by Ben Tarnoff
Twenty-three. This was all very new to me. Even with some experience in the industry, I had no idea how corporations worked. No one in my family worked for a corporation.
So we went into the bigger company and did a presentation for several directors. They found it interesting, because we were thinking about the same problems that they needed to be thinking about. Because the big companies missed the boat on mobile, they were willing to write checks to make up for that gap. That’s probably the biggest phase of talent acquisition that I’ve seen in my career. Although maybe today acquisitions around AI could rival it.
They liked our product enough to make an offer. Their offer was many multiples larger than the first one we’d received. They were a larger company, with more money to spend. They were also more frightened of smaller competitors outmaneuvering them, so they were willing to spend more.
They wanted to acquire all of the assets of our company for a particular price and then wind the company down. The price they proposed was pretty high. And being a young kid with lots of student loan debt, I was blown away by the seriousness of that number. That’s the main thing I remember.
How did they decide how much the assets were worth?
It was a charade. Our assets weren’t actually worth anything. We had a negligible number of users. Our service was not wildly popular by any means. So they valued the assets pretty arbitrarily—this chunk of code is worth this many millions of dollars.
You said the smaller company wanted to acquire you as a way to hire you and your cofounder, but wasn’t interested in your technology or your code. What about the bigger company?
They were planning to throw away every line of code. There was nothing that they were actually acquiring besides us.
Then why buy your code if they’re just going to throw it away? Wouldn’t it have been easier to just hire you, instead of hiring you and buying your code?
Sometimes the big tech companies acquire startups to acquire their technology, and sometimes they do it just to prevent those startups from becoming competitors. In our case, it was the latter.
Even if a big company is not directly threatened by a startup as a competitor currently, the thinking is that if they need to buy them later, they’re going to pay a lot more for it. So they might as well buy the startup as early as possible to nip it in the bud. Our startup was pre-funding, so they could get away with paying us much less. We didn’t have any investors they had to satisfy.
But acquiring our assets was also a way to justify paying us a lot. If they’re only going to pay you two times the normal salary, then that can take the form of a very nice job offer. But if they’re going to pay you more like eight or ten times, it breaks the whole idea of salary bands, which is how big companies organize compensation by experience level. So buying your assets is the back door—it’s a way to get away with paying certain people much more.
As far as what they’re buying—yes, they’re avoiding paying more for a potential competitor later. But the inherent value in a talent acquisition comes from acknowledging that most projects in software fail. Finding a team that can actually ship something that gets out the door is rare. Even at big companies, most projects will not see the light of day. So to find a group of people that have managed to build something—even if it’s small, even if it’s humble—means they’re probably a team that works well together. So they’re worth a premium. That’s the theory behind it, at least.
Also, they could make us sign a contract that locked us in for a long time. The deal to acquire our startup was a lump of cash and a job offer. We had to take both together. About half of the payment came up front, in the form of the cash. And the rest would come to us through salary and stock-based compensation on a vesting schedule over the course of four years.
Sure, I could’ve showed up on day one and quit. And they would’ve been angry at me, but I still would’ve been able to pay off my student loans. However, I would’ve been leaving a lot of money on the table.
Were you excited? Paying off your student loans must’ve felt pretty good.
I was very excited and very terrified. I didn’t want to screw it up. The deal was complicated. There were hundreds of pages of legal documents that I felt very overwhelmed by. We had to pay a lawyer fifty thousand dollars to make sure everything was airtight. My parents didn’t understand it, and to this day don’t understand it. My friends in tech were happy—some of them had been through this experience before.
But it changed my life. I went from being basically broke—my next rent payment would have emptied out my savings account, not to mention my student loans—to not having to worry about money anymore. So that was great.
How did it feel to go from running a startup to working for a big company?
It was intimidating, but there were some really positive aspects. As an engineer, I learned a lot. I felt like I was finally learning how to actually write software. I would go home and read the company’s internal wikis for hours. I was so excited about working there that I read documentation every weekend for a year, actually.
But coming in as a talent acquisition, you’re also expected to be a thought leader. You’re expected to inject the company with new ideas. It’s an informal role—it’s not reflected in your title. But that’s why management has paid a premium for you.
So my cofounder and I started to materialize what we thought this company needed, and assembled a team of people to work on it. The fact that we could come in and substantially change product direction—that we could create and staff and launch a project—was due to the fact that the company had paid extra for us. Leadership assumed we knew something.
Failing Up, Down, and Sideways
You said that most projects in software fail. Why is that?
Because you never know what’s going to work. Market timing is everything: something that makes perfect sense two years from now, or made sense two years ago, might fail today for no good reason. Everything changes so fast: the technology stack, consumer demand, even the fundamental capabilities of these devices.
I mean, everything I’ve ever worked on has failed. I’ve worked on some ambitious projects at several of these big companies, and none of them have succeeded. But I’ve still been rewarded and promoted. And I think that’s a good thing about Silicon Valley. Failure isn’t looked down upon, which is a positive aspect of tech culture.
When you fail inside a big company, does it still feel like failure?
The average time spent on a team is well under two years at most of these big companies. So when a company wants to change direction and abandon a product, people usually don’t take it that hard because they weren’t planning on being there for very long anyway.
On some teams, however, that’s not the case. I’m currently on a team that has been working on something for several years. And it’s failing. We have been launching small representative parts of our product, but users aren’t using them.
This is partly a problem with what constitutes success within a big company: if you launch a product with a million users, it’ll get killed because a million users is nothing. That’s one of the reasons that big companies have trouble innovating, because achieving a 1 percent gain in users of your main product will win every time over launching a new product with a much smaller user base. I mean, a million users would be a rocket ship success for an early startup. For a big company, it’s a drop in the bucket. That’s why big companies tend to get stagnant, because they’ll always prioritize growing the main product over funding experimental ventures.
Anyway, on my team, failure has really depleted our energy. We’re demoralized because we’ve been grinding for a long time on something that just isn’t taking off. It used to be one of the best teams I’ve ever been on—but within a period of six months, we’ve become very unproductive. We have no direction.
That sounds like burnout.
People get burned-out not because they’re working too hard but because they’re not feeling rewarde
d by the work they’re doing. They get burned-out because they believe their work has no impact. On my team, since we know it’s only a matter of time before leadership kills our product, people are burning out left and right.
At work, there are certain things you have to do. But what the company is really paying you for is to come up with new things to do. They’re paying for your creativity. When I’m burned-out, I’m still doing the things I have to do—I’m filing the TPS reports—but I’m not coming up with new things to do.2 Burnout is when the creative part of your work is dead. There’s a muscle I go to flex and it’s just not there.
What about in the startup world? Failure must look different inside a startup.
If you launch a startup that goes out of business, no one thinks you wasted your time. People still revere a founder whose company has failed, even to a fault. Plus, because there’s always more money being pumped into tech, it’s a soft landing for almost anyone whose startup fails.
That changes depending on what you’re working on and the time period, of course. For instance, I don’t think if your social app failed today you would have a nice acquisition offer waiting for you, unless you knew the potential acquirers on a personal level. And that ends up being the major way that the opportunities for “failing upward” are not distributed equally.
Who is allowed to fail, and who gets to fail upward? Your startup wasn’t failing, exactly, but it sounds like the people you met in college were the determining factor in your ability to land acquisition offers.
Definitely. In our case, that was the main thing. We didn’t have an impressive piece of technology or an impressive user base. But we did have social capital.
There are other ways to accrue social capital. If your startup gets press attention, that raises its acquisition price. If you have a really stellar team, that’s another way to fail upward. You could assemble a dozen excellent engineers to work on a very hard problem and then fail at that problem. But you found a dozen engineers that can work together without killing each other and maybe even manage to ship something. That’s worth a lot.
On the one hand, Silicon Valley seems to revere entrepreneurialism. On the other hand, the industry is increasingly dominated by a handful of big companies—companies that, as you’ve explained, frequently acquire startups and burn down all their assets to ensure they don’t become competitors. How do you make sense of that contradiction between the cult of the founder and the increasingly monopolistic structure of tech?
The funding model for startups is venture capital. And venture capital is a hits-driven business: you expect the vast majority of your investments to fail, so the ones that succeed have to succeed on a massive scale. Venture capital is risky, and it requires a lot of money.
Until relatively recently, tech companies didn’t have enough money to compete with venture capitalists. But now they do. Today, you have four or five tech giants with cash piles big enough to really push people around. And this has only happened in the last decade or so—it wasn’t like that in the early 2000s after the first dot-com crash.
But the incentives of a VC firm are different from those of a tech giant, right? The former is giving you capital to help you grow into a bigger company, whereas the latter is buying you to make sure you don’t grow into a bigger company.
Right. But again, the tech giant is also buying you because you’re a founder who has had some amount of success. The reverence for the founder might sound silly, but it’s based on something real, which is that it’s really hard to measure why a company is successful.
There are too many factors at play: market timing, staffing decisions, choices about the technology stack. It’s impossible to know why a particular startup succeeds. So you find something to control for, and that’s the people. That’s why big tech companies like to bet on founders. This is something I’ve noticed in my career: there are people who are just very effective, and the things they touch seem to work. And most people aren’t like that.
How have your views of the acquisition experience, and of the tech industry more broadly, changed over time?
I felt I was succeeding while the acquisition was happening. I had worked hard and I was being rewarded for it. The system was working.
But today I look back and think of it as a failure. Why didn’t I work on something more challenging? Why didn’t I take a bigger swing? At the time, I thought I was working on something groundbreaking. Now, with some hindsight and maturity, I think I just got lucky doing something small.
I definitely feel like this was a silly chapter in my life. I’m very glad I got to pay off my student loans. But I don’t feel good about the work. In fact, I feel pretty embarrassed about it.
It’s not that I consider myself a failure for not having built a successful business. The failure I feel is more personal: it’s that I spent my time on building a small social app instead of something that would have been more meaningful.
What would’ve been more meaningful?
I could have worked on something that actually had a positive impact on society. Or I could’ve set out to solve a problem that had more interesting technology behind it.
Making the World a Better Place
What do you think changed your mind? Because you didn’t feel that way at first.
I think it was seeing more of the industry, spending time at these big companies, and observing certain things.
One of those had to do with bias. Silicon Valley has been under attack for the past several years for having a lot of bias in its compensation practices around gender and race. As a result, the big companies have tried to standardize the way they pay people. They’ll break compensation into salary bands that are supposed to match an employee’s level. So if you’re at a certain level, your pay falls somewhere within the corresponding salary band. Which means that if a man and a woman are in the same band, they’re going to be paid roughly the same.
That’s supposed to help correct gendered pay discrepancies. But it doesn’t really work, because there are all sorts of escape hatches built in. Salary bands only cover your salary. There’s lots of other ways that people get paid.
As we discussed, talent acquisition is one of them. Talent acquisition gives companies a way to pay a premium to people who have more social capital. But that’s not the only way that people are rewarded unequally. There’s also the sign-on bonus. The sign-on bonus in Silicon Valley today can easily be a hundred thousand dollars. Even for somebody coming off their first job, or maybe even right out of school, it can be upward of fifty thousand dollars. And the recruiters have a lot of leeway in setting that number. Then there’s your annual bonus, which is a percentage of your salary at most companies. Finally, there’s your stock-based compensation.
When you take an offer at a company, you’re given either stock options or grants of shares in the company. Those options or grants vest over a four-year schedule. And there’s really no restriction on how high that can go. So for a lot of people, a majority of total compensation comes from stock. Salary typically tops out at around $200,000 or $250,000 at a big company. But it wouldn’t be surprising to be given another $100,000 in stock grants. If you’re joining a company early on, that stock, by the time you’re done vesting it, could be more like a million dollars.
What about ageism in the industry? Silicon Valley tends to be very young. Does that worry you as you get older?
I don’t know where all the old programmers go. They must go somewhere. It is a little worrisome. I’m in my thirties, and I feel like I have less energy. I’m an iOS developer and I haven’t learned Swift.3 Five years ago, definitely ten years ago, the day Swift was announced I would have become an expert on it. And I just don’t have that energy now.
So it sounds like issues around equity and bias played a determining role in changing how you think about the industry.
Well, come to think of it, those are issues I’ve only come to understand in the past few years.
I thi
nk what really shifted my thinking about my success was observing that most of the startups that are getting crazy amounts of venture capital aren’t solving interesting problems. There is a lot of money going into squeezing more ad dollars out of users, and getting more attention and eyeballs. Yo is a good example.4 My app wasn’t much dumber than Yo. And they got millions of dollars of funding.
I also felt like people were becoming founders and investors not because they wanted to solve problems that would help humanity but because they wanted to be in the Silicon Valley scene. They wanted the cultural cachet. They wanted to go to the parties.
That was disillusioning to me, because I had really bought into the ideology that building a business was the best way to make the world a better place. That was something that was drilled into my head at my elite college. I had completely bought into it.
But over the years, as I saw what products were being funded and built, I felt disappointed. It changed how I thought about my own success. I wasn’t actually solving problems—I was just riding a wave of ridiculous overinvestment in social apps.
So your own success started to feel more like a failure—not a personal failure, perhaps, but the failure of the industry more broadly. Recently, a number of high-level people in Silicon Valley have expressed some degree of disillusionment as well. Early Facebook investor Sean Parker, among others, seems to regret his role in building a platform he now considers psychologically damaging. How do you see this disillusionment playing out more broadly in the industry?
