Web Summit’s strange theme: The joys of selling out your startup dreams

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2014-11-05-03-27-35

 

Who knows if there was any grand master plan behind getting the founders of Tumblr, Oculus VR, and Nest to all speak this week at the Web Summit in Dublin. But the founders of these companies all struck a common theme that was a bit surprising at a conference about entrepreneurship:

How I quit worrying and learned to love selling my startup.

That’s a great message if you’re a tech giant stalking startup prey and trying to convince founders with big dreams of world domination to instead become a division of a global corporation. And while the IPO has long been the mythical brass ring in terms of exits, the reality is that an acquisition is the far more likely best-case outcome for startups.

Still, rather than talking about how you can be the next Google or Facebook, the founders of these companies did their best to make a persuasive case that selling your company to them can be a wonderful experience.

Each founder touted the fact that what might otherwise seem like a sour pill to swallow was otherwise sweetened by the fact that they retained a good deal of independence or autonomy within their new corporate cocoons.

Perhaps the top reason cited by each founder for selling was the ability to scale more quickly. Tony Fadell, chief executive of Nest, said his company had expanded into far more countries, far faster than it could have on its own thanks to Google. He said the technical, logistical, cultural and regulatory issues were massive and that Google (which bought Nest for $3.2 billion earlier this year) played a huge role in overcoming them.

“Well for us, we were able to come to Europe much more quickly,” Fadell said on the main stage this week. “We have a lot of work to do and Google has brought a lot of resources to bear to help us with that.”

Oculus chief executive Brendan Iribe also said since Facebook acquired his company for $2 billion back in March that it has been able to scale up much faster. Iribe, who repeatedly used the word “partnership” to describe the relationship, said Facebook has helped the company grow from 75 to 200 employees by using its resources to help recruit and hire talent.

And Iribe said Facebook enabled Oculus to set up a separate R&D group, something it couldn’t have done on its own.

“Typically it’s pretty hard for a startup to have a whole separate research group while you’re also still just trying to build the product,” Iribe said.

Tumblr founder David Karp said being part of Yahoo (which bought Tumblr for $1.1 billion in 2013) had allowed the company to grow its user base more quickly. But he also said it had accelerated its efforts to generate revenue.

During Yahoo’s most recent earnings call, chief executive Marissa Mayer surprised analysts by revealing that Tumblr is expected to generate $100 million in revenue in 2015, making the subsidiary profitable on an operational basis. Mayer said Tumblr’s sponsored advertising was on the rise thanks to an audience that has grown 40% to 420 million since being acquired.

Karp said the ability to plug into Yahoo’s ad platform had saved Tumblr years of work.

“A lot of that is a credit to the investment and support from Yahoo,” Karp said. “That was a huge piece of technology which if we had to build from scratch would have taken us certainly a couple of more years.

Each founder, particularly Karp and Iribe, said they had to deal with some small amount of backlash from a passionate user base who worried their new corporate masters would ruin the product. In the case of Nest, the anxiety was more about the fear of what Google wanted to do with the data from smart devices in people’s homes.

But they each said eventually, those anxieties subsided and that users realized that the sale was not, in fact, the apocalypse.

About the only counterpoint to the happy acquisition talk this week came from Dropbox founder Drew Houston. Speaking on the main stage, he recounted the famous story of how Steve Jobs called him in early days to come to Apple to discuss a possible partnership or acquisition. The discussions never went any further.

And Houston emphasized, for those wondering if Dropbox might be for sale: “That was the last time we had a conversation like that.”

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