When Selling Is a Startup’s Best Option
A version of this post titled “No other exit” originally appeared in the Startup Sunday edition of Data Sheet, Fortune’s daily tech newsletter.
I’d be lying if I said my week didn’t start off with a bang when rumors surfaced—and were soon confirmed—that Uber was selling off its Chinese business to local rival Didi Chuxing in a $35 billion deal. If you need a reminder, Uber and Didi had been battling it out for quite some time, both sinking billions of dollars to aggressively sign up users and drivers.
In some ways, the news was surprising. Uber is well known for its ambitions, so bowing down to a competitor feels uncharacteristic of the company. At the same time, the reasons for selling were immediately clear: Uber had spent $2 billion to expand, and yet was severely lagging behind Didi, not to mention new national regulation that took it out of its gray zone. It just had to put an end to the pain.
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But what of the other acquisitions and rumors of sales this week—are they white flags too?
The company was still small but seemingly a quietly rising star. It’s not clear why it chose to sell but co-founder and CEO Bret Taylor is no stranger to acquisitions. Facebook bought his previous startup, FriendFeed, in 2009 and made him CTO until he left in 2012 (post-IPO). Some have suggested that Salesforce made Quip an offer it couldn’t refuse, mainly to scoop up Taylor. That wouldn’t be hard to believe as he’s in high demand—just a month prior, he joined Twitter’s board.
But then we have Jet, the ambitious company that’s taking on Amazon. This week, the Wall Street Journal reported that Wal-Mart was looking to buy the company for $3 billion. Aside from whether it’s true, the biggest question is why. Is it a bailout, as some have suggested? Jet has raised a lot of money to aggressively compete with Amazon, but has it worked?
Maybe it hasn’t, and the company is indeed looking for a bailout. But maybe it has decided to quit while it can get a good price because who knows what the future holds.
Whatever the case, these companies probably believe they’ll be better off in the long run. With an unforgiving public stock market and continuous talks of bubbles and an impending downturn, we’ll likely see more and more startups taking that route.