When the banks started melting down in the midst of the 2008 financial crisises, suddenly a little sticker that had been placed at their front doors and teller windows took on new meaning. The sticker contained four letters: FDIC
The FDIC was established in 1934 to protect the customers of its member banks against loss should the bank fail or become insolvent. Next to the four letters on the sticker mentioned above reads the following promise:
Deposits are backed by the full faith and credit of the United States Government.
Since establishing the FDIC no depositor has lost funds as a result of a bank failure.
I was reminded of the FDIC as I read of the torrid pace of acquisitions that are happening in startupland these days. As the WSJ reports Zynga, Groupon, Facebook and Google together gobbled up 34 companies in the first quarter of 2012. On the surface, that’s great news! Great for founders and, in some cases, great for investors. But, not really great news for the users of those acquired services.
Most of these acquisitions are small and, in many cases, the acquiring company shutters the underlying service in order to focus the newly purchased team’s attention on other problems they need them to solve. As a result, users and their data are often caught holding the short end of the stick. Activity and data that resided in these services is often lost, discarded or awkwardly offered for export.
Given the current state of startup funding, I foresee this being the state of our world for many years to come.
Which brings me back to the FDIC.
Seems there could/should be a neutral third party service which gives users and their data protection in the event that a startup fails or is purchased for talent. Startups could opt into, and promote their participation in a program like this offering peace of mind for potential users in the same way banks FDIC membership quells the fears of potential depositors.
Perhaps this has been discussed, tried and discarded but as more and more services launch, languish and are lapped up for talent, it seems that some kind of FDIC-like service to reassure and protect in the event of failures or acquihires would be valuable to the health of the startup ecosystem.