How The Big Boys Got There

From the always excellent Mark Suster:

So the buying company usually wants to pay $0 for the company. And wants to structure a huge payout for the employees that will remain. That way investors (dead money for the buyer) and founders (flight risk) don’t get all the spoils while the faithful staff who will stick around get nothing.

and…

You have been at Google, Salesforce.com, Yahoo! for years. You have worked faithfully. Evenings. Weekends. Year in, year out. You have shipped to hard deadlines. You’ve done the death-march projects. In the trenches. You got the t-shirt. And maybe got called out for valor at a big company gathering. They gave you an extra 2 days of vacation for your hard work.

And that prick sitting in the desk next to you who joined only last week now has $1 million because he built some fancy newsreader that got a lot of press but is going to be shut down anyways.

What kind of message does that send to the party faithful who slave away loyally to hit targets for BigCo?

I’ll tell you what is says.

It says if you want to make “real” money  – quit.

Much as I enjoyed the piece, I feel my contrarian hackles rising.

It’s incredibly fashionable to write passionate pieces about how culture should be central to any company’s strategy. It makes us feel good. It makes us think “hey, my feelings DO matter and I deserve to be heard. I’m frustrated. If they don’t watch out I’ll show ’em”

And I believe it, of course, and I believe my firm does a pretty good job of protecting culture. But we need to fess up to something, people.

Most large successful companies you can think of today got that way via acquisitions.

The dirty reality of growing businesses is that it is effing hard to do. Shortcuts are always welcome. There are lots of dirty ways to grow your firm via acquisition and profit from it, let’s call it Druckiavelli’s* list.

  1. Buy out your competition and lobby regulators to raise barriers to entry
  2. Develop one hotshot product and mask the outrageous profit margins by squandering the money on acquisitions or underpricing complementary products, driving competitors out of business or into your arms. Then do #1.
  3. Float a minority share of your company and use the proceeds (other people’s money) to buy everything you can get your hands on.
  4. Run a mutual insurer and instead of returning profits to policyholders dump them into acquisitions and corporate jets (related to #2).

None of these are taught in business schools. Because they’re mean. But they work.

*A portmonteau of Peter Drucker and Machiavelli

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