After Slack’s Sale, What Do ‘Defensive’ Acquisitions Mean for Indie Hackers?
If you can’t beat them, buy them.
That seems to be a growing sentiment among tech giants that are looking to offer innovative products that will help them compete and/or defend themselves from competitors eyeing market domination.
While it’s not a new phenomenon for juggernauts to gobble up as many competitors as possible — look at Microsoft in the 1990s — there’ve been several prominent examples of late.
Most recently, Slack announced it’d sell to Salesforce for a whopping $27.7 billion. Despite its intentions to remain independent and compete primarily against Microsoft’s Teams product, Slack opted for a sale that enables it to survive with a larger, well-heeled parent. This is, of course, despite Slack being generally regarded as a far superior product than that of Microsoft’s imitation.
As Fast Company detailed, the sale is one of the latest “defensive” acquisitions in Silicon Valley. Rather than a conventional acquisition that increases a buyer’s market share, defensive acquisitions are essentially a strategy to buy companies as a bulwark against competitors’ domination of a market.
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Conventional wisdom in a free market is that the best product or idea wins out. But what Slack’s sale demonstrates is something that is perhaps more existentially damaging to not only a free market but innovation itself. As tech writer Liz O’Sullivan puts it, consumers are beginning to see the power of their choice and their volume of options diminished:
“And if a company like Slack can’t stand up to the consolidation of corporate power, consumers’ ability to freely choose the best and most useful product is at risk.”
Facebook’s acquisitions of Instagram and WhatsApp are other examples of a tech giant cornering a market with its deep pockets — moves that have since laid the foundation of an antitrust suit. Google is also facing a serious antitrust suit for monopolistic behavior.
Such acquisitions raise a host of questions for indie hackers. Chief among them may be: If a multi-billion-dollar company like Slack can’t compete for the long-term with the best product, revenues of $401 million in 2019, substantial VC backing, and millions of users — who can?
To quote Paul Graham:
For years I've been telling founders that the surest route to success is to be the cockroaches of the corporate world. The immediate cause of death in a startup is always running out of money.
I think Slack were spending too much and not making enough from the users that loved their product.
I picked up some of their stock earlier this year in case they get acquired. I just sold my position this morning (I'm aware that I disclose this at the risk of making me look stupid later 🤷♂️).