Two interesting articles have cropped up over the past 10 days…
Link 1 – The future of web start-ups, an essay by Paul Graham
Link 2 – Microsoft will acquire 20 companies per year, news story by VentureBeat
Paul Graham describes how starting up a company is going through a similar transition that happened within the technology industry – the process is becoming cheaper, lowering the barriers to entry and ultimately turning it into a commodity:
¨When starting a startup was expensive, you had to get the permission of investors to do it. Now the only threshold is courage. Even that threshold is getting lower, as people watch others take the plunge and survive.¨
But, as with all things in life, there are two sides. With lots of start-ups everywhere, you need a corresponding strategy to sift through and figure out which ones are worth buying:
¨As the volume of startups increases, big companies will start to develop standardized procedures that make acquisitions little more work than hiring someone.¨
And to prove the point, Steve Ballmer announces Microsoft’s strategy at the Web 2.0 conference:
¨[Microsoft] will acquire 20 companies a year for the next five years, ranging from $50 million to $1 billion.¨
It’s interesting to compare acquring companies to hiring people. Charles Handy has written about a similar transformation within the workplace. In his book ‘The Elephant and the Flea‘, he described how business is increasingly splitting into two approaches – centralised core functions (the elephants – large companies), and everything else (decentralised – fleas – lots of small companies and individuals). Working for an elephant would eventually be seen as just an extension of your education, university+. Graduating and becoming a flea would be the natural route for most. The book worked for me – I became a flea in 2006.
Of course, being a flea doesn’t guarantee life-long access to a bed of roses any more than being part of an elephant, it’s just a different lifestyle with different risks and opportunities.