoming a startup. I know, I was there.

[endlessvoid94]

a lot.

[maxko87]

This is exactly why people consider the valley to be a huge bubble. This kind of "innovation" isn't sustainable at all.

[dsrguru]

But what makes it not sustainable? As long as there exist a few GooBooks, won't acquisitions continue to be sought?

[villagefool]

A bit ironic that he sarcastically referees to HN as "Hacker Noise" but then at the end invites people to discuss the post on it.

[graue]

I didn't interpret that as a dig at HN, any more than "GooBook" is a dig at Google and Facebook... He just changed the names to make it clear his story is fictional.

[mck-]

Is this the real story (and motivation) behind IndexTank?

[wslh]

Even if it is inspired on IndexTank the difference is that IndexTank was a very valuable service and ended being an open source project. We can think of IndexTank as a kickstarter project now!

[gregholmberg]

Google, Bing and HN Search all think that "Hacker Noise" is a neologism.

[gruseom]

"GooBook" and "SoSoMa" are pretty funny, but "Hacker Noise" is brilliant. A direct hit!

[Estragon]

I'm curious, is the name "ZombiePlatypus" a reference to any specific recently acquired startups with monsters and animals in their names?

[villagefool]

By the way, how much of this post is IndexTank's own story?

[Nikkki]

As long as all the parties profit from this kind of business there is nothing wrong with it. See for example Android. Whoever thought it would be what it is for Google today for Google?

[mark-r]

I nearly burst out laughing when I read "Hacker Noise".

[rudiger]

Except this isn't how people are making 5+ million dollars in practice.

[chrisyeh]

Sad, but true.

[EternalFury]

Sometimes someone says something true. When that happens, it has to be veiled in the appearance of a satire because no one wants to admit the world really works that way.

[acoyfellow]

I've never been so glad I'm on the other side of the country..

[ema]

If that is the price the world has to pay for the occasional google so be it.

[doug_ludlow]

This is easily one of the most honest and true posts I've read about Valley culture in a long, long time.

Having been through this exact process, I can assure you that this is how it really works.

[kokey]

The strange thing is it reminds me of the late 90s, the GooBook back then were companies like Cisco.

[gruseom]

Would be interested in hearing about your process if you'd care to tell us.

[rudiger]

If you look at all the people making 6 million dollar paydays, is this really how it works? I suspect not, but I don't have the data to back that assertion.