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What I Wish I Had Known Before Selling to Google

An entrepreneur shares his lessons learned from his deals with the acquisitive search giant.
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Jonathan Sposato: Founder of Phatbits and Picnik

I founded Phatbits, which made XML desktop applications, in 2004. A year later, Google offered to acquire the business. We closed the deal after quick and collegial negotiations, and our group integrated into the Google Gadgets division easily.

My one regret was agreeing to stay on for four years. I wound up leaving after a year. I underestimated what it would feel like to be a salaryman, no longer in control of my own destiny. But overall, the integration was a success.

When I sold Picnik, a photo-editing site, to Google five years later, I assumed everything would be about the same. That wasn't the case. This time, negotiations were complex, lasting almost six months. We faced a dizzying amount of changes in the first three months after the acquisition, being shuttled from one part of the company to the next.

One-third of our 25-person team quit within a year of the acquisition. I stayed for two years to offer some sense of continuity, while my cofounders, Darrin Massena and Mike Harrington (who were equally involved with the sale of the company to Google) continued to work at the acquired company for more than a year. By 2012, Google shut down Picnik entirely. I felt like I let a bunch of great people down.

Looking back, I should have insisted that Google's crystal ball for Picnik was clearer. I sometimes wonder whether we should have sold the company at all.

Now, as an angel investor in six startups, I advise entrepreneurs who are thinking about selling to think carefully about the return on investment, including the effect on team culture, not just the bottom line. 

 

This post has been revised to correct the role of Picnik's cofounders in the sale and its immediate aftermath. 

IMAGE: Randy Stewart, blog.stewtopia.com
From the February 2014 issue of Inc. magazine




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