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Startup ≠ Investment Vehicle
Week 54 of Founding Typogram
While the dust settles from the bombshells of Adobe acquiring Figma, I took some time to reflect on my points of view towards startup acquisitions after I published my last article.
During the discussions in various comment sections, I was repeatedly reminded that the deal made perfect sense for both parties involved. It made sense for Adobe to kill a powerful competitor in one blow and, in the process, gain a beautifully crafted product and many new users. It made sense for Figma as it is a tremendous win for the tireless founders and employees to bag a deserving paycheck. Every time these arguments came up, I felt unfit to express the opinions that I expressed. Who am I to say anything?
The situation is oddly reminiscent of a humourous old saying in Chinese: “The emperor doesn’t worry, but his eunuch does.” making fun of people who worried about other, more important people’s problems. I, of course, was the eunuch in the equation. But why is Figma getting acquired by Adobe not my problem? I am a user of both products. Not only that, I taught both Figma and XD in my “Crafting Interactions” course at School of Visual Arts; my students are users of both products.
Here comes the weirdest thing I found in this ordeal: while both Adobe and Figma are content with the acquisition, the users from both sides are all sad and worried. Figma users are visibly frustrated — they loudly express their disapproval of the acquisition, and some even consider leaving. Adobe XD users, not as loud being the minority, also find the deal displeasing — the future of XD is unclear; XD users may have to spend resources to migrate their design systems and design files to Figma when XD sunsets.
The puzzled feeling haunted me. There is one thought I had not gotten out of me, partially because I didn’t know how to articulate it and partially because I knew even when I articulated it, it was going to be laughed at. I found someone, another me, who said it better than I would have said it:
Of course, they got the laughter that “we” deserved. It is naive, as I imagine many people would think. But their courage in saying it encouraged me to have my stab at what I really thought:
A startup is not just an investment vehicle. It has its own hopes and dreams too.
I hope more investors and corporate leadership realize this. We, as working-class humankind, spend days and nights pushing pixels and crushing bugs, arguing with our work friends even when we like them, not because we want to 100x on a stock (at least not only because of that), but because we want to create great products to serve our fellow humans — save their time, make their work more enjoyable, make them more productive and happier in their lives. These are the hopes and dreams of the startup. It exists, struggles, and tries, to serve a greater purpose, not just to enrich the investors.
Furthermore, the users of these startups have their hopes and dreams too. Figma’s community really, really loved Figma, in an almost touching way, in a way that most product makers like myself would die for. So many talented users burned their midnight oil to create Figma plugins and community files and shared them for free, enriching Figma’s ecosystem for free! Design podcasters rave on and on, episode after episode, about how awesome Figma is, without a penny paid to them for advertisement. Why don’t we the users have a say in this acquisition? The acquisition impacted our day-to-day life the most!
It challenged me to rethink the relationship between a company and its customers. For traditional goods that are sold on store shelves, the customer has a relatively limited relationship with the company. If the laundry detergent wasn’t good, I would just not buy them next time. But SaaS product is different. Choosing a product is a big investment of our time. Once I choose Figma, my entire company’s design files and design system will be in this format; I will be knowingly trapped in the product to some extent.
B2B product is even more so. When a company shifts its focus, it can lead to another customer company’s death! Prototypo, an awesome typeface editor, can’t keep their product running partially because Graphcool, a product Prototypo used, got replaced by Prisma but the upgrade requires some substantial development work that the team can’t take on. Prototypo may have already decided to sunset at the time, but the product can’t even run locally as an open-sourced project was the final nail in the coffin.
Shouldn’t the customer have a say in their investment? There has been a public outcry against the acquisition among users, but it didn’t matter at all in the end. Shouldn’t it matter a little?
I am not talking about letting the users hijack the entire decision-making for companies. I am thinking out loud here: some companies set up a separate class of shares with higher voting rights for founders or investors, meaning share doesn’t always have to be equal to voting rights. For example, some founders may only own 30% of the company but have 50% of the voting rights. This gave me an idea; users own 0% of the company, but can they have a higher than 0% voting right? Public companies sometimes require all stockholders to vote on mergers and acquisitions. Can we revolutionalize company practice and grant users a seat to vote on these matters?
Hear from You
Y Combinator led some new investment practices, eg. more founder-friendly terms that were discussed here. That gives me hope that startup practices can be innovated on. If VC can do it, startup founders certainly can too. Do you think the practice of granting users certain voting rights is feasible, or a good idea?
See you next week! If you have friends who are interested in founding startups, please consider sharing my newsletter with them!
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