Primum Non Nocere

This latin phrase translates to "first, do no harm" and is one of the principal tenets of the Hippocratic Oath that doctors take. I've been thinking about it a lot in the context of web services recently.

We all know about the many web services that have been purchased by large companies and have fallen by the wayside in the years following the acquisition. Services like delicious, myspace, flickr, bebo, and many more come to mind.

But there are also examples of web services that have not only survived, but thrived, under corporate ownership. Here in NYC two that I use daily are Reddit and Vimeo.

Reddit was purchased by Conde Nast in October of 2006. Here's how Reddit has done against its primary competitor Digg under Conde Nast's ownership:

Digg reddit

Vimeo was purchased by IAC in August 2006. Here's how Vimeo has done since then:

In both cases, the corporate owners basically left these services alone. For a while last year the Reddit team was down to one developer.

And yet these two services have thrived under their corporate owners. What can we learn from that?

First and foremost, web services that are working should not be subject to wholesale change and reinvention. The investment that is made in product should go into scaling the system so that more users can access it at the same time, so that the service is reliable and available, and so that users get a great experience when they come to use the service. Changes that are made should be done incrementally and carefully. If it is not broken, don't fix it.

I do not mean to suggest that the teams that have been working on these two services haven't done anything. Both services have grown and developed into market leading web services. The work that has been done on them has been very good.

And it is also true that both Reddit and Vimeo have strong engaged communities of users who make the products what they are. And to Conde Nast and IAC's credit, the corporate owners have not done anything to alienate those communities. They have let these services and communities grow and develop slowly, patiently, and succcessfully.

I think there's a lot to learn from these two examples. Not just for corporate owners but for all operators of web services. Primum Non Nocere.


Comments (Archived):

  1. Rohan

    If it ain’t broke….

  2. ShanaC

    Still, how do you effectively monetize without tampering with them a ton?  That’s an art form waiting to be understood

    1. fredwilson

      reddit has reddit sponsored postsyou can see one at the top of the reddit home page charges filmmakers who want premium services a monthly feei don’t know for sure, but i believe both services are operating at breakeven or possibly even making money

      1. maxniederhofer

        They’re both quite firmly cash-generative, though arguably Reddit would benefit from investment. It could be one of those web companies that matter…

      2. ShanaC

        No I know, this was meant to be a more general question.I mean, is a purchase worth it from a corporate standpoint if it doesn’t help make money (probably not).  But you lose users if you tamper too much.So therein lies the question.  How do you not tamper too much when you have to turn on money.

    2. andyswan

      Best way is for business to actually have a revenue model that works before you buy them.Pulling on known lever much more likely to work than trying to insert new one.

    3. JamesHRH

      Shana – I think it is amazing that corporate owners would purchase without the profit model in place and leave it alone.You could argue that IAC is not corporate, very unique place.Conde Nast I do not know much about. I am not even sure why they would purchase a reddit.

      1. Carl J. Mistlebauer

        Conde Nast is a producer of content and I think the acquisition of Reddit makes really logical sense for them.I think right now they are in the “…okay, we acquired Reddit now what do we do with it” stage, and that’s a great place to pause. The reality is that buying companies look like one thing when you are on the outside looking in and they look totally different once you are in the inside looking out.I remember when we would talk about needing to expand our product line and develop off shore manufacturing and on paper it made all the sense in the world. Then we bought a company in New Jersey that produced shirts and pants in India; the solution to all of our problems.I also remember my first day in New Jersey wondering, “….and exactly why did we buy this?”

      2. ShanaC

        I don’t know about either, I’m not inside IAC nor Conde.And much like you, I’d rather purchase with a clear way to make money.  Less damage to potentially do on integration

  3. John Revay

    One Question & One CommentQuestion – it must be interesting sitting on as many boards as you have (life to date), knowing – when offers to buy come in – who is more likely to want to sell – Investors or founders  – I think when Jobs past away last year -apparently he had praise for zunkerberg not selling out.  I would think in certain circumstances some of the founders may want to get liquidity – I think you did a post recently about this w/ the advent of the secondary markets helping w/ this.Comment – “web services that have been purchased by large companies and have fallen by the wayside” – I think one reason why they may is that the founders typically cash out and leave to do something else – is that not one of the reasons why  acquired fall by the wayside.Interesting topic!

    1. fredwilson

      i should have addressed this in my post. the founders of both reddit and vimeo are no longer with the services.usually it is the founder who wants to sell. that has been the case in every exit we’ve had at USV

      1. Japindado

        I think USV and its co-investors may be unique in this regard.  There are plenty of other investors that regularly force change of control decisions on founders / management. Don’t you think?

        1. fredwilson

          Nope. Almost every investment we do is with a syndicate of VC firms. I rarely see VCs pushing for exitsThis is one of those issues where VCs have gotten a bad rap and don’t deserve it

          1. jason wright

            Is that a ‘risk’ strategy?

      2. Rob Hunter

        If the founders want to sell, can you keep the founders (and other critical talent) through an acquisition?  Do you just figure out your valuations with and without them, and then assign multiply them by your expected probabilities?It seems like all the money in the world can’t be counted on to keep founders with an acquired company – I’m thinking Tony Hsieh from Microsoft after selling LinkExchange.Not messing with an acquired company seems great (and maybe that IS your retention strategy), but I bet a whole lot of things can still go wrong.

      3. David Semeria

        Fred, do you think founders would be less likely to push for a full sale if they could take a decent chunk of equity off the table?

        1. fredwilson

          Yes. I know so.

    2. Baptiste Picard

      Great thoughts here about the founders! I am wondering about the best way to keep founders on board after the acquisition by a large company, how do you do that besides a cash out clause? Is it anyway better to try to keep them on board after such a move or should the company just let the founders go?

  4. abhic

    First of all, Viva la Reddit!I wonder what would have happened to Dennis & FourSquare if Google hadn’t totally messed up Dodgeball.

    1. JamesHRH

      Google does not leave things alone.

      1. abhic


  5. Colin Pape

    Was just thinking this about Amazon and IMDB last night…

    1. JamesHRH

      or Zappos.

    2. fredwilson

      IMDB is a great example

    3. Matthew Moore

      Amazon turned IMDB into a product hawking site. That’s fine, but not really consistent with the original vision for IMDB and it drove off community. It’s probably a moot point since wikipedia was incorporating much of their content and usefulness.With Zappos, their purpose (selling products) is the same now as before, so no grounds to alienate community.

  6. andyswan

    Right on!   Reminds me of how it’s a big mistake for a woman to marry because she “just knows the man he could become….”But then again, I can see the acquirer’s point of view.  Many times they’re buying young companies as a KNOWN GAMBLE on the technology and the team….with little interest in the existing revenue model, if there is one.Sometimes when you gamble, you lose…and ya it sucks for those networks of engaged users that fall by the wayside…Sometimes when you gamble, you win….and that can mean different things.  It could mean Reddit where the original service just gets bigger and better….or it could mean [redacted] where the technology and teams get watered down a bit but you still end up with something better than you could build for your massive client-base.So even when you win, the loving users (and founders) may still feel that their product has been “harmed”.If you want to make sure that no harm is done to your product….retain control.  If you want to make sure you’re doing business with a product or service that will care what you think…be prepared to get out the credit card.

    1. fredwilson

      that last point is the money point!

    2. LE

      “Right on!   Reminds me of how it’s a big mistake for a woman to marry because she “just knows the man he could become….””Well first are you sure that is what you meant to say? Because if you believe that most people get married young (for the first time) as opposed to in their 40’s and 50’s I’m not sure that statement is correct since how accomplished are most people at marrying age?There are many examples of this being the case (young Warren Buffet, Young JFK, Obama, Clinton, a promising lawyer, doctor actor). And I’m sure also that @gothamgal:disqus was attracted to Fred because she might have know “the man he could become” instead of the man he was at the age they married.  And yes I’m equating money and success with what you are saying (or at least a comfortable living).The saying that I would relate is more something like a woman who marries thinking she can change a man into something he’s not. I’ve heard this numerous times: “I thought I could change him” and it’s turned out to be false. I’m wondering if that is what you actually meant?

      1. andyswan


      2. ShanaC

        Butting in for a moment (same with @andyswan:disqus )(I can do that, I’m the resident single female)I think what andy is trying to say is it is a mistake to change a person’s qualities.It is totally reasonable to bet that certain qualities will lead to certain outcomes (egL firey people will argue with you, and you may end up madder)It is fair to hope for positive change.  But don’t count on it.Also, I’m finding that right now, with my people, my generation, the qualities of a relationship have really changed.  Even with secondary feminist issues(babies for example) its gotten much more egalitarian.  So your advice would be the same either way

      3. Donna Brewington White

        I hope @andyswan:disqus  meant what you interpreted.  Both in terms of startups and spouses.  With both, it is all about what you anticipate they will become but the raw material needs to be there rather than the dysfunctional notion that you can  make it something that it is not.I married a 26 year old for the man I thought he would be at 35.  Actually, it took a little longer but he got there. In some ways, better than anticipated.  ;)I did not marry him with the expectation that I would make him into the man I wanted him to be.  That is stupid.  Marriage should not be like private equity investing — at least not in terms of those that buy distressed companies and engineer turnarounds.

    3. george

      Really good post!On face value – goes back to the one’s mission and convictions…

  7. andyswan

    Pulling on known lever much more likely to work than trying to insert new one.

    1. Cynthia Schames

      Very Grimlockian.

  8. John Petersen

    I think the problem with most acquisitions and why they fail to live up to the expectations of the acquirer is often obvious. For most acquisitions, the acquirer looks at the new company and says “how can this enhance our bottom line or help us to grow and expand our core business.” The acquirer then revamps and redesigns and adds new features to try to make the new company more valuable to the acquirer’s core business. The result often involves a complete change in direction from the original product vision of the founders. Hence, acquired company becomes unusable for existing users.The companies that acquire well are the ones that look at it from your perspective Fred — how can we leverage our company to help the acquired company grow.

  9. bobby d

    Yeah, but Reddit & Vimeo have done a piss poor job at monetization.  Even though Icanz, Ebaum, all steal reddit content, and are somewhat profitable.Once the corporate head decide its time to monetize, reddit & vimeo will likely jump the shark.  Like digg, reddit is being overcrowded by the bros, and the quirky indie nerd curated content is giving way to mainstream pablum.Sites are like night clubs.  They are hip for a while, but overcrowding, soon pushes the trendsetters, and stickiness connectors away.

    1. fredwilson

      i guess it depends on what you call a “piss poor job at monetization”think that both are breakeven or possibly even cash generating

      1. bobby d

        yeah, but Reddit serves ~2B pageviews/month! and they are likely just above breakeven && employs less than 10 engineers.

        1. fredwilson

          I would not characterize that as a problem

      2. bobby d

        The main business proposition of the web was that massive scalability would push marginal cost >>> 0.  But very few websites that >1B pageviews are making back the capital investment from their seed-late stage funding (digg, flickr, etc)

  10. Cynthia Schames

    All I can think of is TechCrunch right now.

  11. maxniederhofer

    Not just for operators of web services, but a good principle for VCs as well :)P.S. what subreddits do you read?

    1. fredwilson

      Yes Indeed!

    2. fredwilson

      i like politics and technology subreddits

  12. Donna Brewington White

    Seems like the perfect marriage…large company resources + startup/entrepreneurial energy and mentality.  But isn’t it a rare corporate beast that can resist the urge to tinker?I wonder if large companies that have retained an entrepreneurial edge are more likely to allow the acquired entrepreneurial company to thrive? I think of Amazon, for one.I wonder if a certain leadership/managerial style at the top of the larger entity is key?

    1. William Mougayar

      The other part which you know very well Donna is Culture. A culture misfit can break a whole bunch of things especially if the integration is required. If the real integration is not required, then someone who runs the startup has to report to someone at corporate. In this case, the management style is key- if the corporate executive understands how to manage (or not manage), they can insulate the startup and let it thrive on its own. The critical period is typically 6 months. Whatever it settles at in 6 months is typically how it continues to evolve. The organ is either rejected, ignored or thrives on its own.

      1. awaldstein

        Well said.Critical period is earnout defined. How you set those is the key cultural incentive.

      2. Donna Brewington White

        So often, it comes back to culture, doesn’t it?You bring up an interesting point about the management style of the corporate executive determining how he/she will sponsor/manage the startup’s relationship with the organization. I find this also to be the case when a company says that it wants to hire someone with “entrepreneurial spirit.” It’s a nice buzz phrase but I wonder how often they really know what they are asking for and are willing to make the space for this person to thrive — someone who will be seen by some as a maverick.I am actually having an epiphany while responding to your comment. I am realizing that I experienced to some extent a microcosm of what you are describing — a startup department within a large, very corporate setting. I am now understanding why we thrived — and why we were hated by our peers. For a long time we were insulated — untouchable. But, I have no idea why.I will watch for the “critical period” you described. That’s really interesting. May have some implications for hiring too. Of course it always comes back to that for me, doesn’t it? ;)- posted via

        1. William Mougayar

          Loving the “posted via” label 🙂 – posted via

          1. Donna Brewington White

            “Loving the “posted via” label”If you’ve got it, flaunt it!- posted via

  13. markslater

    Iac is not like your west coast acquirer. They dont try to swallow, they buy and hold. Big difference. Flickr is a yahoo service. Veimeo is an iac company

  14. kidmercury

    youtube is another example… largely left it alone, slowly integrating it…..

    1. Rohan

      I find Google does a ridiculously bad job at integrating portfolio companies in most cases.For a very long time, Google Chrome handled Google Docs and YouTube the worst among all browsers

      1. kidmercury

        i disagree… maps, android — android makes up for all their failings and then some……part of the challenge now though is that google is so big that it is fragmenting into different factions within itself…..i.e. some stuff will integrate well with the android team but not the chrome team, and vice versa…..overall though i think google has outstanding organizational structure and managment and this is hte primary reason for their success…..though i think amazon is well-positioned to beat them, and is another company that seems very skilled at integrating acquisitions IMO  #fs

        1. Rohan

          Okay I’m not an Android user or fan – so I’m ignorant on this one. I guess we’ll agree to disagree… 🙂

        2. jason wright

          Android, that ‘open’ platform. Umm. I was reading that Google has been putting the heat on several handset manufacturers to stop them from implementing  features and tweaks that don’t match Google’s “vision”. Some say IoS is closed, but Android may not be quite that open either.

          1. kidmercury

            open and closed are meaningless terms…..i think big government vs small government is more meaningful. apple is big government: they focus on national security (i.e. no porn, everything is filtered) and charge exorbitant taxes. google is limited government: still regulations, but fewer — and the tax burden is lower, resulting in lower prices and a more vibrant economy. of course, big government or small government, neither is a substitute for good governance…..though i’d argue small stands a better chance of being good. as with all matters of politics, though, one’s personal preference and ideology comes into play.  #fs

      2. jason wright

        Thinking of Fredsquare, I mean Foursquare, what happened to Dodgeball?

    2. William Mougayar

      Definitely. It’s another great example where they let it grow and grow and grow, without touching too much of the initial product.

  15. DanielHorowitz

    Hey Fred -A couple notes here:Reddit – As you noted, I think it’s all about the community. Vimeo – You are showing a graph from 10/12/08 to 1/17/12 as noted in the top left of the screen, but the x-axis for the graph shows months Jan – Oct. This is wrong and misleading. The X-axis should show 2008, 2009, 2010, 2011…Additionally, while I agree that Vimeo is growing fast, you offer no benchmark, which is again misleading as the entire online video market has grown considerably since 2008. Edit: Changed 02 to 12

    1. fredwilson

      But other than YouTube I struggle to think of a video hosting service that has done well

      1. matthughes

        Wistia is a cool company.More B2B focused, certainly not the scale of YouTube or Vimeo.

  16. DanielHorowitz

    One more comment about Vimeo. With Video we are also interested in videos watched per user and total minutes of video watched per user. (Perhaps opportunity in the video analytics space?) Edit: Not to be super nitty, but you also present the graph as how Vimeo has done since its acquisition in 2006, but the graph starts in 10/2008. Again, a bit misleading, but it doesn’t look like the data is public from pre-10/2008

  17. jason wright

    Do you ever advise founders not to sell to a corporate buyer because you feel it won’t nurture the portfolio company in the right way?Do corporate buyers typically reveal what their plans are for a portfolio company when an acquisition is discussed?

    1. LE

      “not nurture the portfolio company”I would think that would totally depend on whether after selling you still have any skin in the game. While I think anyone selling would like to have their legacy go on and not be the previous founder of a company that ended up failing just as many people (like Mark Cuban selling to Yahoo) will move on with the 3 billion and be ok with it.

      1. jason wright

        Don’t the terms of many purchases require the founder(s) to remain in position for a specified minimum period? Doesn’t that thought temper the eagerness to sell?$3 billion – not your typical sale, even for Fred. 

        1. LE

          There is always a transition period and that period is negotiable depending on the circumstances and type of business being sold. In the case of a company that I sold it was three months and then I made myself available by phone and charged for my time.I found this quora but I disagree with one part of it at least:…”It is not possible to require anyone to stay on.  It is a free country.”It is possible to require someone to stay on in the sense that you can design financial incentives as part of the contract. Obviously everything is negotiable. Taking taxes into consideration you could insure someone staying by working in a large dollar amount (which becomes a penalty) if they don’t fulfill the obligation.

      2. JamesHRH

        Cuban atypical. Highly, highly prepared / experienced bootstrap entrepreneur.

    2. John Petersen

      I could be way off base here, but I find it unlikely that VCs ever advise against an acquisition unless they think the company is being undervalued. The nurturing and all that soft stuff is the founders decision.

      1. jason wright

        You could be right on the base John.I just wonder if VCs try to protect their reputations in this regard with a view to the next investment they might find themselves desperate to make? Entrepreneurs look for investors, but investors also look for entrepreneurs. Apparently there’s oodles of capital out there looking for a home, but a limited number of grade A startup homes. The investor with a rep for wiping his or her feet on the way out might not be deemed suitable by some. 

        1. John Petersen

          My gut tells me that you are right with the amount of capital out there compared to the number of worthy investments, especially given some of the big rounds that have been raised recently.Is it public knowledge what % of a VCs bankroll is currently invested? I assume its not but would love to look at some of those numbers and see how that plays into investment decisions.

          1. jason wright

            % – I don’t know, but I would doubt that a VC would want that sort of  information out in the open. I’m not saying that investment/ sale negotiations are like a game of poker, but if you know the other sides real position you have the upper hand.

      2. fredwilson

        that’s not my experience

        1. John Petersen

          That’s awesome. I’m really glad to hear that Fred. I definitely defer to your experience here

    3. Rohan

      Hmm. I disagree with John.I can’t imagine a top class VC lapping up any deal that comes by. They wouldn’t just sell your soul for money. And, in any case, I would imagine being top class in this business is like being top class anywhere else – saying many more NO than Yes..I don’t know if corporate buyers reveal what plans are but I’m sure people involved will demand an understanding for the immediate future. Could be my naivette speaking, though..–Note: Top class = Sustained excellence in the business for many years i.e. which can’t come from deal hopping. 

      1. jason wright

         Dave Morin of Path was interviewed by Jason Calacanis recently on TWIST.It seems that a well known search company may have made a $100 million offer to buy Path. Apparently, and according to the scuttlebutt, the major Path investor was jumping up and down screaming for Dave to agree to the sale, but Dave wasn’t having any of it. I’m just reporting the interview. Whether the content is accurate or not is hard to know.  Some buyers have a rep for failing to nurture purchases. I guess there’s a subtle difference between standing off a purchase and allowing it to retain autonomy, and neglecting it ‘to death’. 

        1. LE

          I’m not seeing any personal failure in Dave’s short history (of success) which is mostly tied to Facebook.…As such he is probably focusing on what he sees as all upside and not looking at the fact that Path could not be the big thing because none of what he did has ever not worked out. (Feel free to correct me I haven’t followed him …) So roll the dice. It’s obvious that there has to be an alignment between the goals and risk profile of both the investors and entrepreneurs they invest in. Otherwise you could have a case where someone who either doesn’t need the money or is willing to gamble ends up creating a problem for someone who would rather cash out.We find that in the domain business this frequently happens with people holding out for exorbitant amounts for their domains when the next buyer might not come along for 10 years if ever. The same sellers tend to be the ones that attend industry events where there is gambling.

          1. jason wright

            From the interview alone I came away being very impressed with Dave’s persona, intelligence, integrity and intent. Seems like just the kind of person any smart investor would want to work with. When I finally decide upon which smartphone to purchase Path may be the very first app I download.”We”?I’m having that very problem at the moment, added to which I suspect the ‘registrant’ has used a fake name and address on the whois database. They really don’t help themselves.

          2. LE

            “We” – I’m very familiar with the domain business. Feel free to write to me at [email protected] and I will be glad to offer any advice that I can.

    4. fredwilson

      Yes. All the time.

  18. LE

    “First and foremost, web services that are working should not be subject to wholesale change and reinvention. …. Changes that are made should be done incrementally and carefully. If it is not broken, don’t fix it.”While I’m a big believer in “not broken don’t fix it” and could easily argue in favor of this I can also take the other side. That is complacency and non-paranoia of change going on.Unfortunately this is all a matter of nuance and the particulars of a situation.  Obviously you would not wholesale change something that was working and earning money (although Intel did going from memory chips to microprocessors so as I say “it all depends”). And what looks stupid in retrospect (big three not selling small cars) made sense back in the 70’s (“mini cars mini profits I believe Henry Ford said).  Way back myspace was the shit. Then facebook came along.  Not sure that has to do with who bought the company as much as a new shiny ball that came along.…Myspace would have a hard time doing what FB did because FB was built from the ground up as a different idea. Same as a new startup airline can pick off a prime market of a legacy airline and have a new work ethos.  Or a foreign car maker can come into this country at the right time and steal market share.Plenty has to do with the culture and workforce. Key talent working under a superstar (say Spielberg) may leave if he sells a company and then becomes less active in day to day or leaves entirely. The draw and thrill is gone. 

  19. Carl J. Mistlebauer

    Some founders have a passion for creating and others have a passion for their creation.  Those whom creation is a process will sell and move on, those for whom creation is a result will retain control.The key to success is to understand exactly what ones passion is based upon.  Having dealt with enough new companies (start ups and or distressed companies) I have found that to make these acquisitions successful they involved a brutally honest conversation with the founder.If you believe that a company founder loves creating rather than the creation then demanding they stay with the company and or demanding a non compete is like asking “…why does the caged bird sing….” I can relate, because I find running an established company boring and mundane; that’s when you delegate the day to day…..

    1. Kevin Pillow

      When you deal with a company  founder/founder’s  more interested in creating start ups to be acquired at an early stage how did you view the value of that company?

      1. Carl J. Mistlebauer

        First off, no one starts by being a serial start up founder; tech is one of the few areas where there seems to be a churning option in start ups.Second, in the world of the old economy (companies that produce product) you have sales, you have cost of goods, you have overhead, and you have assets and liabilities.As an investor the valuation process is one thing, as a company that also produces product the concept of valuation is totally different.

        1. Donna Brewington White

          Carl, have you ever thought of teaching?  You really should.Be one of those who can do AND teach.

          1. Mark Essel

            Isn’t he teaching now?Why shouldn’t students learn where to find knowledge?

          2. Carl J. Mistlebauer

            Donna,Thank you for the compliment!My philosophy of management is that as managers we are teachers. If I can get my employees and coworkers to THINK then I can solve so many more problems just by spending a few extra minutes during every exchange exploring what they were thinking.I call it the Socratic Management Method…It sure beats micro managing or being a tyrant…Besides nothing is more empowering and endearing to a team of people than the feeling that you care enough to wonder what they were thinking and how they drew the conclusions they did.

  20. Youssef Rahoui

    Agreed. For example, I am a heavy user of Delicious and the new acquirers have recently changed many things that drive me off.They get on my way: when I add a website with a browser bookmarlet, instead of driving me back to the website and closing the Delicious popup (as it was the case), they leave me on Delicious: I have to click the website again and close the Delicious window. They annoy me with their stack stuff I couldn’t care less. Etc.So, yes, first do no harm and, second, listen before acting!

  21. William Mougayar

    I had no idea Vimeo was owned by IAC. They struck me as another aggressive start-up with good growth and a great, stable service. So that’s one data point this is working for them.But your point about focusing on scalability and growth has further ramifications. If the product feature set is fairly mature, and there is little competition in a given space, then I would say Yes. But there are cases where the product is still evolving and taking shape, in which case getting it to maturity is as important to growing the user base. But isn’t another factor the original motivation and justification for the acquisition? Was it to integrate the product, to get users, buy the technology or the people, etc..whatever the case might be will determine more or less its fate. It is interesting that the 2nd Hippocratic Oath point is “I will not give a lethal drug to anyone if I am asked.” Big Co’s are notorious for changing their minds and doing things that end-up harming the acquisition afterwards, i.e. giving them that lethal drug. 

    1. JamesHRH

      The second oath is classic.

  22. awaldstein

    I did M & A for a while. Intent of the acquisition, earn outs that work and managing internal culture are the metrics that make these acquisitions work or not. 

  23. LE

    Sorry to fork here but I read this article today and long have wondered why the publishing of legal notices in newspapers, a long established practice, hasn’t been disrupted.There’s an obvious opportunity in this market. For background read this:http://www.courierpostonlinhttp://aconnecticutlawblog….Instead of the “do no harm” to newspapers reason, here is the “why”:”“The state has told us directly that most municipalities lack websites that are robust enough to store and secure legally required public notifications. To think these notifications can be made the same way trash and leaf collections are posted is stretching things,”Obviously there is an opportunity for a third party to provide this service.Someone already has (reprinting newspaper notices essentially) but I’m not aware of anyone that has gained traction or is venture backed and eliminating the papers. (Mandated by legacy laws that would need to be changed).This is the type of business that just needs to gain some early adopters to show as proof of concept to convince other municipalities that are trying to save money. While this is a difficult nut to crack (politicians not wanting to piss off newspapers) it would seem to be worth the effort  and stand a chance of success.

    1. fredwilson

      I do this every year for our family foundation. There has to be a better way

    2. Carl J. Mistlebauer

      LE,The reality is that what we need is a way not to change the way legal notices are published but rather to improve the accuracy of the data that our justice system and government system provide.  Background checks is an obvious nightmare example:… 

      1. LE

        I will top that one. It’s the de facto “died and made you king” problem that rules so many issues. How about the power that the big three personal credit rating services have over what we pay on mortgages. I’m not talking about identity theft. I’m talking about a system that penalizes you for using credit cards, or not even needing credit cards, or closing credit card accounts or not carrying a balance.  A system whereby a person with actual assets and money in the bank can actually appear less credit worthy than someone living hand to mouth simply because they don’t have a history because they don’t use credit.An alternative system that figures out some way to certify individuals as to credit worthiness by doing actual due diligence on individuals (similar to D&B for business although that could be gamed of course) is another opportunity that someone should explore.

        1. Carl J. Mistlebauer

          LE,The reality is to a company that provides credit the ideal customer is one who will pay the minimum balance for the rest of their life. The reality is its a system that rewards you for using credit cards; when you use credit cards the card companies get a fee from the vendor that accepts credit cards and then they get a monthly income stream from the user of the credit card in the form of compounded interest.D&B is a way for companies to determine if they will extend terms, like Net-30 to another company, where the profit or the income is in the sale of the goods or service with interest being only applied in past due situations.I remember when American Express was a card where you had to pay the full balance at the end of a month; that fits more along your idea.If you look at the financials of any bank or company that offers credit cards you would be shocked to find out how much of their profits come from revolving credit programs.I stopped in Krogers this morning to pick up some dog food so I can create a liquid dog food for my dog that refuses to eat and while checking out I was asked if I wanted to put my purchase on my Krogers Mastercard.I don’t have a Krogers Mastercard….So the cashier informs me that I could get instant approval after purchasing 2 cans of dog food and a box of chicken broth….Had to break her heart and pay cash….Its bad enough that Krogers won’t give me their lowest prices without scanning in my shoppers card so that they can track everything I buy but now they want to finance my meager food purchases?Reality is KidMercury will be coming up with a “FREDCARD” Mastercard within the first six months after the launch of Fredsquare….I have just got to tone down my sense of humor…. 🙂



      1. Carl J. Mistlebauer

        Its hard to provide a service to small government because they in turn do not see themselves as a service provider.- posted via

  24. Reykjavik

    But in both cases, there is minimal synergy with the rest of the corporation. As someone with inside knowledge of both of these parent companies, they have missed a lot of upside by not better leveraging their portfolio companies. So why buy them in the first place? It’s interesting to contrast this with the Apple approach, where they Borg-meld things into the main body of the corporation and disdain the idea of thinking about separation business units.

    1. jason wright

      The obvious difference is that Apple is the brand whereas Conde Nast publishes brands. 

      1. Donna Brewington White


        1. jason wright

          …and a company like Conde Nast is at heart still a traditional offline publisher, and the tradition there has always been to use the strategy of multibranding in defense of market share against any upstart newcomer(s) from successfully entering its commercial territory (a form of ‘moating’ around the Conde Nast corporate castle). This way of operating fits well with buying a Reddit and keeping the brand name alive. Apple isn’t structured in this way. It probably operates by quietly seeding a slew of startup ideas and then watches and waits to see which show promise and potential ‘fit’. The right ones eventually get formally acquired – the team, technology, and IP gets assimilated, but the brand is dropped.



  25. Otto

    I love Vimeo for the quality independent content. I don’t care who owns it, just as long as they don’t make it unnecessarily difficult for the independent creators. But as a viewer I feel no brand loyalty to Vimeo. If they ever alienate their content creators or viewers I’ll just move on to another service that features video production, regardless of its popularity, because it has never been easier to produce, share, or view independent videos.

  26. Sheamus

    I think Reddit has thrived *despite* Conde, not because of. It wasn’t more than a year or two ago that there was all sorts of talk about how Reddit had been left high and dry by Conde – which is largely why they were down to just one developer. There was no money being put into the kitty (or, at least, a minimal amount).Putting this down to some great vision on Conde’s part is completely false, IMO. I don’t think Conde had any clue what to do with Reddit, so essentially ignored them. If that’s a win, then bad parents across the world need a second look. I think all credit here goes to Reddit, the team, and then Reddit, the community. Digg’s implosion didn’t hurt either.

    1. fredwilson

      all true. but that was sort of the point i was trying to make. which is services can thrive under absentee owners

      1. Brad Lindenberg

        which also means that some services can be run leaner than we think… 

  27. LE

    Bricks and mortar example of the same topic, in today’s Philly paper:…Summary:Safeway bought the chain for $530 million when Genuardi’s had 39 stores; of the 27 left, 16 were sold to Giant for $106 million.Genuardi’s decline began almost immediately after Safeway acquired it.Executives clumsily discarded what had made Genuardi’s successful: a sense that shoppers no longer craved just Velveeta and macaroni.Genuardi’s was the region’s go-to store for gourmands before the likes of Whole Foods and Wegmans swept in, offering a food-lover’s smorgasbord of delicacies delivered with customer service so smothering, it could be mistaken for the affections of an Old World aunt.Under Safeway, a premium was placed on the stores’ operating efficiently – watching inventory, buying merchandise at the right prices, things like that. Genuardi’s customers began to notice on sales floors less of what they had come to love.

    1. Carl J. Mistlebauer

      Oh, that list is endless….My all time favorite is Sears buying Lands End, which at one time was quite an iconic brand with employees that were passionate and dedicated (in fact they still have alumni get togethers) and Sears didn’t wait a day before they started destroying that company.Then the whole Sears and Kmart purchase that was a real brilliant decision.Here you find yourself the owner of some of the most well thought of brands, Lands End, Craftsman, and Kenmore and a corporate story, that of Sears and Roebucks, and Kresge, and what do you find valuable about the acquistion?The real estate.What’s really sad, is that Sears would be really easy to turn around even today……

      1. Mark Essel

        How about Kmart buying Sears, and going bankrupt? I heard this from a retired friend while walking but haven’t caught it in my personal news stream.

        1. Carl J. Mistlebauer

          Kmart came out of bankruptcy in 2003 and then acquired Sears in 2004 and bankruptcy this year appears to be a very realistic option.Realistically it solves nothing because at the end of the day Sears is history. They have already hired a licensing guru to take the brands Craftman, Die Hard, and Kenmore out and market them to other retailers and to begin slapping those brands on other products.JC Penney got themselves a CEO from Apple, smart move! Sears just got themselves one from Brookstone, stupid move.But that is what happens when everyone tries to either be another version of Target and or Walmart, like as if Target is not the best Target and or Walmart is not really all that good at being a Walmart.The trouble at Sears has always been that they attempted to be a “mid tier discounter” and in reality there is no such animal; you are either a discounter or you are not.But that is what happens when you lose your vision and listen to the chatter of market analysts.If you do not know who your customer is and what your market is you are lost….Its like Kmart, after emerging from bankruptcy the first thing they did was do away with blue light specials and their little in store deli, which created the carmel corn smell when you entered the store.While it was their inventory and distribution software that was their biggest issue.Oh, but Walmart didn’t have blue light specials…yeah, Walmart has an awesome computer and IT system….and they did have the little smiling face….ah but what do I know….

  28. Derek

    I’m impressed by how Conde Naste has handled Reddit. They also have embraced i-device publishing. I use the New Yorker iPad app and frequently check Reddit on my iPhone.

  29. abhic

    Here’s a great post on why ‘Being acquired doesn’t have to suck’ by Jonathan Hoyt of OrderedList (acquired by GitHub) – http://theprogrammingbutler…



    1. Dave W Baldwin

      Ooops, thought your comment was on Education.

  31. bfeld

    IAC is an interesting positive example. They’ve acquired two companies I was an investor in (ServiceMagic and DailyBurn) – each which has thrived under their ownership. And – their approach has been exactly as you prescribed.

    1. fredwilson

      the hold co model works better i think when you look at the track record of acquirers

  32. Guest

    Of course, no acquirer thinks they’re doing harm when they force an acquired company to align itself with their own vision. I think this situation also calls for a French maxim: Laissez faire.

  33. Brian Paul

    I suppose it’s the founders (and purchasers) dilema. It’s very easy for an acquired service to stagnate. On the other hand, overly radical changes can alienate the community of users that has made the acquisition a success in the first place. Ebay/PayPal comes to mind as do a few other IAC properties.I think Fred’s emphasis on careful changes should be strongly stated but we should caution that organic innovation must also be consciously fostered to some degree. I suppose it all goes back to why the purchaser is doing so (good fit, buying R&D, or block a future competitor) and if there is a strong internal champion with enough vision to take the reigns once the founders depart.

  34. Mark Essel

    Doesn’t William Buffet acquire businesses where the owners retain authority to operate like this?

    1. fredwilson


  35. Rod Turner

    You are so right Fred.  I was EVP at Symantec from the early days.  When we started our acquisition strategy, we worked very hard to keep the teams together and to avoid interfering with their autonomy. I managed the first acquistion we made, and then grew that business to be the leader in it’s market on DOS (Breakthrough Software, TImeLine), and in that case we dieliberately made no changes whatsoever for the fiest six months, during which time we firgured out the business. After the six months had passed, we very carefully integrated finance, operations and sales. We did not change development, product management, tech support, QA, or strategy.  We did really turn up the burners on marketing and sales, and we much increased investment in the engineering 1990, when Symantec acquired Peter Norton Computing, I was GM of that merger and we took the same approach, although by this time we have made four other acquisitions, so we did not have a hands off period of 6 months.  We stepped up R&D, and invested heavily in marketing.  At the time of the merger, the Norton business was about 22% of the combined entity. Four years later when I left the Norton product Group, it was up to about 80% of Symantec’s revenues.  It became Symantec.Rod Turner 

    1. fredwilson

      those are great stories/experiences to share. thanks for doing that.

  36. Karan

    Guys sorry if I am a little off subject.  What I want to share is still related to web services and what  I believe is the next evolution of social bookmarking – curated search.  After reading this post I searched for “vimeo” on KBucket (crowdsourced curated search site).  The result shows you how curated search is different- – let me explain what you are looking at: The first search hit, tells you that vimeo is in a KBucket page called web 2.0 under cool sites/video sites – When I go to that page – I can not only find vimeo and its description but all other competing products – The other search hits on the page have vimeo listed as the source of the page(look at Author tag) – Further the KBucket names tell me more about the context of the page – Middle East (news on Middle East) – Wikileaks Cables and Occupy Wall Street KBucket pages. If you think this is interesting, we are looking for investors!

  37. Dorian Benkoil

    Fred, VCs often achieve their returns via a strategic investor buying the company. You’re essentially telling those investors to buy the service, but then let it be. Is that the main key to successful strategic acquisition, or do you have other pointers? What proactive steps can strategic investors make to best integrate a company they’ve acquired?

    1. fredwilson

      I think they should act as we do. Support financially but mostly leave it alone and let the team do what’s best for the business

      1. Dorian Benkoil

        I hear you but that can conflict with the financial modeling, assuming new efficiencies, that often accompanies a strategic buy that incorporates the acquired business into the purchaser’s.. It’s hard in that scenarioto leave the acquired business alone.

  38. LIAD

    Should be the first rule of Venture Capital too.

    1. fredwilson


  39. kukouri

    Very interesting read.

  40. jason wright

    Do doctors spout latin when doing annual physicals?  

  41. fredwilson

    i wish i had learned latin