> And yet so many modern day startups have no viable exit strategy beyond acquisition
Bandcamp was already profitable and has been for years. The pandemic dramatically increased their sales. They were doing fine.
Why did they need an exit?
That is the real flaw of SV thinking: that simply being a profitable, going concern is somehow inadequate. The result is monopoly accretion as small companies are repeatedly swallowed up by bigger ones.
Did bandcamp raise a lot of money from venture capital? The last round listed on crunchbase was a series A in 2010. It looks like management were fine running it more like a lifestyle business.
Yeah, as far as I can tell, they took a seed round and a series A and have been profitable since... 2014? If memory serves?
If you look at their staff growth, it's been very slow and very steady. At the time of acquisition they were sitting in the 100-150 headcount range, which is modest for a company that's almost 15 years old. Given their claim of 207M to artists last year and their touted 18% average rev share, we can guess they were generating around 50M per year gross, which is a very healthy cashflow for a company that size.
Their strategy was clearly not to take over the world, but to carve out a niche and not bother to directly compete with the streaming platforms (which helps to explain, for instance, the incredibly rudimentary mobile player app).
As for the senior management, Diamond had already previously started and sold a company. I'm sure he was doing fine. The same is true of Mark Hall, their VP of Product (who started 5-ish years ago, if I recall). The technical founders I'm less sure about, though apparently at least one of them had already moved on.
I'd absolutely describe it as a sustainable lifestyle business that had a good long-term trajectory. It was never going to be a unicorn, but who cares?
A company with 100 employee isn't a lifestyle business. The term we used to use for that before VC swallowed the world and decided that anything less than a billion is chump change was simply "business". A 100-person company with millions in revenue is a successful medium-sized business.
The only reason it doesn't feel successful and stable today is because we live in a unprotected corporate environment where any of the giant behemoths may anti-competitively crush a smaller business if they so choose to and there won't be any repercussions.
I wouldn't be surprised if the main motivation for Bandcamp selling was simply the fear of being either bought out by someone worse, or crushed by them. (Likely Spotify, which is two orders of magnitude larger than them.)
I love the 'rudimentary' app. It was only recently I noticed a lot of people complaining about it. It was a surprise to me. I can search and find new albums, and I can listen to album from start to finish without any issues, share a track link to a friend, and purchase + download the album for offline. Only feature I would have liked to see is the niche addition of built-in ListenBrainz support. What else was missing?
For me the big one is playlists. I'm absolutely an album listener (call me old school), but I like to build thematic playlists of multiple albums that I listen to in rotation (for example, I have a background electronica playlist I love to use when I'm working), and the player lacks that capability.
Notably, Bandcamp absolutely encourages purchasing individual tracks, so for folks who, unlike me, tend to build mixed playlists, it's even more annoying that this feature doesn't exist.
In fact, they only very recently (as in last month!) added basic queuing support:
Bandcamp is 100% a bonafide operating business. I don't want to put words in your mouth, but perhaps you're seeing that they were just trying to run "Business as usual" and equating that to a lifestyle business as they weren't chasing growth.
I think the most likely explanation is that the founders just got bored with the project as they got older and aged out of their own primary target demographic. You have kids, you start getting regular colonoscopies...all the trials and tribulations of teen and twentysomething indie musicians start feeling less urgent and relevant.
That, and/or they were not interested in running a company that is finally getting too large to feel like a family / tight-knit community. The kind of person who likes running a 20 person outfit is very plausibly someone who gets no joy out of running a 200 person one or even actively hates the idea.
So they sold to someone they liked well enough, or in any case someone they distrust less than others to have the expertise and values to scale the business in a way that doesn't COMPLETELY destroy what made it special
I think it's more so the result of cheap money than some way of thinking. Higher interest rates will curtail a lot of this activity. Might even see a wave of divestitures or spinoffs as companies have to look harder for sources of capital.
The need to "exit" and the obsession with "growth" that occupies the minds of SV founders significantly pre-dates the low rate environment that's dominated since 2008. The only difference is the path: IPO vs acquisition.
Because the people who like to start new companies and take lots of risks generally tend to not like running stable businesses and dealing with FP&A managers, lawyers, compliance and tax experts
> Because the people who like to start new companies and take lots of risks generally tend to not like running stable businesses and dealing with FP&A managers, lawyers, compliance and tax experts
... in SV/the tech industry.
That's kinda my entire point.
Stealing someone else's analogy: If you went to a bank to get a small business loan to open up a coffee shop, and you told them "Yeah, I'm hoping to take a bunch of your money, open a coffee shop, never return a profit, and then sell it to Starbucks", you'd get laughed out of the room.
SV is not a homogeneous thought-entity. Maybe the founders were tired of running it or wanted to move on to do something else. Businesses get bought and sold all the time and don't need to be a lifetime commitment for the founder (it would still get sold or shutdown at that point anyway).
You make a good point, but I wonder what the real world business equivalent of this is? Is it the destiny of every successful café to become acquired by Starbucks one day? (assuming there's not a better comparison I should be thinking of)
Successful restaurants, bars, etc do change owners from time to time as owners retire or simply want a change of pace. I imagine the difference is the amount of money involved. It's possible for an individual to save up several hundred thousand to a million to buy an existing, profitable small business. Less so the hundreds of millions to billion+ a business like this might go for.
Around me in Sydney, there is a major “hospitality group” that’s spent the last 10+ years buying up bars and pubs.
There’s a few smaller operations doing it as well.
The big one, Merivale, seems to have practically unlimited money to throw at interesting or struggling venues. While I really don’t like the changes they eventually make to most places they buy, I have a grudging respect for the business acumen of Justin Hemmes the owner.
He seems to have an uncanny knack for having bought a good sized venue a year or two before, in every area that becomes cool and popular. Often they’ll barely change for a few years, while the demographics around them shift, then one day they’ve suddenly been renovated and there’s a queue of b-grade celebrities all dressed up and lined up around the block waiting to get in every weekend for a month or two.
I totally get that my demographic spends less over the bar than the crowd he’s so good at attracting, but he’s ruined two of my local ex-favourite pubs in the last few years, and over decades he’s turned some of my favourite music venues in things like trashy Mexican restaurant/bars.
But yeah, even as successful as he is in his field, I doubt it’ll get him into the three comma club.
The goal of every venture-backed tech startup is to reach an exit. That's the whole explanation of "why." You can go back in time and ask them "why did you have to take VC money" in 2008 and that might be an interesting question. But once they did, there's no surprise whatsoever that they went for the exit today.
Bandcamp was already profitable and has been for years. The pandemic dramatically increased their sales. They were doing fine.
Why did they need an exit?
That is the real flaw of SV thinking: that simply being a profitable, going concern is somehow inadequate. The result is monopoly accretion as small companies are repeatedly swallowed up by bigger ones.