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In this post from his blog, Tony Greenberg, CEO of RampRate and Los Angeles Founder Institute mentor, shares his thoughts on startup acquisitions. He questions the allure of selling to a large company, and even goes so far as to suggest large companies are essentially killing off the innovation that was once so dearly sought after. Is big business is all about "eating companies and murdering dreams"? Read Tony's article and weigh in on the comment thread below.
Below, an excerpt from Save the Entrepreneur. Big Business Keeps Buying Startups. And Killing 'Em, by Tony Greenberg has been republished;
"The entrepreneur always searches for change, responds to it, and exploits it as an opportunity" - Peter Drucker
"Every week it seems like more stories of big companies paying big bucks to scoop up little firms with interesting technologies. And then the big companies kill, in one fashion or another, what they just bought, seemingly squandering whatever initially made the acquisition so attractive. What’s this all about? How is it that big companies can’t help killing the things they love? An injection of entrepreneurial spirit is just what most companies say they want, to drive innovation, to stay ahead of the market and, truthfully, to improve their hipness quotient. But the only spirit that most big companies seem to appreciate is that of Hannibal Lecter. When it comes to entrepreneurs and acquisitions, big business is all about eating companies and murdering dreams. Can we please just stop the slaughter?
“Entrepreneurs are simply those who understand that there is little difference between obstacle and opportunity, and are able to turn both to their advantage.” – Victor Kiam
Sometimes, of course, companies aren’t buying a business, they’re buying some tech, or a team. That’s the presumption behind Apple’s purchase of Lala, the nifty streaming music company it bought last year and is shutting down (Apple, of course, isn’t talking). Similarly, Google scooped up and shut down Bumptop, an equally nifty 3-D desktop interface. At least with Apple and Google, you have two endlessly innovative companies acquiring tech and talent that are likely to re-emerge later with interesting products. And for so many entrepreneurs, getting bought out is the exit strategy: Work your butt off, sell big, pop some champagne, pack up the office and go figure out your next big idea.
But the list of failed acquisitions in so many other sectors is so dishearteningly long that it’s a wonder any halfway sentient CEO ever dares do a deal. And yet, dare they do, to the destruction of so much that could be cool and great.
Given that track record, it’s interesting to ponder if there might be a better way, that feeds a big company’s need for talent acquisition, revenue growth and product innovation, while preserving an entrepreneur’s ideas and spirit. Fortune magazine just ran an excerpt from a new book about the rise of Facebook, written by David Kirkpatrick. In it, Kirkpatrick talks about the constant efforts by company after company to buy or control Facebook, beginning just four months after it launched and continuing to Microsoft’s $15 billion offer. Through it all, founder Mark Zuckerberg stubbornly kept control of his company, taking as little investment capital as he could to keep growing Facebook. Facebook is now closing in on 500 million users, its books in the black and Zuckerberg still in control. Microsoft, meanwhile, took a tiny stake and signed a big advertising deal that valued Facebook at, yes, $15 billion.
Will Poole has been on both sides of the equation, co-founding early e-commerce company eShop, which Microsoft bought. He then spent 12 years as a senior Microsoft executive before leaving in 2008. Will quips: “As an entrepreneur who’s staring into the gullet of a big acquirer, be sure you really know why you’re being gobbled up,” Poole says. Is it “for your business, your team, or your intellectual property? If it’s for the business, plan to move on after a well-crafted transition process. If it’s for your team, be sure you focus on how to lead and grow your team from inside a big new beast, becoming an ‘intra-preneur.’ And if it’s for your IP, buy your beach house and plan your next startup.”
Click here to continue reading Save the Entrepreneur. Big Business Keeps Buying Startups. And Killing 'Em.
For more startup insights from Tony, follow him on Twitter @RampRateTony, and apply now for the Los Angeles Founder Institute where he will be mentoring this Summer.
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