As long as there has been venture capital, there has been the exit Strategy — the entrepreneur's plan for getting rich, then getting out. There must have been an earlier time when people actually planned to stay and run the companies they founded — Hewlett and Packard never considered an exit strategy, or at least they never implemented one — but the advent of VCs ended that. What happened was a subtle change of perspective, a differentiation between the skill sets of starting companies and running them. In part, this can be traced to the energy level required to start a modern high-tech company. Driven by VC expectations and dollars, entrepreneurs have to work so hard so fast that they nearly always get burned-out and replaced. Then there is the VC's fantasy that they offer value by beating-up CEOs and tossing them into the street. The major result of all this is that nobody stays for long and everyone plans for their exit, typically through going public or being acquired. And lately, the acquirer of choice seems to be Microsoft. Companies are started with the specific intention of being eventually purchased by Bill Gates.Too bad.

A survey of companies bought by Microsoft in the last few years shows something very interesting — that hardly any of the founders are happy. To me, this is not at all surprising, but I have been around since the dawn of time, and most of these folks have not. To them, it is a shock. They work hard, gain their precise dream and it turns out to be a nightmare. I'm here to explain both how this phenomenon occurs, and why.

The first exit strategy was going public, the initial public offering of stock. This is still popular, but it requires of company founders a commitment to stay with the outfit for an indefinite period of time. Founders have to pretend it is their life's goal not just to have started a company and made it a success, but then to run the company on a day-to-day basis for the rest of their professional lives. Of course, this is a lie. Founders are adrenaline junkies and become bored with success. It is a rare founder who can convert to being a good manager.

Acquisition is easier in many ways. It means the founder will no longer be in charge and can get out of the company much easier. Being acquired is faster and cheaper than going public, and lately produces nearly as much wealth. The trick is to be acquired not just by a company with money, but one with great long-term prospects of its own. This all has to do with the management of sudden wealth. If your startup is bought by Rustbelt Inc., an aging industrial concern trying to reinvent itself, good judgement suggests selling that Rustbelt stock as soon as possible, regardless of the tax consequences. But if the purchaser is a Cisco, Microsoft, or even Yahoo, the strategy changes. Only a fool would sell their stock in these companies, which have strong growth records. It's better to live on margin loans and never pay taxes again.

But being acquired, especially by Microsoft, has its perils. Recently, I did some snooping around Hotmail, which was bought by Microsoft a couple years ago, and found lots of unhappy rich folks.Hotmail was one of the first providers of free Web-based electronic mail. The idea was simple, to give users for free a lifetime e-mail address that they could access over the World Wide Web. In exchange for this wonderful service, users only had to provide some information about themselves and then tolerate their messages being surrounded by ads. It worked brilliantly for customers and entrepreneurs alike, so free e-mail is here forever and the founders of Hotmail are rich. From idea to acquisition — from $0-$395 million — it all happened in 18 months.

But what is it like to be acquired by Microsoft? It is not very pleasant. Some of this is an artifact of being acquired by any big company, and the rest is peculiar to Microsoft. "Almost everyone I know regrets the acquisition," said an early Hotmail employee no longer with the company. "An IPO would have been more fun."The first problem with being acquired, no matter what company is doing the buying, is that the values and goals of the company doing the acquiring are almost never the same as those of the company being acquired. At its core, Microsoft didn't really care much about what the Hotmail founders wanted for their company. It was Microsoft's money, remember.

Microsoft is not some big, stupid, screwed-up company. It is a big, smart screwed-up company. Part of that screwiness has to do with the way Microsoft manages the companies it acquires. This stems, I believe, from a bad experience in the company's very first acquisition, when it bought Powerpoint. Even though this late-80s purchase was of a company with fewer than 50 employees, both Bill Gates and then-CEO Jon Shirley told me the experience was horrific for Microsoft. It was a problem of trying to merge corporate cultures that were very different. And the lesson learned was not to even try for such a merger. For the sake of Microsoft, the new model says that the corporate culture of the company being bought has to die.

"All we got was money," said a Hotmail founder. "There was no recognition, no fun. Microsoft got more from the deal than we did. They knew nothing about the Internet. MSN was a failure. We had 10 million users, yet we got no respect at all from Redmond. Bill Gates specifically said, 'Don't screw-up Hotmail," yet that's what they did."Here's what any company that wants to be bought by Microsoft should know about the boys and girls from Redmond. First, it is an adversarial culture that makes progress only through constant infighting and bickering. "During the technical due diligence, two Microsoft people got in an argument that we thought might actually come to blows," said a Hotmail founder. "They were fighting with each other in front of us. It was our first hint of what was to come. Politeness is ignored and bitches are rewarded. Everything is about power."

For all the infighting, though, it is very hard for Microsoft to actually make progress from this violent internal dialog. The company moves forward by edicts from Bill Gates, but most of the debate among subordinates just generates friction and heat. "They send a new top-level group down to see us every week, yet it really means nothing," said another Hotmail employee. "The plan is constantly changing. Today Hotmail is primarily a way of shoveling new users into the MSN portal. We had for a short time a feature called Centerpoint for communicating directly with our users, but that was killed as a possible competitor with the MSN portal. No new features could be added because the Outlook Express team saw us as competition and sabotaged everything."

What Hotmail learned is that at Microsoft almost anyone can say "no," but hardly anyone can say "yes." The way it specifically works at Microsoft is that everyone says "no" to anyone below them on the organizational structure or on the same level, and "yes" to anyone above. Since the vertical lines of authority are narrow this means people tend to agree only with their bosses and their boss's boss and try to kick and gouge everyone else. The only person at Microsoft who hears "yes" all the time is Bill Gates, who must think he is in paradise.

There is no way to fight the Microsoft culture. It is either adapt or leave. Adapting means coming to understand that Microsoft is all about e-mail and not answering those 400 stupid messages is a sin. Survival means becoming a drone, so all your attention goes into quality of life. People start coming to work later and leaving earlier. It's no longer about the business plan, but Microsoft is making so much money that nobody even notices.