May 27, 2015 · 5 minutes

 

Acquisitions. Acqui-hires. Intellectual property grabs. All are considerably better options for a struggling startup than the admission of failure — and often the scrutiny attached — when a company completely shuts down operations.

If you've ever had chance to be around an entrepreneur in the the last days or months of a company's existence, you will probably come to two realizations. One, almost everything she will tell you about the health of her company, and the possible interest from outside parties, is bullshit. Two, the sweat on her brow, the persistent need to keep checking her mobile phone, and the odd habit of running out of discussions without saying a word, are all tells that she's undertaking a mission to convince someone — anyone! — that there's something of value left in the company.

There are many factors that drive this type of founder behavior: Concern for employees, hesitation to give up on a dream, and ego are three common emotions of end of days company leaders. But the chief concern may the pressure to repay investors for the money they sank into the company (although not everyone has this same concern). That fear of VCs — and the far more horrible realization that they may never get funded again — leads founders to do everything in their power to get something in return from a business, whether it was built by a decade of hard work or a few months of horseshoe-up-your-ass startup luck.

And, there seems to be no shortage of folks lining up to pay a cool million or two for the spare parts tech of a failing startup or the treasure trove of potential new customers they can supposedly migrate from one company to another.

Which leads us to two bits of quirky news on the acqui-deal front.

Midway through last week, word got out that New York-based worker-on-demand company Handy was in talks to acquire competitor Homejoy. It's kind of a good story. Handy, which has been gobbling up similar companies for more than a year — Mopp and Exec being two — adds another West Coast-based service's user base to its ranks. For any company, new customers is always a good thing. Meanwhile Homejoy, which had a ton of momentum last year but has struggled of late, finds a soft landing for its leadership and employees.

Quite the happy narrative.

However, it may not be all ice cream and puppy dogs. The reality is that in the tradeoff for its existing customer base, Handy may be acquiring a cash eating machine. A couple of sources have said that the company is not just out of cash, but beyond flat broke. Now mind you, this is a company that raised a $38 million round of funding in December of 2013. Burning through that much cash in a year and a half means that something is wrong; no business can sustain losing so much without have some sort of positive revenue stream.

The problems seem to have begun almost as soon as Homejoy got the huge influx of cash. They lost potentially lucrative partnerhips, like one with Airbnb. Homejoy also lost a lot of customers when it increased prices, eventually leading to it shutting down operations in Canada and France.

Recently, word also leaked that Homejoy was in the advanced stage of negotiations with German on-demand worker company Helpling. Venturebeat reported that the deal fell through after the Berlin-based company got a look at Homejoy's financial numbers. The report may be true, or it could be some more subterfuge among industry competitors, with Helpling catching wind of the potential Homejoy/Handy deal and trying to downgrade it before it went through.

The only confirmation that anything is going on came from Handy, which just re-confirmed that they were in talks with Homejoy (as reported by TechCrunch) but that the deal wasn't done yet. As it happens, while it's highly likely that the Homejoy deal with Handy goes through, it's not by any means a guarantee.

Homejoy was also unwilling to talk about recent negotiations. The company, while not able to talk about any deal or deals that may or not be about to happen, did want to point to its success at adding new customers. And it does have some value in terms of not only customers but the professional cleaners that are already connected to its platform. So as long as investors still believe that there are opportunities for workers-on-demand companies, there is some reason for Handy to be interested in Homejoy's assets.

This is not the only instance of odd happenings with acquisitions recently. Boston blog Bostinno reported last week that custom product platform CustomMade — think Etsy for on-demand, custom built goods — had been acquired by e-commerce furniture giant Wayfair. It would have been a really nice story for CustomMade, if it were accurate. The reality in this case was quite similar to what is happening with Homejoy.

It seems all of the reports were coming from the company. I reached out to Wayfair and was told that I was only the second news outlet (after the Boston Globe's BetaBoston) to try to find out what the deal was from Wayfair's end. It turned out there was only a minimal financial exchange between the companies* and that Wayfair was doing a solid by CustomMade and hiring many of its employees.

And let's not even get into what's going on at Clinkle as that sunken ship washes ashore.

So what gives? There are about a million different "laws" of business and life that tell us that not everyone can win. And if you've ever heard any really successful company leader speak they often have at least one or two absolute bombs in their past.

So it seems interesting the lengths that companies are now going to not wave the white flag. It seems that in the attempt to give everyone a soccer trophy for competing, no one is opening up to show the next generation of potential entrepreneurs how not to fuck up.

[illustration by Christopher Barson]

*Correction: While initially a source said that no money was exchanged in the deal, according to Wayfair, a very, very small amount of money changed hands so that the company could have access to hire some of CustomMade’s employees. Wayfair would not disclose the amount of money, but said it was "minimal." A company spokesperson reiterated that Wayfair in no way acquired CustomMade.