Uncrunched

Sarah Lacy wrote about acqui-hires this weekend on Pando Daily. She got some things wrong.

The main problem is her argument doesn’t work on its face. The logic breaks.

She says that all the interested parties love acqui-hires – entrepreneurs get an easy out, buyers get engineers, and investors get a free pass.

But she also says acqui-hires have to stop. In the world she’s describing, which is a three party circle jerk, I don’t see where the pressure would come from to stop them.

In reality investors don’t like acqui-hires at all. An acqui-hire is marked down as a “fail” in the books. In almost every case we’d much rather have the entrepreneur keep fighting for a win even at very long odds.

That being said, we don’t complain about them or try to stop them. But some investors do and will. That’s why there has been academic and legal interest in finding ways to plan ahead for acqui-hires in financing documents.

The idea would be to make them less attractive to entrepreneurs, or at least to give investors a bigger piece of the pie when they happen.

As investors, we never see an aqui-hire as something like getting our money back when we buy a lottery ticket. Like I said above, it’s just a loss. If every company we invested in did an acqui-hire our fund would perform terribly and we wouldn’t be doing this for very long.

Sometimes a company is just done and an acqui-hire is the best solution for them. But most of the time companies still have a fighting chance, and an acqui-hire is just the easy way out.

The article that needs to be written is how many entrepreneurs today expect an automatic Hollywood ending to their startup. No one is preparing them for the extremely hard times ahead, and they seem to be going in blind.

Nick O’Neill also has a good rebuttal.

My credit card won’t die.

On August 1 I cancelled a Chase credit card. I cancelled it because I couldn’t get rid of fraudulent recurring charges by contacting the merchant.

A few months ago I had tried asking for a new card with a new number, in the past that always worked to clear out all the BS recurring charges (gym memberships, etc.). The charges blasted right through that new card.

I wrote the blog post because I was surprised in the change in the law that allows credit card banks to continue to push recurring merchant charges even after a card had been claimed lost or stolen.

But it turns out it’s even worse than that. Yesterday I received a bill for that cancelled credit card. The account was closed, said the bill, but there was a new charge for $40.

Say what?

I called Chase. They told me that even though I had cancelled the card merchants could continue to bill me.

Basically, any merchant that had a recurring billing relationship with me can keep billing that card even though it is a closed account. All I can do is pay the charges or go through the dispute resolution procedure.

This raises an interesting philosophical question – How does Chase manage to continue to accept charges on my behalf when we’ve ended the contractual relationship? Can an account really be called “closed” when people can still run charges through it?

That’s something I’m going to explore by actually reading my credit card agreement. Shudder.

The merchant won’t deal with me because they don’t want to deal with me. My bank won’t stop them.

My only recourse is to go through the full dispute process and all the paperwork it entails.

The guy from Chase was interesting. He said that this was really necessary because so many people defraud merchants by getting out of recurring charges.

Err, ok.

I really don’t think I’m going to be giving out my credit card so freely in the future.