An acquisition is always a failure | PandoDaily

By Jake Lodwick
On April 2, 2013

I never intended to become a tech entrepreneur. Growing up in Baltimore, I was focused on Legos, Game Boy, my parents’ video camera, and DOS computer games. I learned Photoshop so I could manipulate photos, and HTML so I could publish them. When video cameras with FireWire ports came out, I learned Premiere and After Effects so I could edit home movies and make ridiculous short films with hokey special effects. I uploaded them to blumpy.org, my crudely named personal website.

When Josh Abramson and Ricky Van Veen saw my work, they emailed me about helping out with CollegeHumor.com, a months-old, primitive (but entertaining) website that was already getting sort of popular. I got right to work, uploading my videos to the site, iterating the interface, and coming up with new features. I learned PHP and MySQL, so users could upload funny pictures (instead of emailing them in), and so we could automate our curation and publishing. Before we knew it, the site was bringing in $10,000 a month, and it became clear that we could do this full-time after graduation instead of getting normal jobs like our classmates.

18 months after graduation, business was booming, and a New Yorker profile sent us into the stratosphere. Overnight, everyone in Manhattan’s media industry was paying attention to us, and we ate it up. I would sit there coding, and Josh would drop a $50,000 check on my desk – that month’s cash distribution. We’d never raised money, and since we had no external shareholders, we simply funneled our profits into our personal bank accounts.

And it wasn’t just CollegeHumor. When Josh incorporated in 2000, he fortuitously called the company “Connected Ventures.” This gave us the mental freedom to work on projects that had little or nothing to do with CollegeHumor. While sites like AllDumb and Campus Hook went nowhere, we found real winners in Busted Tees and Vimeo. There was very little planning involved here; we would have an idea, start working on it, and if it took off, we’d restaff accordingly. Aside from the occasional hangover or internal squabble, nothing stood in the way of our imaginations.

The party ended in 2006, when we sold our company to IAC, a conglomerate owned by media mogul Barry Diller. Bit by bit, the youthful energy that created so much value was siphoned off. Whereas we’d once been free to work on whatever seemed interesting, we now found ourselves in vaguely defined middle-management roles, sitting through pointless meetings where older doofuses who didn’t understand the Web challenged our intuitions and trivialized our ambitions.

Not understanding the nature of IAC, I assumed it was only a matter of weeks before I persuaded my new bosses to adopt our way of thinking of a better approach to consumer tech, with less structure and more play, an exploratory mindset that, through trial-and-error, produces very tangible real-world value. After all, this was how we created the company that *they* bought. But big companies aren’t just big versions of small companies. They’re another class of entity entirely, more concerned with sustaining their own rhythms and control structures than experimenting with strange ideas from acquired ex-founders. It wasn’t long before I was ejected like a virus.

With a fat bank account, I was pretty set to do whatever I wanted for a long time. The sale afforded me the ability to make art, invest in other companies, and unwind. But it didn’t take long to realize that my new life was a hell of a lot less exciting than running an independent company had been.

I typically refer to the IAC sale as “the worst business decision of my life.” I’m not sure IAC is worse than any other large company in this regard. An entrepreneur is someone who, almost artistically, designs a living entity which embodies the values, beliefs, and ambitions of the creator. It’s impossible for a larger entity to swallow a smaller one without completely reshaping it. When this process begins, a wild visionary – the entrepreneur type – is the most toxic, indigestible actor imaginable. And this is why I roll my eyes when a new acquisition is announced: Because I don’t see it as a triumphant graduation but a sacrifice to an industry that is afraid to dream big.

An acquisition, or an aqui-hire, is always a failure. Either the founders failed to achieve their goal, or – far likelier – they failed to dream big enough. The proper ambition for a tech entrepreneur should be to join the ranks of the great tech companies, or, at least, to create a profitable, independent company beloved by employees, customers, and shareholders.

When I moved to San Francisco in 2011 to start Elepath, I was introduced to Kevin Rose, who was doing something similar with a startup called Milk. We talked about the challenges of switching from Web to mobile, and the excitement of starting team-focused companies that raised money without a single, specific product idea. Less than a year later, Milk was gone, slurped into Google after incubating just a single product. I was disappointed, but as an entrepreneur, I understand (and often expect) failure. What I could not tolerate was the reaction to the sale, which was viewed as some sort of triumph for all involved. That Milk’s sale was seen as anything but abject failure disgusted me.

Kevin’s a good guy, and I don’t mean to pick on him personally, as the problem is endemic in this town. Companies are conceived of, financed, and built with the hope of getting noticed by a deep-pocketed suitor and, literally, killed. Because although the human workers remain, the soul of the company – its vision – is discarded like an eggshell. Arguably, a company is nothing but a vision shared by a team of collaborators. And when the vision dies, the visionary fails.

After a big sell-out, your parents might be fooled. They’ll read your press and tell their friends what a big success you are. Heck, even you might be fooled, blotting out any self-critical thoughts with $8,333,333.33, or whatever your cut was. But a visionary is an implementer of visions, not an acquirer of dollars. And if you consider yourself a visionary, the only honest response to your own acquisition is to admit your failure, dust yourself off, and start building your next company.

[Illustration by Hallie Bateman]