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Ask HN: What do companies acquire and shutdown a startup?

7 points by keosariel ↗ HN
I've seen repeated times, companies acquiring good startups for a large amount of cash and later shutdown the startup. I'm curious why this happens, if you intend to acquire them why shut them down.

6 comments

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edent
It depends on what they are acquiring.

* People - buying a ready-built high-performing team is cheaper than trying to assemble one from scratch.

* Patents and IP - if it is the idea which is valuable, you don't need the product.

* Competition - the start-up is (or could be) an existential threat. Buying is a cheap and legal way to shut them down.

* Customers - getting the start-up's customers on to your own platform. No need for the old one.

* Ego - buying a start-up is a big deal and helps people feel good. And maybe get a promotion. There's no rationale for buying other than short-term internal metrics. So the product gets terminated quickly.

keosariel
I think this has given me a depth understanding, especially the Patents part.
ellen364
Completely agree with these.

Another is “My company has been bought by private equity, who’ve given us N years to make the company profitable.” I’m not sure why it happens, but sometimes the recently purchased company goes on their own buying spree. (Maybe they’re given money to spend buying companies?) During the buying spree, the post-acquisition phase isn’t necessarily thought through and some companies get closed.

dtagames
Sometimes you just need people in a room who look like they are busy, especially to impress investors. No one actually looks to see if the division or acquired company is doing useful work, but it looks good to have them in the annual report and to mention how many "data scientists" and so forth they have working on the product -- a product which the investor knows nothing about and cares even less. They're just gambling on a hoped-for final outcome and believing that the next acquisition will fool the next investor into buying them out.
aristofun
Because most of the startups are not profitable and have no chance to make a lot of money.

But people working there are often great.

You can't just hire most of them. So first you pet their ego with some cash & startup success narrative and only then hire.

jotjotzzz
They probably acquire the IP and shut it down before they can compete with them.