Why Google, Microsoft or other Biggies will acquire you?

Ready to be acquired?

Ready to be acquired?

An exit criterion is one of the most important sections in a business plan. How much important? Hint: Venture Capitalists see this section carefully before funding. Got it. Now move ahead.

Basically how do you plan to exit the Startup phase? Do you think you will get acquired? Do you think you will go ahead with the IPO route and get listed on the bourses? In case if getting acquired by the biggies like Google and Microsoft for sweet million/billion dollar deals is what you startup dreams of, than it has to be planned well more beyond the business plan.

The best source to understand why some startups are acquired by companies like Google and Microsoft is to keep tracking the daily news and find the reasoning behind it. Google and Microsoft will acquire you for a reason and that is neither charity nor because you are enterprising. End of the day if this is what you plan; your startup needs to be ‘worth acquiring’. I have been tracking this stuff for some time and hence came out with this simple list of – Why will your startup get acquired? (By the way this post might seem as a completely tech startups ballgame but I have used these examples just to put my points. The advice here applies to all startups in general)

Because you have rock solid team

Technology works at a rampant scale. While one startup keeps thinking of what will be their product, another one jumps into the game with their beta launches. It’s a mad world in technology. And to fuel this wildfire Biggies require brains. The new trend on the buyout streets is Acquihiring. Whether it is Google, Microsoft or even Facebook; you will find that at times companies are acquired not just because of the product but because of the brains they have behind those products. Examples like Facebook acquiring FriendFeed come under this category.

Because you have a raving fanbase

Whether it was about Youtube yesterday or it is about the Skypes of today, the biggies have enough talent pool to jump into these markets and compete with your tiny startup. But winning a competition takes its own sweet time. An immediate shortcut is vertically growing by mergers and acquisitions. Google already had Google videos in place; Youtube’s acquisition was more to do with the millions of users already hogging the network rather than the technology behind it

Your product complements theirs

Facebook to FriendFeed was more complimentary. So was Overture to Yahoo or Double Click to Google. Forget the profit making startups, Google even acquired re-captcha and started serving them to make a contribution to the literature we can’t consume today. If your startup creates an add-on product that users start using as complimentary tools over and above what the biggie provides, it makes sense that they acquire and integrate you.

But mind you there’s a caveat to this. You actually need to add value and not just provide a rudimentary service which can be made in a week or so. Take example of Twitter which will soon start hosting images on behalf of its users (after creating its own URL shortening service). Many startups are already in this domain still no acquisition? You have to understand the thought process that needs to go in these products and the innovation that needs to  be created.

You copied them

This is an age old technique to success. Forget originality. Look outside your country. Find a nice idea and photocopy it! When I talk about India I remember Baazee (acquired by ebay) from my childhood days to SoSasta (acquired by Groupon) till date. These sites got acquired by the same company that they were trying to mimic in their countries. Rather than expanding user base and try to reinvent the wheel by learning the same stuff, these biggies just went ahead and showed the moolah! Don’t just look outside the box, look outside the country! Are you ready to do the implementation of their idea?

They will have to anyway build it

This is probably a compilation of multiple points listed above. Though I did highlight multiple examples above; there still might be scenarios where buying is easier and building can be costlier. It’s not just about time, it is also about the money and experience that your startup can already deploy which the biggie might not be interested in putting in. If down the line Microsoft or Google has to provide a service, hack their vision, start building it today. So next time they are out for lunch start serving them your delicious startup.

Remember there can be a gazillion reasons apart from the above points but they are based on the same hacks that your startup provides to the biggies. You have a clear vision for your product, you enable them entering a new industry, Their competitor has acquired a startup similar to yours or You can generate quick change for them. These are all the reasons why your startup will be acquired by Google or Microsoft. The solution Plan, prepare and be ready to get acquired.

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{ 1 comment }

Pradeep October 18, 2011 at 8:08 am

Nice post and good tip:)

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