StartUp and Merge

There appears to be a clear inability of big companies to foster new and, in particular, disruptive technologies. Organizational inertia with companies that have grown big already seems to keep them from succeeding in new but small markets. Employees see their jobs in danger when new technologies arrive or fear the loss of an expert status. Moreover, new smaller markets are less attractive to big companies. For more details on this topic I recommend the book innovator’s dilemma.

The niche for using the new (disruptive) technologies is filled by new start ups. And, apparently, the number of startups appears to be growing (remember, there was a recession!) and the number of old companies (30+ years) appears to be shrinking.

Source: US Census Bureau, Business Dynamics Statistics (http://www.ces.census.gov/index.php/bds/sector_line_charts)

In return venture capitalists become more powerful, more business angels and accelerators rise and more seed funding organizations are found. There is already a quite big scene for IT companies and finding the right one is quite a task. Some provide support for IT startups of a certain market only (e.g. PeopleBrowser for social media startups). One they all have in common is the support for founding a company and the share they take. Some want money for office space, some offer everything for free. Some give courses and training, some only an ecosystem of people to talk to.

What is also interesting is the number of acquisitions of startups. Google made 102 acquisitions since 2001. The common lifecycle of newly founded companies is more often ending with being acquired by a big player.

The cycle helps big companies to stay at the top. They fail to switch to new technologies or conquer new, small markets and instead acquire a player in a certain field. Important here is to make the acquisition smooth.

What I am shocked about is that this way existing companies can stay atop by acquiring new startups that conquer small markets for them. Assumed the big company has enough intelligence to discover new markets and understand future developments. I wonder if this might get lost with not conquering new markets on your own. The intense IT market with a wide range of new technologies and some time in the future a striking, disruptive technology will show. Microsoft who is and was always selling software already suffered heavily from the disruptive Cloud technology and transition to software services.

This whole development leaves me less afraid of founding a new company if there would be the opportunity one day. The support becomes better and the whole market expects new startups to be created all the time.

So, there are two popular options for a startup: become big or being acquired. But, there are other options as startups might fail or become less successful. When a company starts it should also always think about its possible ending, the exit strategies.

After all, I feel people become more flexible, more independent and freelance and starting a company is an option for more people. The age of finishing school, joining and living in a company a whole life appears to be over.

One last interesting piece of information: founders become younger according to an article of Spiegel Online.

About these ads

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s