Silicon Valley’s acquisition fever is bad for innovation

46 点作者 chwolfe超过 11 年前

17 条评论

ChuckMcM超过 11 年前

Sigh, survivor bias taints this analysis so hard it hurts. There are lots and lots and lots of innovative startups that don't get acquired and go through the whole process without all that much press. You don't see them, it's boring to read "Startup that changes the ways machine tools are stocked at machine shops turns in another year." The really crazy ones (either crazy funding like Color, or crazy exits like WhatsApp) get lots of press, and so one things "oh they are all like that."Acquisitions are a way that investors get their money back, so they encourage investors to invest in startups, and by its nature that encourages innovation. Perhaps not as much as random $100K grants given out on the street corner would, but it does encourage company formation and execution. IPOs do the same thing.What investors don't like is a company they invest in, own a big chunk of the equity and it never goes anywhere. So called "zombies", companies that are nominally profitable, but not not enough cash flow to support M&A, too much cash flow to just roll them up. Those companies need an innovative way to 'cash out' their investor over time so that they can get on with their lives.

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Aloisius超过 11 年前

As long as these newly minted millionaires & billionaires continue the Silicon Valley tradition of reinvesting their money back into new startups then I think we'll more than offset the potential innovation we lose by them being locked away and their own companies merged/shuttered.Now if the culture ever changes and people start hording their money, then I'll agree we have problems.

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ericflo超过 11 年前

He says "Suppose that Yahoo had pledged to allow Google to operate independently...Chrome and Android likely would never have gotten off the ground." But Android was...an acquisition.

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ekpyrotic超过 11 年前

Not only is this argument wrong, the /opposite/ is true.Buyouts are actually the /engine/ of innovation. They're the fuel. The oil.You know this yourself. Just take a quick look at Silicon Valley - it's a hotbed of innovation. If you believed this argument, you'd expect to see a dirge of new businesses & a desert of new ideas. That's just not true. We have wearable tech. Quantified self. Bank challengers. News extractors. And things that don't even have names. The place is full of vibrant startups & new ideas. Just compare it to the energy, banking or agriculture sector.So, why is the argument wrong?Because buyouts /liberate/ innovative entrepreneurs from their old companies so they can go onto to found new startups - new startups that push the envelope again. San Fran is full of serial entrepreneurs who skip from one place to the next - first, revolutionising auctioning. Then, payment processing. Then, something else.Just look at the PayPal mafia: <a href="http://en.wikipedia.org/wiki/PayPal_Mafia" rel="nofollow">http://en.wikipedia.org/wiki/PayPal_Mafia</a>What if PayPal hadn't been bought out. YouTube might not have existed. Nor LinkedIn. Nor Palantir. SpaceX. Yelp. Yammer.Buyouts lets these innovative people sell-up - at the right price - and move on. Not only that, but they allow them to move on with additional capital that they can plough into their next venture.If buyouts didn't happen as often, entrepreneurs would have to wait another 3-5 years - or even longer than that - for an IPO. It would lock in capital, and enterprise would suffer. Plus, an IPO is mighty expensive & just not right for some businesses.Entrepreneurs would be locked into their first companies.This 'lock-in effect' is exactly what happens when Governments raise Capital Gains Tax - the tax on the profits of selling a business. If it's harder (or more costly) for an entrepreneur to cash out and move on, they stagnate - and so does innovation. This is a well-known and studied phenomena: <a href="http://www.fas.org/sgp/crs/misc/R40411.pdf‎" rel="nofollow">http://www.fas.org/sgp/crs/misc/R40411.pdf‎</a>Acquisition don't suffocate innovation.Acquisitions are the oil of the economy.

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trhway超过 11 年前

and the alternative would be? why would VC invest money with such an ease if there wouldn't be a good chance of a good exit? And how would you have innovation without VC? I mean take any place outside Bay Area - such anyplace would be an exaple of innovation without easy VC.>WhatsApp is the kind of unconventional startup that could have changed the world if it had grown into an independent public company.future is easy to predict.>It might have been able to attract some of Silicon Valley's most talented engineers and pioneered new business models that don't rely on intrusive ads and pervasive data collection.and the money to pay these engineers would come where from? I mean if we exclude "intrusive ads and pervasive data collection" as the revenue stream (the stream that glorified in the article Google mostly relies on).

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msoad超过 11 年前

He forgot that those big acquisitions give employees enough money to start their startups independently and be crazily innovative.If I get $500M I might work on my good bad idea. Good bad ideas like Space X

nl超过 11 年前

Meanwhile, in the rest of the world: "What I would give to have problems like that"...

jfasi超过 11 年前

Acquisition fever is certainly a force pushing innovation downward, and I think the argument this article puts forward is sound. On the whole, however, I think innovation in the technology sector is driven by other factors. In particular, the barriers to entry for a new company in the technology space are extremely low.Once upon a time a young company needed to devote significant monetary and human capital to building their software and hardware platform. Today, they can use open source frameworks and commodity hardware. Marketing once meant medium to big media buys, which had high entry costs and provided little to no insight into their success. Today you can literally buy attention by the individual customer, and enjoy a deep and detailed understanding of the success of your campaign. In addition the (relative) abundance of early stage investors means if you have an idea, you can bring it into reality with (relative) ease.Innovation is so cheap that it doesn't have to happen inside a big company anymore. If a team gets bought out and cannot pursue a new opportunity, someone outside the company will step up and go after it.

argumentum超过 11 年前

The (bad) article discounts at least the following:1. Often acquisitions thrive under their new overlords (think android, youtube, instragram). They might also need the financial resources of the purchaser to aim higher.2. Acquisitions increase the # of potential angel investors, which leads to more money for startups. Look at what PayPal's acquisition has done for innovation (it's famous "mafia" ended up funding and/or founding Facebook, Tesla, Palantir, Spacex etc.)3. An acquisition culture leads to more examples of successful founders, which leads to more people wanting to be founders.

adventured超过 11 年前

Silicon Valley has a cash 'problem.'AAPL - $158b, GOOG - $58b, CSCO - $48b, ORCL - $37b, INTC - $20b, HPQ - $16b, FB - $11b, EBAY - $9b$357 billion in cash among just the top eight tech firms (cash wise). Those eight firms are generating roughly $100 billion a year in profit, compiling that cash hoard ever larger.It's not surprising Silicon Valley has acquisition fever. Cash and equivalent yields almost nothing these days. To top it off, the stock market is at all time highs, so stock-as-acquisition-currency is primed as well.

lmg643超过 11 年前

this is a silly article. re-write the headline and it is an explanation of reality:SV's innovation fever is driven by acquisitions (or the possibility anyway).People launch companies, iterate like mad, in the hopes of a payout of some kind. willing to go without revenue to prove out a concept quickly. the endless trial-and-error results in a lot of interesting outcomes. the reward is the acquisition.

joesmo超过 11 年前

It's worthless to speculate about what would have been if this or that. There is no way to know. It is sad, however, when the aquisition happens simply to remove competition like some of the buyouts that are immediately followed by startups removing their product offerings.

salem超过 11 年前

Google maps was based on an acquisition, as were many of Google's marquee products:<a href="http://en.wikipedia.org/wiki/List_of_mergers_and_acquisitions_by_Google" rel="nofollow">http://en.wikipedia.org/wiki/List_of_mergers_and_acquisition...</a>

hiroaki超过 11 年前

Acquisitions provide liquidity for startups that hope to realize value only in the long-term. This is actually a good thing because it can actively encourage more ambitious startups.

mbesto超过 11 年前

This is a very poor conclusion, but arguably will sit very well with the audience of the general populace who will feel smug that "they had the idea of whatsapp and facebook first":> But any new products he launches will be shaped by Zuckerberg's vision for the web, not his own. And that's a shame.Innovation is a vehicle for the creation of wealth. Innovation is in and of itself fairly worthless. The only reason the concept of innovation is so popular is because of the value (and the valuations) we put on companies who are seen to be innovating. I don't think it's in question that a lot of wealth is being created right now. Where's the shame in that?

myzerox超过 11 年前

It's bad for innovation at Whatsapp but great for innovation in Silicon Valley as capital flows back into the cycle.

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michaelochurch超过 11 年前

As a place for innovation, Silicon Valley is dead. It's now a cross between Hollywood for ugly people and Wall Street for people who can't hack winter.Acquisitions aren't the problem. If the alternative is hard-stop failure, meaning the work and acquired knowledge is effectively thrown away, I think M&A is far better. What is a step down is the replacement of R&D by M&A, but that's the fault of shortsighted executive fuckheads all over the country-- not limited to the Valley.If you see the Valley as another Wall Street-- with a similar corporate ladder (engineer -> VP/Eng -> CTO -> founder -> investor)-- it will piss you off less. But you will also realize that it's a much crappier Wall Street-- worse pay and bonus structure, less prestige outside of the Bay Area echo chamber, more project-management bullshit (e.g. "iterations" and extreme closed allocation and "story points"), less autonomy, and more age discrimination-- and wonder why the fuck anyone would go into the startup game (unless born into VC connections).The danger of startups (by the way) is that if you play that game for too long, you end up stuck in it because the "job hopper" stigma makes it hard to move back to hedge funds. This might have been OK when engineering roles at startups had real upside, but now that engineer equity allotments are in the pathetic 0.01-0.1% range, it's a shameful and wasteful trap.

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