HACKER Q&A
📣 keosariel

What do companies acquire and shutdown a startup?


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.

  👤 edent Accepted Answer ✓
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.

👤 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.