Why I sold my startup, Sparkbuy, to Google

Posted: July 13th, 2011 | Author: | Filed under: Sparkbuy, Startups | 74 Comments »

Shortly after the sale closed, John Cook interviewed me about the experience.  He did a great job of transcribing all of my verbal gems, like “Maybe that is an economic way of looking at it, or something that I am unfamiliar with.”  I’m not even sure what that means.

It was the best I could muster in the middle of a crazy, exciting, wild time.  But looking back, I realize that there’s an important question there and I didn’t do it justice.  Selling a company can be a very lonely decision, so I want to revisit John’s question and share my thinking with others who might be making the call.


It was a great deal for the shareholders

Most VCs don’t care how long your company takes to show a return – they don’t get to re-invest proceeds of their deals, so if you exit early, the money sits in a bank account earning interest for years instead of contributing to their returns.  Since my investors were angels, they would look at the exit on a time-adjusted return basis.  Or put simply, if I could give them back their capital plus a great return in just six months, that could be a terrific outcome.

It was our #1 choice of acquirer

Most startups are acquired.  Actually, most startups fail – but of those that are successful, most are acquired.  Given that an acquisition was, one way or another, the most likely outcome for Sparkbuy, I compared Google to a list of about a dozen other potential acquirers.  They were at the top of my list.  If was going to go to work for The Man, I was more excited about The Man being Google than anyone else.  The employees (both of them!) felt similarly.  Even the investors appreciated the bragging rights of having a portfolio company sell to Google.
Further, the people who I would be working with were amazing.  Scott Silver has always been one of my engineering leadership idols.  After trying to recruit Phil Bogle to Ontela I knew I wanted to find a way to work with him.  While I’ve never been excited about having a boss again, Nick Fox was someone I actually knew I’d enjoy working with and learning from.

I was excited about pursuing the Sparkbuy vision at “Google-scale”

The Sparkbuy product was launched out of a personal frustration with consumer electronics shopping, but the problem is much broader.  It’s just hard to find reliable, accurate, unbiased, quantitative information about products.  Search engines favor old prose over fresh data.  Sparkbuy was about helping consumers make better decisions.

The team I’m working on now is taking that opportunity to the next level.  With business development resources, the Google brand, Fortune-100 budgets, and an appetite for giant risks, we can tackle problems at a broader scale than ever before – making consumer purchasing easier, better informed, safer, and faster.

Working a real job sounded like a good idea for a while

After eight years at startups, the idea of pulling a steady paycheck for a few years was seductive.  Some personal events, while ultimately amounting to nothing, made me feel like having great health insurance wasn’t a bad idea either.  (Soapbox sidebar: health insurance reform is key to promoting entrepreneurialism and small businesses in this country!)  I loved the idea of keeping a more regular schedule, and spending a bit more time with my family.

The money was life-changing

While I’m not in the position of my good friend Rand, who’s gone on the record saying that his life savings is $25,000, I was not previously wealthy.  The Ontela/Photobucket merger was a spectacular deal for all parties involved, and I didn’t take any cash of the table – I’m still 100% invested in Photobucket.  That means the Google sale accomplished three lifelong goals for me: allowing me to set aside enough to pay for my twin toddlers’ college educations, funding my wife and my retirement account, and giving us a financial cushion that means I’ll never have to work at a job I don’t love. It also meant that, overnight, I can pay some karma forward and start investing in startups that I’m excited about (more on that soon).

I get to swing for the fences

Some people are wired for the “billion dollars is cool” kind of risk that folks love to write articles about.  I wasn’t, at least not until I figured out the aforementioned three problems.  At least I was in good company, though – my new great-grand-boss, Larry, famously tried to sell Google for $1mm and failed.

But this lets me play the Shawn Parker game without regrets.  When I start my next company, I can swing for the fences.  Or self-fund it and do something that I love, without worrying about maximizing shareholder value.  Which brings us to…

The company was in a great position to raise money, but I didn’t want to

As the CEO of a startup, I’m dedicated to pursuing value for the investors who’ve extended me their trust.  One of the primary inputs to my decision making is how best to create value for shareholders over the life of the company – it’s not the only consideration in decision making, but it’s a big one.

One of the reasons I founded Sparkbuy was that I was excited to try a different way of building a company.  While I was at the helm of Ontela (now Photobucket), we raised over $30mm.  That’s a ridiculous amount of money.  We had a lot of fun and accomplished some amazing things along the way.  I worked with a team of fantastic people and was never happier than when I was going in to work to spend time with them.  If I had it to do over, I’d do it the same.

But I find there’s two type of people in the world – those who like refining one thing over and over and getting really good at it, and those who like trying new things.  You can guess which category I fall in to.  I wanted to try something different – a smaller raise ($1mm), angels instead of large VCs, and growing organically based on revenue.  That’s what I did with Sparkbuy, and it was a good decision when I made it.

But markets continued to heat up to a fiery glow.  The valuation of comparables in our space was shooting through the roof.  Competitors were raising rounds in the double-digit millions.  It was becoming increasingly clear to me that the best strategic decision for the company was to raise a large financing round at a lofty valuation and grow like crazy – but I wasn’t particularly excited about doing that.  In other words, what I thought was best for the company wasn’t what I, selfishly, wanted to do.

If I hadn’t sold, I would have raised money, and I didn’t really want to do that.

It was time to spin up a B2B strategy

Much as Sparkbuy’s direct-to-consumer website was winning rave reviews from users, there was new and substantial interest was on the part of other companies.  We were getting offers to do long-term deals with Fortune 500 companies that would generate huge revenues over a period of years.  Of course, pursuing those would have required raising a bunch more money.  Once again, this was what I did at Ontela; and once again, while it was fun, I wasn’t excited about pivoting Sparkbuy in that direction.

The biggest risk was still ahead of us

The bigggest challenge for any consumer startup is how to profitably acquire customers.  We knew from the start that this was the largest risk factor for Sparkbuy, and with the launch of our beta (a month before the sale), we were just starting to dig in to this problem.  I had a list a mile long of initiatives to drive profitable growth, but in the end all you can do is experiment and iterate, and it can take a long time to find the magic.  Our value as a company wouldn’t hit a new inflection point until we solved this problem, and it was a long ways off.

To sum it all up

Some of my investors were overjoyed.  Some of them were sad that Sparkbuy would never grow in to its own.  I’ve been called a sellout, and people have told me that I epitomize what’s wrong with entrepreneurs outside the valley.

It’s all cool.

I don’t claim my decisions are right for any other company, or anyone else.  This was not the hardest decision I’ve ever made.  It wasn’t even in the top 10.  There were a lot of moving parts, but at the end, it was simple.  Google hit my “life changing” number, provided a great return for my investors, gave me and my coworkers terrific jobs, and made it all happen six months from the day we were incorporated.  I’ll have other companies some day, and I’ll play them differently.  Your decision, should you be called on to make it, may be quite different – but I hope it leaves you feeling as lucky as mine has!

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  • Anonymous

    Congrats again, Dan – looking forward to backing you again as an investor in your next start-up :-)

  • People call you a sell out ? damn.. I think they forgot that you went and bought the number 1 photo sharing website out and integrated it with a great product. 

    This is a great article and speaks honestly about the challenges faced. Its the kind of honesty that I saw on the Mixergy interview and since been a big fan..

  • Great story Dan.  Really appreciate the openness and insights!  Congrats again!

  • Dad

    seems like a great move to me.  Given the resulting change in your financial situation you can always go do another one a different way :-)

    I appreciate the insight into this situation.  I hope things go well for you and that you get to spend more time with your kids before they grow up and leave (Geek’s taller than me now, yikes! happens so fast…)

  • Really great post Dan. Enjoyed it a lot.

  • Love reading stuff like this, congratulations

  • Gaston

    Thank you.

  • Stephen Hilderbrand

    Congratulations!  This is a great story (I’m sure there’s even more to it…) and shows that you were in it for all the right reasons.  And there’s nothing wrong with returning to having a boss who will mentor you as you grow into your greater role as investor.

  • Dave Matthews

    Great insight – thanks for writing this and congratulations Dan!

  • Thank you for sharing.

  • Did you get a lot of criticism of your decision to sell? Or is this more self reflection?
    Sounds like a really smart move and awesome opportunity.
    Congrats and well done!

  • Congrats Dan! Seems like this decision lets you contribute to the startup scene in a whole different way while letting you put some $ away for the future. Sounds simple enough :) cannot wait to see more of your investments!

  • What does SparkBuy even do? First time I heard of it.. did it even launch? Geez. this is not a startup acquisition, just a talent one, gimme a break. We all know u got lucky ’cause this type of business relies on affiliate income and seo, and hoping google doesn’t penalize you… ’cause there’s no customer loyalty in businesses like these (ask pricegrabber and shopzilla). 

  • Eminently well-reasoned, as always.  Good times!

    Strongly agree about the importance of health insurance reform.  I’ve been continuously covered as an entrepreneur solely because of California’s very aggressive small-business health insurance laws.  Two founders can get group health for 10% more than the large-company average.  Entrepreneurs are certainly unreasonable by several definitions, but forgoing health insurance tips the scale to being irrational or outright irresponsible.

  • Dan, interesting hearing your thoughts on why you sold Sparkbuy. I’m in a similar position with our startup happybuy (http://www.happybuy.com/) so did wonder why you sold so quickly after launching when you probably didn’t yet get to tackle the hardest problem full-on (which as you note is customer acquisition).

    Like you, I believe there is still a lot of opportunity to improve the online shopping & search experience and found Sparkbuy quite inspiring. We’re looking to incorporate some of the nice things that were featured in your product but also think there is huge scope for other improvements in the future.

    Would be great to learn more about your experiences if you’re interested and have the time – I’ll drop you an email.

  • Sparkybuy did launch for a few months. I agree – for a lot of traditional sites like this, there isn’t a lot of customer loyalty. However there may be ways of mitigating this – for instance creating a more social experience which a site like svpply is focusing on.

  • Dforeman

    Congratulations. As bhorowitz said, “The transition from today’s web back-end architectures to tomorrow’s cloud computing will result in profound benefits. Specifically, application developers will be freed for the first time ever from the physical constraints of the infrastructure enabling them to develop radically better solutions. Over time, every existing application will be rewritten to take advantage of the cloud and these benefits.”

    I’m working on a similar UX-focused solution in a market that lacks a web-based shopping experience. If you’re interested, I’d love to buy you lunch next time you’re in the bay area. throwawaycontact (at) gmail.com

  • A little bit of anonymous criticism, but a lot of honest perplexity.  There’s a lot of inertia behind the “dipshit company” meme:

  • Thanks Boris!  It was fun working together – however briefly.

  • Thanks Vineet!  I’ve been fortunate to have many people give me honest and realistic information that’s helped me through my career, and I’m happy to have the chance to pay it forward. 

  • Getting to spend more time with the kids is AWESOME.  Probably should have put that on the list too!

  • Thank you!  I have only one nit to pick, about your “greater role” comment – I think there’s nothing more noble in startupland than being an entrepreneur.  Investing is just a fun new hobby.

  • Sergio Ricardo Santos

    Timing is everything in life.well done on my humble opinion.all good for everyone.

  • Thanks for writing this. You really captured a lot of the sentiment I felt making the same decision with a similar outcome. 


    PS – Maybe we can grab lunch in the plex now? We just joined!

  • Dan, Your written thoughts are better than your “verbal gems”!

    Thanks for the honesty and keeping it real. Congrats to you, your family, and Google for getting one hell of a dude.

  • Huge congratulations!  Will shoot you an email shortly.

  • Huge congratulations!  Will shoot you an email shortly.

  • Anonymous

    What is / was Sparkbuy exactly? The site seems blocked by your announcement overlayer.

  • It’s just silly that the choice of job and choice of health plan are linked.  I’d really rather pay employees as much as I can, and let them get the insurance that’s right for them and their families.  But if we’re going to have employer-paid health insurance, at least level the playing field for the little guy.

  • It was a comparison shopping site for TVs and Laptops.  We could find you – for example – the lightest laptop that meets the minimum specs for Photoshop CS5 (the
    Lenovo ThinkPad 5397FFU at 2.7 lbs, if you’re curious).

  • Anonymous

    Thanks, sounds very cool. There’s no way we can see it in action anymore?

  • Unfortunately no. 

  • John P

    Hey Dan, I’m curious – what was it about the deals with F500 co’s that would have forced you to raise a bunch of money? Could the deals not have financed themselves?

  • Patrick


    I’m really excited to see what you and Google can accomplish with this search method. I just went through a month long camcorder hunt for our video team and was frustrated the whole time with weak search and navigation. Being able to target my search like you described below would be great.

  • Sounds like Sparkbuy’s tech & methodology has the potential to contribute to $GOOG’s eCommerce services platform in a similar way $MSFT’s Jellyfish acquisition has done for Bing.
    Will the Sparkbuy functionality be available to devs via API?

  • Philip Vaughn

    Dan, it’s always nice to hear the nuances behind a big decision. Thanks for taking the time to share them and congrats.

  • Peter Claassen

    Thanks for posting your thoughts through and about the process Dan.  Fun read.  Congratulations again!! 

  • Msolomon6

    So does this mean that you are working towards a B2B solution?

  • Anonymous

    I absolutely love your first point “It was a great deal for the shareholders”.  Too many businesses believe their first priority is some altruistic benefit to the community / employees / planet that I simply can’t get behind. 

    Successful businesses are about a great marriage between ideas and the capital necessary to turn those ideas into reality – and great CEOs keep their shareholder’s ROI forefront in their thoughts.

    Hope we see more of your great ideas emerging from Google, now that you’re an employee.    Kudos all around!  

  • Dan-  Nifty stuff.I was made familiar with SparkBuy as a company to pitch–and noted that as we started Simplifilm.com.  It seemed to take some serious explaining and one of our story-videos would have done it.  

    We weren’t ready to pitch you yet…you were in the “when we have our reel ” folder…so I left it in my “later” folder in Evernote.  I came back, and boom, sold.  Ah, well.
    Anyway, it sounds like you’re sane – not an ideologue. That’s rare, right? People I encounter believe that it’s better to try for a billion than it is to have any other goal.  They scoff at the YCombinator pivot model, and yet, that is a valid way to earn money, help investors and bring a profit to the market.

  • Fred von Graf

    Well thought out and enlightening.  Thanks for sharing!

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  • Michele Pewitt

    Dan, I really enjoyed this piece. It’s helping me put thing into perspective as I am getting ready to raise my seed round. Like you, I am trying to swing for the fences. With that said, you’re a real inspiration. Thank you for the post.


  • Great post. Thanks for sharing, Dan. This seems like a great move for you. 

  • Bob Crimmins

    So awesome Dan!  Hard to understand why anyone would give you a hard time about your decision to sell. 

    Looking forward to seeing http://google.com/sparkbuy/every-freakin-thing-in-the-world/

  • Anonymous

    Really enjoyed reading this. I guess everyone feels lonely during the sell? Very interesting.

  • paying it forward is always a good thing. I think being an entrepreneur we take favors and help from so many people to become successful that it would be stupid to not try to help in any small way …

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  • briantr

    Comment originally posted by me on the republish at businessinsider.com
    prefdata on Jul 18, 8:20 AM said:Shapiro’s honesty and transparency into the personal and business thought process he went through is informative and inspiring. I have never read Shapiro’s blog but will be sure to subscribe now. Congratulations to Sparkbuy!

  • Hi Dan, first time commenting/reading here so I’d like to say a belated congratulations!

    But also, thanks for the honest post. It’s a great insight for other entrepreneurs like myself who are just starting out on their journey to get a glimpse into what we could be faced with in a few years if we’re successful (and lucky!).

    As a UK person it’s a bit hard to empathise with the Health Insurance parts (we have the NHS) so I guess we’re a bit more fortunate there?

    Again, congratulations and good luck working within the Machine