When startups are bought to be shut down

The very definition of success for a start-up has always been for me that one of the major players in the market (the Googles and Facebooks of the world) would purchase your business. The american dream, start from an idea, keep your shares and sell them at a skyrocket price when the time is right. Most people's view on the matter would usually end there, as in there is not so much plan for after the fact. You are busy enough tackling the how to get there to think about what happens after.

Everybody is aware of the fact that only few make it in the startup world (1 every 10?) but once you make it (as per the definition above) things are not always fairy tales. One would argue they never are, but two recent cases that touched me close really made me think about this topic.

So what happens after you have been purchased by a big player? Well you think you get resourceful and you can expand your vision, but the two following examples will show you how this is not the case

Pebble

If you are a follower of the wearable and smartwatch panorama, you know by now that Pebble has been bought out by Fitbit (see here). I have followed the company from the early ages, and I do not know anybody directly working there. I did not buy the watch on day one, but I do have a first version of the Pebble in my possession. I am an engineer and a geek, so I am biased (I did write few apps and watch faces for it). Pebble was criticized (specially in early days) because they were geek oriented and hence my bias. But all in all it was a nice device with a community behind it writing mostly free apps for it.

Pebble has always been put forward as the example the famous David vs Goliath, the story of the underdog. When the big players (the fruit company, the TV and smartphone market leaders) said the smartwatch will be a phone in your wrist, these guys said they would to a basic e-paper (which was not so true at the beginning) device, focusing on autonomy. The broke records for crowdfunding multiple times plus they got there before anybody else (at least for this generation of wearables).

Success, you made it. Oh no!, it gets even better, a bigger company - Fitbit, the competition- now buys Pebble. But why did they buy it, well because Pebble struggled with their finances and they got a good deal. Fitbit bought them for a fraction of their value (at least their value one year before). All in all Fitbit buys Pebble for what? To shut it down, get few of their engineers on staff and kill all the products. Fair, it is a capitalist system, if you can kill the competition it is not against the rules. In my (engineer) heart though this feels really bad. Good technology that is now thrown away because of that. I read also that Pebble staff had to hand in their shares in exchange for some of the debt the company had. All in all they got bought by Goliath and did not get any money for it. The world lost good tech and a product with thousands of followers.

Before closing this topic, let me praise on the impressive setup Pebble was able to accomplish with their web-based development tool. To let my engineering side shine. Writing code on your web browser, which transparently allows you to debug your watch code (through internet, your phone and Bluetooth to the watch) with minimal setup. Kudos to you Pebble, I hoped Fitbit would take over that.

Sapiens Brain Stimulation

Well you can say the Pebble example is more of a Silicon Valley kind of story, which is more common and, to us in the right (as in not the left) side of the Atlantic, seems like too far. A much closer example is found in the Eindhoven region (Netherlands) where I am currently working. Sapiens Brain Stimulation's story is also one you would consider a success. Small spin-off from Philips, revolutionary tech for brain stimulation to help treatment and life quality of Parkinson's disease patients. They do all the proper steps and they are set forth as an example for the region. They succeed, all of the sudden the biggest player in the medical device world (Medtronic) buys their company.

Wow, you think, you made it! Now let's enjoy. Unfortunately recent news (see here in Dutch but google-translatable) report that Medtronic will be shutting down the activity about a little bit more than a year into the purchase. Why? competition is not as (technically) good, but they got there sooner, change of management in the company, few excel cells flipping and your division goes out of business.

You make it, in a challenging startup environment, with the most invasive (deep brain proves getting inserted through your skull to the brain) methods, you get all the medical green lights and you see good results. You succeed (as defined above), so it stands to reason that you would have a bright future. The book example of success and the model to look upon in the region, smashed by economies of scale.

Sad, but still capitalism. Sadder: the fact that great tech is now going to be put down (similar to Pebble) but now with moral repercussions. It is not a convenience for an engineer (web based development) but a substantial improvement in the quality of life for Parkinson's disease patient. Gone, vanished.

So what's the message?

Success in a startup is not measured at the time of getting acquired by a big company. Re-evaluate your measure of success. Co-workers of mine would argue that the vision to change the world is what start-ups thrive to do. I want to now believe that.

Best technology does not always make it. Sometimes big fish eat startups just to shut them down. Moral lines (IMHO) need to be drawn, specially when health is at stake. It breaks my inner engineering feelings when such tech killings happen.

Even though buyers try to keep valuable knowledge/engineers, chances that the right people (even if they are bought) stay working for what the competition was I would say are pretty slim. Specially because of relocation and working for a completely different goal.

Disclaimers

I have to acknowledge I look a the startup panorama from the outside, as something I do not have experience on and quite frankly, having seen it from pretty close, not so sure it is something I am keen on exploring. At least for the current period.

Besides collateral contact, I do not work or represent neither of the companies mentioned in the text above.

This article presents my subjective view on a topic. This does not represent the thinking of my employer, previous employeers, my customers or any other affiliation I might have or have had in the past.