Covering the Exits

So! Adobe has quietly canceled their plans to acquire Figma. For everyone playing the home game, Figma is a startup that makes web-based design tools, and was one of the first companies to make some actual headway into Adobe’s domination of the market. (At least, since Adobe acquired Macromedia, anyway.). Much ink has been spilled on Figma “disrupting” Adobe.

Adobe cited regulatory concerns as the main reason to cancel the acquisition, which tracks with the broader story of the antitrust and regulatory apparatus slowly awakening from its long slumber.

On the one hand, this was blatantly a large company buying up their only outside competition in a decade. On the other hand, it’s not clear Figma had any long-term business plan other than “sell out to Adobe?”

Respones to this have been muted, but there’s a distinct set of “temporarily embarrassed” tech billionaries saying things like “well, tut tut, regulations are good in theory, but I can still sell my startup, right?”

There’s an entire business model thats emerged over the last few decades, fueled by venture capital and low interest rates, where the company itself is the product. Grow fast, build up a huge user-base, then sell out to someone. Don’t worry about the long term, take “the exit.”

This is usually described in short-hand as “if you’re not paying for something, you’re not the customer, you’re the product”, which isn’t wrong, but it’s not totally right either. There’s one product: the company itself. The founders are making one thing, then they’re going to sell it to someone else.

And sure, because if that’s the plan, things get so easy. Who cares what the long-term vacation accural schedule is, or the promotional tracks, or how we’re going to turn a profit? In five years, that’ll be Microsoft/Adobe/Facebook/Google’s problem, and we’ll be on a beach earning twenty percent.

Anf there’s a real thread of fear out there now that the “sell the company” exit might not be as easy as deal as it used to be?

There’s nothing I can think of would have a more positive effect on the whole tech industry than taking “…and then sell the company” off the table as a startup exit. Imagine if that just… wasn’t an option? If startups had to start with “how are we going to become self-funding”, if VCs knew they weren’t going to walk away with a couple billion dollars of cash from Redmond?

I was going to put a longer rant here, but there must be something in the water today because Ed Zitron covered all the same ground but in more detail and angrier today—Software Is Beating The World:

Every single stupid, loathsome, and ugly story in tech is a result of the fundamentally broken relationship between venture capital and technology. And, as with many things, it started with a blog.

While I’m here, though, I’m going to throw one elbow that Ed didn’t: I’m not sure any book has had more toxic, unintended consequences than The Innovator’s Dilemma. While “Disruption Theory” remains an intellectually attractive description of how new products enter the market, it turns out it only had useful explanatory power once: when the iPhone shipped. Here in the twenties, if anyone is still using the term “Disruption” with a straight face they’re almost certainly full of crap, and are probably about to tell you about their “cool business hack” which actually ends up being “ignore labor laws until we get acquired.”

It’s time to stop talking about disruption, and start talking about construction. Stop eying the exits. What what it look like if people started building tech companies they expected their kids to take over?