What's the story behind Otto? There are exactly two blog posts on the Otto blog- Otto launches and Otto sells to Uber.
The line 'When we started Otto we committed to rethinking transportation' - what, three months ago?
I hadn't heard of these guys before, but a business designed to be quick flipped? Was this business ever not part of Uber? What kind of three month old startup has a team that size?
There doesn't seem to actually be even an MVP product there. How do businesses like this end up getting built and sold so quickly?
This is from the big Bloomberg article/interview that came out today:
'Kalanick began courting Levandowski this spring, broaching the possibility of an acquisition during a series of 10-mile night walks from the Soma neighborhood where Uber is also headquartered to the Golden Gate Bridge. The two men would leave their offices separately—to avoid being seen by employees, the press, or competitors. They’d grab takeout food, then rendezvous near the city’s Ferry Building. Levandowski says he saw a union as a way to bring the company’s trucks to market faster.'
Which implies to me that the plan was for Uber to acquire Otto all along.
"Okay, Travis, but I don't want to just get hired on as another employee, I want to be cool like Kyle Vogt. Give me a few months to buy some trucks, rig them up with sensors, put splashy logos on them and get some press, and then you can acquire me using some of those Saudi gigabucks you picked up in your series F."
The author is an investor - from reading it probably pretty early - in Uber. It's probably not, but I do wonder whether as an investor he encourages Travis to maintain his Wii Tennis position or not :)
I see nothing wrong with it. Otto takes on the risk of developing a new business, and gets acquired if the risk pays off. Uber gets to benefit from Otto's efforts without taking the risk, but they have to pay for it in order to make it theirs. It's mutually beneficial, and risks get taken that probably wouldn't be taken otherwise, which is good for innovation.
This kind of thing is pretty common at Adobe and Cisco as well. There is a bit of a revolving door of executives and senior engineers leaving to start companies, intending from the beginning of being acquired by their former employer if their business pans out.
Many companies could not take the risk of running an innovative new business internally -- their board wouldn't let them, or their investors wouldn't. This kind of thing probably results in more research and innovation taking place that would have otherwise.
Probably deliberate; probably sensible too. Package up a group of people capable, as scientists, of making auto-trucks work. And seek a company with deeper pockets that wanted to get into the auto-truck business, and that could take them on as a ready-to-go modular truck department.
Is it just me or has there been a proliferation of "strategic startups" lately? They never intend to turn a profit but rather seek to become a pawn in the larger game between e.g. Google and Apple. Of course, in a winner-take-all market, it should be the easiest way to "win". Go Big or Go Home is now Go Big or Get Acquired...
IMO, it's just good positioning (as in market positioning) for getting hired through an alternative process, with a higher (presumably) payoff.
You prove you can build the prototype, de-risking the hirer's decision to pay you more than a normal hire. This reasoning presumes that the 'normal' hiring process and market resembles a lemon market. This is my IMHO. Bad hires drag down all participant's perceived value and compensation.
This is pretty common in the biotech start-up world as well. Do an analysis of what the big biotechs (Novartis, Pfizer, Roche, BMS) are investing in and go out and start a company in that space. A few years later, you either get a big investment from them, an in-licensing deal or outright acquisition. I think it's a pretty smart way to do things.
Of course, what's "hot" can change pretty fast, so you have to be lucky as well.
Funny enough, I was recently working with a startup that wanted to buy the ot.to domain. It looked like it was being used for directions to an event or someone's house no longer than a month ago.
We were also thinking of branding as Otto, and had a hard time finding anything about a company named Otto -- stealth mode indeed.
And the logos are eerily similar as well. I was thrown off track shortly and wondered what this traditional company was doing with uber until I realized, that someone would probably not have done enough research into the potential dangers of this branding.
I think you are assuming the worst without any information. It's not surprising in the least if you take a minute to find the back story:
The founder started a company called 510 systems which was sold to Google, and years later he left Google to create another company focused on self-driving trucks. They obviously have deep experience in the area, and Uber obviously wants that expertise.
Uber could be buying the company not for the founder's experience, but for that of the team that said founder assembled. In real estate parlance this is called "land assemblage": a developer spends years buying up enough adjacent plots of land to build something useful, then he sells it at a substantial premium to someone with enough local political connections and/or capital to make that happen. There should be a subcategory of tech exits that's called "talent assemblage" where the CEO hires the right people to develop a product and sells it to someone with sufficient resources to see it through. While this isn't remotely as valuable as actually seeing the project through, it does still have considerable value.
EDIT: this would be a subcategory of the acquihire
I wonder whether they were upfront during recruiting all those team members that the intention was to "sell them" to Uber?
(You know, just like that real estate developer is always scrupulously honest when negotiating for that last plot of land, they always say something like "This is the last piece I need to make my seven digit profit! How much did you say you wanted for it?", and would _never_ try to tell the owner of that plot "This is exactly the same house design that my alzheimer's affected mother has lived in all her life - it'd make her last few years _so_ much more comfortable. Would you accept $market_rate*0.8?"...)
Probably these people if they knew they were going to work for Uber, they wouldn't have signed on. But Otto, sure, why not. Otto really was, at the face of it, a recruiting agency for Uber. (An expensive one, I'm sure..)
Acquihires are interesting in that they might seem expensive, but might actually be cheap from the standpoint of mitigating the risk of an unknown and unproven team.
This case might be a little different given the short time this team existed though.
> Acquihires are interesting in that they might seem expensive, but might actually be cheap from the standpoint of mitigating the risk of an unknown and unproven team.
Considering that, IMO, Valley companies severely overestimate that risk I think acquihires are a really expensive way to acquire people.
Exactly; given Uber's history of squeezing their drivers, minimizing their take home pay in an attempt to get the lowest ride rates in the market, I wouldn't be too quick to sign up either..
I had the exact same reaction. My other thought was how can a brand new start up founder in SF have the time to take 10 mile walks? Consider the average walking speed is 3 miles an hour. It all feels very press-release ready - two car-based start up guys walking ...
"stealth mode" is a thing. just because they launched their website a couple months ago doesn't mean they haven't been working on this stuff for while longer.
"Stealth mode" may not even be the reason they had minimal web presence. Maybe it wasn't a priority. I personally help off doing a proper website for three years and it launched last week. Mind you, I don't run a startup, so web marketing is the least of my concerns.
The line 'When we started Otto we committed to rethinking transportation' - what, three months ago?
I hadn't heard of these guys before, but a business designed to be quick flipped? Was this business ever not part of Uber? What kind of three month old startup has a team that size?
There doesn't seem to actually be even an MVP product there. How do businesses like this end up getting built and sold so quickly?