There’s a significant thing going on in the world of startup exits: It’s not just the traditional Google/Facebook/AOL buyer who is stepping forward to slurp up the innovative new(er) companies. It’s “real-world” companies who are fighting to compete as their core markets change forever. Om lays it out here on GigaOm.
Zipcar and Avis. OneRiot and Wal-mart. Etc.
This makes complete sense, and I find it super-exciting.
The first reason it makes sense is this: We’ve seen it all the way back to desktop publishing when the disruptive technology enters a market, there is a time when the geeks take over. For DP, it was the Mac guys setting type in Quark Express and sending the output to a digital print bureau’s Linotronic. My first company was a DP ad agency of sorts, so I experienced this transition first-hand.
But the geeks only last so long. Ultimately, the *real* designers learn the technology and assimilate it. Now, the traditional world of advertising and print is back in the hands of the ad industry.
It’s possible that this is what we’re seeing with this shift in acquirers: we geeks have taken over the world as tech has transformed everything from shopping to the taxi business. Maybe we’re seeing the start of the next phase when these traditional companies begin the assimilation process. It is inevitable.
It also makes sense that a shift emerge because some of the tech-to-tech (or maybe even more problematic, tech-to-media company) transactions have a barrier. Acquisitions are expensive and hard. Integration is a rough deal and rarely do the acquirees get the expected transformational value. Most fail because incentives and cultures are misaligned. That is much more likely to happen in a company where there is competing acquirer/acquiree tech DNA.
In the end, it is far easier for a tech company to build rather than buy. Internal projects are risky, but at least the culture and incentives are under control.
However, in the case where there is no existing innovation/tech culture, there is less issue in blending. Also, if there is no technology “religion” there is less issue with culture clashes.
The reason it’s exciting is that there may be an escape hatch for all of the recent investment over the past 5+ years.
In 2008 when I began angel investing I expected there to be a big future flood of acquisition and operating capital flowing into the dry (post 2001-bust) riverbed of Internet startups. The idea was right to some degree, but I expected a big rush for revenue-driven tech companies to go public. Not really working out that way.
I believe the existing startup-as-tech-company-innovation-engine days are over, or at least drawing to a close.
If we’re beginning the assimilation phase, hold on. It’s about to get really exciting as the rules change and we see 10-100x the potential of previous opportunity.