Ask HN: Does disrupt mean unnerve established player, so player must buy you?

https://news.ycombinator.com/item?id=9990937

by hessenwolf • 11 years ago

11 8 11 years ago

news.ycombinator.com

klinskyc• 11 years ago

No. Uber is "disrupting" the taxi industry, but has no intention of being bought out.

hessenwolf2• 11 years ago

Okay, so it certainly does not 'only' mean that. I am thinking a lot of the insurance industry, e.g, the wifi toothbrush (http://beamtoothbrush.com/). This is what started my train of thought.

When venture capitalists look at exit strategies, one strong possibility is to threaten to take market share, even unprofitably, from a cash-rich incumbent.

Mahn• 11 years ago

Probably something more along the lines of "big change that will piss some people off", but it's really just a buzzword, you can have it mean whatever you want.

tomasien• 11 years ago

There's a weird period during things that appear truly disruptive where the established player may try to buy you. This happens when it becomes clear there's a non-zero chance that the established player may quickly become extinct because of the new player's growth, however it is still not inevitable. Lately, the most prominent examples of this have come with Facebook's successful and failed acquisitions. For example:

Instagram in Apr. 2012: Facebook is about photos, but it wasn't crushing mobile like it is today. Instagram was, but it still wasn't clear whether Instagram's growth would top out or what monetization would look like. Facebook made a $1bn offer that many thought was crazy, but Instagram is now worth (by many estimates) 30-50x that.

ON THE OTHER HAND:

Snapchat ~Nov 2013: Snapchat pioneered an entirely new way to interact with photos on a phone - another existential crisis for Facebook. Facebook offers $3bn in cash. To an extent FAR greater than when Zuck made the offer to Instagram, people were aligned in saying Evan S should take the offer. Snapchat, after all, in many people's minds was about sexting and distasteful things - take the money. Growth would top out eventually, people would get over it. Evan, however, disagreed - Snapchat wasn't mostly used for sexting, it was used for sharing moments. And it was working, and in fact it had become inevitable to him. Zuck went through the same thing getting offers from Yahoo and Microsoft at Facebook, and he was right. Evan, FWIW, I think is also right - Snapchat is going to change the game.

davidgerard• 11 years ago

That or "blatantly break laws and hope you make money fast enough". Worked for Uber, didn't work so well for Sand Hill.

kartikm• 11 years ago

Assuming what you are doing is disrupting the industry, the end goal will almost entirely depend on the degree of conviction which the Founder / CEO has in their company and their motivations / aspirations. Of course, the funny thing about motivations and aspirations is that they could appear clear till the time there is an inflection point in the business and results surpass expectations. Knowing you are spearheading and are part of a 'cult-backed' growth can often set back your prior motivations of cashing out on a big payoff from an established player.

Why stop now and if I do, what do I do next? Can I ever replicate this high again?

So an acquisition by an established player or an IPO to further cement your position is ultimately a function of what underlying motivation is driving the leader. Just like everything else, motivation nowadays is often as fluid and agile as the product you are developing.

michaelochurch• 11 years ago

Well, not originally.

Disruption isn't always a good thing. Established newspapers getting squeezed out by unreliable and biased sources like blogs isn't a good thing. Both sources of information have their place, but we don't want to live in a world where people can't tell the difference between the New York Times and Breitbart.

At this point, most VC-funded startups are audition projects for product managers who'd rather manage up into investors than corporate executives. If they succeed (get bought on favorable terms) then they skip a couple rungs on the ladder and get to be executives at an earlier age than they'd otherwise get. If they fail, they either get acquired on worse terms (acqui-severance) or they have to suck up to their investors enough to get an EIR gig and repair their reputations.

Established players in tech aren't "unnerved" by startups. They don't fear startups, and they don't fear mediocrity. They know that most startups can't threaten them, and the things that do threaten established players are "unknown unknowns" that no one even thought about. Companies aren't killed by competitors, but by an inability to adapt to new means of doing business (usually because upper management is afraid to compete internally with the existing company and factions).

Besides, most acquisitions in the Valley are cases of favors being paid back. It's not that MegaCorp's CEO says "oh shit, we have to buy IUsedThisToilet before Google buys it"). It's that some VP in MegaCorp owes a venture capitalist a favor and is willing to spend $850 million of his company's money to clear the score. And most people who are involved in purchasing decisions get kickbacks, not of an overt monetary kind (because that would be illegal) but in terms of long-term career support and job placement. Often, the guy who decides to buy a dipshit startup for $2 billion will get, a year later, a VP-level position in a "unicorn" with 5% equity and zero responsibilities. Since the appearance is of an unrelated, merit-based job offer, all parties avoid getting in legal trouble for the kickback.

hessenwolf2• 11 years ago

Any examples for the latter?

Ask HN: Does disrupt mean unnerve established player, so player must buy you?

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