Let’s start with a conversation withwho founded Hot Studio, a user experience and product design company. After 20 years, Maria sold it to Facebook in what was, at the time, considered to be the largest design talent acquisition ever.
Maria, tell me a little about Hot Studio prior to the acquisition.
My whole professional career was led through people-centered design. I really leaned into design being a vehicle to help people make sense of the world and focus very religiously on what people need, want and desire in life, and really lead from that perspective.
Hot was a company that allowed us to do that work for hundreds of clients. It was full service; we offered everything from business strategy to engineering execution. It was around 80 people, located in San Francisco and New York.
It was a great culture. I really invested a lot in creating an environment where people could maximize their creativity, feel psychologically safe, and be able to be their best selves. And it was wild. It was diverse. We had 50% women, we had people of color, and it was a real safe, diverse company, where people liked to work. And we threw lots of great parties.
It was quality, above all else. We were profitable, but we weren’t driven by profit. We used profit to sustain our ability to do great work. I always believe you hire people much smarter than you, who are better than you. It was no bullshit; you can’t be egoless, but it wasn’t driven by ego. It was driven by a desire to do your best work.
We did everything. Marketing sites, web applications… We had one of the first apps released on the iPad. We dabbled in interactive TV experiences. We worked with nonprofits. It was everything that you can imagine in the digital space.
How did the company start, and how did it grow?
When I got out of school, I was working for Richard Saul Wurman. He got a gig to redesign the Yellow Pages in California. I went there for three months, and I didn’t leave. It was the dawn of the digital age for Apple; it was like 1987. We were asking, “What is this computer? What’s Illustrator and Photoshop? How do we use it?” And I really fell in love with the intersection of design and technology.
I started freelancing, and then I got busy. And then I hired some friends. And then I was like, “I have a company. I got a BFA. How do I do this?” And then I figured it out on the job.
Growth was slow and steady. I had just two employees working with me in ’97. And then it went up to 20 in ’99. And then there was the dot com bust; companies like Phoenix Pop and companies that I was already competing with disappeared overnight. I had some steady clients that just kept me alive.
It went from 20 to 15 employees for a while. In 2003 there were downturns here and there, and then from 2007 on, it was slow and steady.
We started having disciplines; we started organizing. And so once we had PM and visual design and UX and engineering, and then we scaled so we could take on the kind of projects from beginning to end that we wanted. And that’s how it got to about 80.
Do you remember what payroll was for 80 people?
Yeah, I do, because it kept me up at night. It was a 1.3 million-a-month burn. We had to bring in 1.7 or 1.8 million dollars every month in order to turn a profit.
And that kept me up. We survived three major downturns. It was so mentally exhausting. When I hired somebody, I was so careful, because I knew that I was creating a contract with that person. I’m going to hire you. I’m going to support you. I’m going to support your family, and in return, you’re going to do this for me. And I really took it personally with every single person who worked at Hot Studio. That was my thing. I cared about every person there.
I started getting tired. I started getting really exhausted. I had two kids. I had this large payroll. It fucked with my head when things were bad. It kept me up at night. And when I was in my mid-forties, I started telling myself, “I don’t know if I want to do this anymore.” I didn’t know if I could handle another downturn. It felt like a hamster wheel.
People were always interested in an acquisition of Hot Studio, and I was never against it. But potential buyers just didn’t get what we were doing and why we were doing it. They saw us as skills, but they didn’t really pay attention to the culture and all the special stuff that we had.
I have enough people in my inner circle, like Clement Mok (who sold Studio Archetype to Sapient), Kevin Farnham (who sold Method to GlobalLogic), and Christopher Ireland (who sold Cheskin to WPP). There were a lot of people who I knew, like Simon Smith (who sold Phoenix Pop to Liquid Thinking), who went through acquisitions which just sucked. So I had a lot of models and role models. I had a lot of advice from these people: pay attention to this, don’t pay attention to that.
There were also these M&A people, these hardcore white guys who I just didn’t relate to—they didn’t see the people-value. They were looking at EBITDA, they were looking at all the things that they are supposed to, but I didn’t feel like they got the secret sauce of what Hot Studio was.
And then, Facebook approached us. They were our client, and they were basically renting our people because they didn’t have enough designers. It became a conversation—“We want your people, but we don’t want to steal your people.” They had a bit of a soul back then!
It was December of 2012, and I was called into Facebook to talk to Sheryl and Mark. I did not know that was going to happen. I walked in, and it was Mark and Sheryl grilling me about Hot Studio and why I would want to sell my company. And I wasn’t prepared, but somehow I didn’t fuck it up. And then there was a negotiation for three months; I turned 50 in February, and then I sold my company in March. We sold it on March 14th, 2013: that’s when we announced to the world that we sold Hot Studio.
Tell me about the process.
We signed an LOI, and then we had to share our books; anything that they asked for. And we had to agree to incredible confidentiality. The code name of the acquisition was called Hot Tamale. And it had to be done in a cloak of secrecy. I shared the news with my leadership team, all the directors, and they were interviewed. But Facebook didn’t have access to interview anybody else; that was my demand. Because I didn’t want it to unravel. So my directors had to basically present portfolios of every single designer, and advocate for that person.
They didn’t hire everybody. They only really wanted the designers. I was so worried about legacy; I told them that it couldn’t be 20 people who go, it had to be a majority. So I think the number we agreed on was like 55. They had to hit a number to bring people along.
There was a lot of negotiation. I had three or four pregnant women at the time, and I made them hire the pregnant women. I was like, “I’m not going to fuck up these working moms who are probably the breadwinners of their family.”
I also negotiated a million dollars for me to pay people who weren’t invited to go. I thought, “You’re either going to get an offer for a job at Facebook, or I’m going to give you money.” It was based on longevity; if the designer was with Hot for more than five years, I paid for a year’s salary. Because I knew it was going to be really hard for people who loved the company and would see this as a betrayal.
And there were people who felt betrayed, because they believed in the company. And then I sold it. Some people hated Facebook even back then, so they saw it as being evil, an evil thing that I somehow stepped over my values.
There was a lot of negotiation. They low-balled me at first. I walked away from the deal. But I had a great team around me. I had my accountants. I had my M&A advisor, I had my lawyers. I had my team of people who’ve been fucked over by acquisitions before. I had a good bubble where I felt confident that I could negotiate because I had all of the context.
How about the money?
My bar was that, if I sell my company and it’s the worst decision in the world, will I still walk away with a significant amount of money that’s going to fundamentally change my life? If it didn’t change my life, fundamentally, it wasn’t going to be enough of a good deal for me.
And how did you do?
I remember when the check was mailed to me. It was a few million dollars. It was the biggest thing I’ve ever seen in my entire life. I took a picture of it. I still have that picture.
And I remember running upstairs, sitting in my bedroom; I have two young kids, they didn’t know what was going on. [My partner] Scott and I go upstairs, I open this up and I see this fucking check for a few million dollars.
I was like: “I have a check.
That I’m going to bring to the bank.
And their eyeballs are going to fucking pop out of their heads.”
And I remember going to the bank, dressed like this; I had been financially struggling for how many years? And I had this check…
How did that feel?
It was amazing. I’m so proud of how I conducted myself. I thought, this is a girl who a lot of people underestimated. Who went to art school. Who got a bachelor’s of fine arts degree. And competed in a man’s world; I was one of just a few women leaders at that time.
And I negotiated the best fucking deal, without going to school for it.
And again, I have to thank the people who’ve been there before me and their generosity. Kevin Farnham shared his deals with me, Christopher Ireland was there for every step of the way. And I had other people who were checking in and they were like, “Make sure you do this and don’t do that.”
And then ultimately, I was the one who closed the deal. And so I’m incredibly proud of it. It put a marker in time. It was in the newspapers. Hot Studio made the news. John Maeda put me in the Design in Tech Report and said, “This is a change. This is a landscape change for designers.” And I’m just super proud of it. And even though I did get to Facebook, and it wasn’t the right fit for me, it worked out for a lot of other people.
So you got the cash up front; were there other terms of the deal related to compensation?
There was a certain number of people who had to stay in the company for three years. They listed my top employees by name. And so a percentage of them, if a percentage of them decided to leave, I would get less of an earnout. So, I had to make sure that those people were satisfied and happy.
And there was also a certain period of time I had to stay; four years.
But you didn’t stay that long.
Facebook wasn’t the right fit for me. I mean, we did the deal, but then it was a shit show. Integration was a shit show.
First of all, there were things that I didn’t know about the deal. I was super optimistic. But what I didn’t pay attention to were the people who were already in design at Facebook. I only met a few of them. My understanding was that they were really happy that Hot Studio was going to join them. But in reality it was a small group of designers, and they didn’t think we were good enough.
They had a bias against agencies. There’s a whole thing against agency versus product companies; that was alive and well at Facebook—they somehow didn’t see the skills that we had as designers and agencies applying to product design. They thought it was a different animal. I mean, it’s different, but it’s just a different way of looking at problems. And so when we got to Facebook, there was not a welcome mat there.
And I was 50 years old. I was one of the oldest people at Facebook. I was older than Sheryl. Mark was 25 years old. His leadership team was 25 years old. They did not give a shit about the experience that I would bring to the table. It was more like, you’re here. Now prove to me that you belong here. There was no real ramp up for me. There was no real support for me.
At the end of the day, it wasn’t about me. They didn’t really want me. They really wanted my worker-bee people. I was a strategic thinker who could think broadly. They needed people who were going to go narrow and deep and care about the pixels. So it was hard for them to place me to begin with. But they also didn’t give me any kind of buffer or support or ramp me up. So a lot of my leaders, my leadership team struggled too. The people who were executing did well.
The people who were strategic really struggled finding a place. And some of them were pushed out early. That shook me because I felt like I was betraying them. I was afraid of getting fired. I didn’t have support. No matter what I did, they didn’t think I was performing well. The culture was too male, young male.
And then Autodesk came and offered me a job, and I used what my earnout was to negotiate a really good deal to move over to Autodesk.
So you did end up walking away from cash at Facebook?
I walked away from millions.
Wow. In retrospect, was that a good decision?
Does it hurt? Yes, when I think about it. But what did I trade? My sanity. I would have a lot more money today. My critical voice would be like, “Well, you’re an idiot.” But my sanity, my intuition is: “You saved yourself.”
I regret none of it. I don’t regret the acquisition because I am now financially secure. No, I don’t have a yacht. I don’t have property in France. I don’t have any of it, but I have two kids in college that I’m paying for, full ride. I have a good life here. I don’t really think about money. I work; I still work as a coach, but I have this financial security which I would never have had if I didn’t sell my company to Facebook.
What would you have done differently?
There’s always lessons learned. And so I think if I had to go back in time, I would have been less optimistic. I should have asked about culture fit. I should have asked to meet more of their designers. I should have asked about integration strategy. I didn’t know any of that stuff. And I put too much faith into Facebook. I’m a person who always looks at the good news, but a little pessimism would’ve gone a long way.
Was there an integration plan prior to the deal closing?
There was no integration plan. We didn’t have anything on paper. It was like people were rolling in, but Facebook… It was the early days of Facebook. They weren’t organized. So they were rolling my team in and they were putting people on projects. And then it’s up to the people who run those projects to make sure that my designers felt welcome there. And some people were just left hanging in the cold.
If I did this again, I would’ve asked for an integration plan. I would’ve asked more questions about the culture. And I would’ve asked who I was reporting to.
What advice would you give a designer who is thinking of selling their company?
Have a really good team of people around you who you trust, who have had the experience before, who get your company, and who get the things that are important to you. Not just financials, but culture and people, and your value system. It’s super critical to have a great team around you.
And you have to find those people. You’ve got to find your mentors. That’s how you grow. Find the people who’ve been in the experiences before, because it’ll give you comfort and they’ll help you prepare for the worst case. If you don’t know them, look at your competitive space. Look at the people who you’ve competed with. And if they’ve gone through this, reach out. The worst thing that could happen is they say no. But you know what? People who go through acquisitions are more than willing to share their war stories.
You’re suddenly in the church; it’s very similar to having a child. When you don’t have kids, and then you get pregnant and the baby’s born, you step over a metaphorical line. You step into a community of people who understand the world you’re in. That’s what it’s like with acquisition. When you are a founder or a CEO, we all know what keeps us up at night. We all have the same fears.
A lot of the downturn, when things were really bad, I would often go to bars with my competitors and we would commiserate. We compete for the same projects. And even in a downturn, that one project can keep your company. But we were all rooting for each other. We were supporting each other because we know how hard it is to run a company. There are fears. There’s payroll. There’s so much stuff that normal people don’t have exposure to.
If you don’t have that network, find the network.