The Innovator's Bias - Chapter 1
“I don’t get it,” Steve blurts out in disbelief. “Why would they acquire us only to shut us down?”
The day had started as a regular Wednesday at Interstitial Networks. Steve had been going through some final checklist items in preparation for a major software release scheduled that Friday when his manager and VP of Engineering, Jeff, walked into his office to deliver the news that their parent company (following on from a recent acquisition) would be shutting down their Austin office in a couple of months.
“Things have gone from bad to worse with the economy,” Jeff replies. “As a cost-cutting measure, the company is consolidating all operations to headquarters in Boston.”
“Does this mean I’m being laid off?” Steve asks.
Jeff sighs. “We did have layoffs earlier today, and I’ve had to let several good people go. This is always the hardest part of the job, but no, you’re not being laid off. Upper management asked us to create a list of top performers in the company who have the option of relocating to headquarters or taking a severance package. You are on that list, Steve.”
“I don’t know what to say. How does all this work? How much of the team is left? Can we still make the release this Friday?”
“There won’t be a release, Steve. Offices aren’t all that is being consolidated. Headquarters will also be sunsetting our product and migrating our customers onto their platform.”
“What? Isn’t our product the reason they acquired us in the first place?”
“Yes and no. Sure we have a great product. But at the end of the day, they acquired us for our customer list, not for our product.”
Seeing a confused look come over Steve, Jeff elaborates further: “Given enough time, money, and effort, all features can eventually be copied. From a business perspective, it doesn’t make sense to keep two platforms but merge them into one. Guess which one won?”
“You don’t seem all the surprised. Has this been the plan all along?”
“I guess when you’ve been through the number of acquisitions that I’ve been through, you stop being surprised. Consolidation of people and products is inevitable after a merger. Typically though, the transition usually takes a year or two to complete, not two months. The impending recession has significantly sped up that timeline.”
“Is that why I still have a job …to help speed up with this consolidation?” Steve asks.
“No…” Jeff takes a moment to phrase his response, “…okay, initially, yes, you’ll be responsible for porting over certain key features into the parent company’s platform. But after that, you can move to any other project in the company.”
“I still don’t understand this. It just seems so wasteful. I thought the acquisition was validation that we had created something truly amazing. Something that would continue to grow and evolve, not be shut down like this. All those countless nights and weekends we spent on this product seem like it was all for nothing….”
“Steve, we did create something amazing out of nothing. Those countless nights and weekends are precisely the reason we were able to beat our competitors to market. The acquisition is proof of that. The work you helped create will still live on — just in a different product. That’s a business decision and not a reflection on you or our team.”
Steve nods.
“It’s been great to see you grow from your first summer internship with us almost two years ago when we were just kicking off this project into a technical leadership role this past year. You were practically part of the founding team and helped us get to this point. You should be proud.”
Steve cracks a smile. “What about you? Will you be staying on?”
Jeff smiles back. “Nah. They don’t really need two VPs of Engineering. Plus, I’m not about to uproot my family and move them halfway across the country. I’ve built a career by taking telecom spin-outs to acquisition or bust. I think I still have four or five more startups in me before I’ll retire.”
“Do you know where you’re headed next?”
“Not yet. I’ve put some feelers out, but I’m waiting to settle things here before accepting anything.”
“And, Susan?”
“She founded and bootstrapped this company and still owned 80% of it at the time of the acquisition. So she definitely doesn’t need to work a day more of her life. From what I’ve heard, she’s already negotiated an exit… I’m sure she’ll either start something new at some point or become an investor — maybe both.”
“Wow, Jeff. You’ve given me a lot to process. By when do we need to make a decision?”
“Headquarters wants to move fast on this one. You have until noon this Friday to let HR know whether you’re staying or leaving. If you’re staying, I’m sure they’ll set up a reasonable timeframe to plan for the move and help with moving expenses. Our lease on the building doesn’t run out for a couple of months. If you’re leaving, they’ll process the necessary paperwork for your severance package with you on Friday afternoon.”
“That is fast.”
“I suggest taking the rest of the day off to think things over. But don’t overthink this, Steve. You’re young and good at what you do. You’ll do well wherever you go. Call me on my cellphone if you want to talk through anything.”
Steve nods.
Seeing that Steve has no more questions, Jeff gets up and leaves. Steve pulls out his phone and texts Peter: “I’m sure you’ve heard the news…Lunch?”
“So what are you going to do?” Steve asks Peter.
“I’m leaning towards staying. Moving back to Boston wouldn’t be bad at all”, Peter replies.
“That’s right. You went to MIT there, didn’t you?”
Peter, like Steve, was recruited by the company right after he graduated from university. Unlike Steve, who majored in engineering and only fairly recently taught himself how to code, Peter had been coding since he was twelve. He also graduated top in his class in Computer Science.
“Yeah. Given the current economy, staying on seems like the path of least resistance. If things don’t work out with Interstitial, I’m sure I can always find another job in Boston. How about you?”
“I don’t know. Have you ever considered starting your own company?”
“A startup? Sure, when the timing is right. I’d like more startup experience, though, and I think that working at other startups is the best way to learn.”
“Yeah, me too. That’s exactly why I picked Interstitial, and it’s been a good run. We’ve learned a ton, but I think they’ll have us on this migration project for at least the next year, which will not be exciting work… I can’t help but think that all this is a sign to venture out.”
“In this economy? You know there’s a recession coming.”
“I was reading up on that. Some of the best companies, like Microsoft, IBM, Uber, and Airbnb, all started during a recession. Did you know that even Apple’s run of products that put them on top, which started with the iPod, began during a recession — after the dot-com bubble in 2001?”
“I didn’t. What’s the explanation?”
“The article cited the redistribution of talent during downturns as the biggest reason for this. When people like us are left without a job, instead of weathering the storm at a big company, they leave to form new startups and challenge the status quo.”
“Yeah, I guess that makes sense. So do you have a startup idea?”
“Sort of, yes. I’ve been tinkering on the side with virtual reality for several years. I believe the hardware is finally here to make the metaverse vision you see in movies like Ready Player One and the Matrix possible. The missing piece is software.”
“You want to build the Oasis? That’s pretty awesome and ambitious.”
“Yes, it is, but we don’t have to build it all. If we can build a killer metaverse operating system, we could attract an army of software developers to build killer apps on it.”
“Like Microsoft Windows for the metaverse,” Peter adds.
Steve laughs. “Yes, I like that analogy.”
“You said we. Do you already have co-founders?”
“No. But what do you think of joining me? You are one of the smartest developers I know, Pete. I think I can get a working proof of concept done in 6-9 months. If we work together, we could do it in half the time.”
“I’m flattered, Steve. But I’m not sure….”
“If we keep our expenses in check, the severance package and stock options should give us each at least a year of runway to get something off the ground. I plan to approach Susan once we have a working proof of concept in less than six months. She bootstrapped her company and knows our track record. I’m sure she’ll back us.”
“Looks like you’ve given a lot of thought to this. How would we split ownership?”
“50/50. I read that’s the cleanest way to handle ownership in a situation like this one.”
“That seems fair. I’ll need some time to think this over.”
“Definitely, but remember that we only have until Friday to decide. How about I send you some links to my research and an early draft of a product roadmap to review? To avoid any unnecessary legal complications, we should probably wait on drafting any founder agreements or doing any real work together on this until we make a clean break with Interstitial.”
“Agreed. I’ll have my answer to you by tomorrow morning at the latest.”
“That would be great. I’ll also check with HR to see if we can process our severance package a day early. Every day in a startup counts.”
“Sounds good.”
“Awesome, Pete. I really think this is our time to make a dent in the universe.”
Later that evening, Steve is in front of his computer working on his product roadmap when his phone lights up.
It’s a message from Peter: “I’m in!”
Steve texts back: “Great news! I checked and we can leave a day early so I’ll be processing my paperwork tomorrow morning.”
“Sounds like a plan!”
The next morning Steve heads over to meet with Karen at HR. She’s got all the paperwork neatly stacked in a pile and proceeds to run through a boilerplate exit interview.
Fifteen minutes later, Steve loads a box with his stuff into the trunk of his car, pulls out his phone, and texts Peter a message: “I’m done. How about you?”
A few seconds later, he gets a reply: “Sorry, Steve. I’m staying.”
Steve calls Peter.
“What happened, Pete?”
“Last night, I called my parents to let them know what had happened, and they didn’t think jumping into a new startup right now was a sound decision.”
“Isn’t this your decision, Pete?”
“Sure it is. But as you know, I was on the fence myself, and I called them for a second opinion.”
“I see.”
“I really love the idea, Steve, but I think the timing could be better…maybe we can touch base in 6 months and see where things stand then?”
For a moment, Steve thinks about rehashing his reasons for starting now but then realizes that Peter has already made up his mind and so lets it go.
“Sure, Pete. I’ll keep you posted.”
Steve attributes Peter’s hesitation to join him to a lack of vision on his part. He is hopeful that once he can show him a working proof of concept, he’ll win him over.
He drives off the parking lot and looks at the Interstitial Networks logo on the building through his rearview mirror.
Off to a new adventure… he thinks to himself.