Giving into reasonableness (acqui-hires)

Last week, Sparrow became the latest poster boy for talent acquisitions (Google gets the team, kills the product). Paying customers complain (I supported it!). Indie devs get depressed as one of their rank sells out.

I disagree with Matt Gemmell that these are a good thing – this is not a feel-good rags-to-riches story. It’s about brilliant developers giving into reasonableness because they didn’t have the runway to be foolish.

Why is this happening?

Given the situation, everyone is behaving rational:

• The unemployment rate for software developers is 2.5%. The unemployment rate for developers who can build a well-liked app like Sparrow? Zero. Companies will pay $200k/yr+ for those that have proven they can ship great products. A signing bonus, $200k/yr, and parties with caged tigers is a strong opportunity cost if you’re floundering.
• Investors look for homeruns – $50/mil in revenue in four years. They don’t make money on your cash flow: they make it when you get acquired. You’re in trouble if you aren’t on the rocket ship growth path.
• Startups that raise funding aren’t built for profits. They’re spending big from the outset. There’s no infinite runway.

Sparrow, Google, and the investors aren’t bad people. When you take money, you’re accepting that (1) a business that just makes you wealthy isn’t good enough and (2) you need to figure it all out in 4 years. If you’re running out of money and tired from working your butt off, a great signing bonus + salary is an awfully soft landing.

How not to get acqui-hired

First, you need some inspiration. See what Vinod Khosla, a Silicon Valley (gasp) Venture Capitalist has to say on why you need to think beyond getting acquired.

Next, don’t take the cash. Here’s why:

• There’s nothing to prevent you from taking money in the future. Despite what you may have heard, VCs will come to you when you’re growing and profitable. You can go from bootstrapped to billion-dollar company – see Github and Atlassian.
• As rapper/philosopher Drake says “the first million is the hardest”. Figuring how to make money gets easier with more data and customer feedback.
• Perspective. Long-term, you need to be moving toward getting paid what you’re worth. No one likes a developer with an inferiority complex. It may take a couple of years. Like smoking, the effects of not working on something you love slowly adds up over time.
• Time. Raising money takes a lot of it – especially when you’re starting and don’t have a track record. That’s time that takes away from launching your product.
• Leverage. Like working in nothing but your whitey tighties? Your customers won’t care if it creates a better product. A future investor probably won’t either – why mess with what’s working?

In summary, there’s no one one to blame but ourselves as developers if we (1) take funding and (2) don’t grow like a rocket ship in 4 years.

Lets build infinite runways first.