
Idea: Self-acquiring feature startups - madanella

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madanella
So many of the new services being created and offered online are accused of
being features only. Wouldn't there be an opportunity in combining a set of
these feature-startup companies into a very interesting acquisition target or
a company with more potential for going public?

I'm not proposing that VCs or some company act as the acquirer. I'm proposing
that these companies merge their teams and traffic and resources 'equitably'
and keep working toward the goal but with greater momentum. Kind of a 'hackers
co-op'.

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It seems if several startups merged into one, it wouldn't be an attractive
acquisition. An acquirer might only want one subcompany, but has to buy the
whole thing at a greatly increased price. Acquirers like the a-la-carte aspect
of startups.

Startups do too. The founders started their company precisely because they
didn't want their product to be averaged together with a bunch of others.

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madanella
"The founders started their company precisely because they didn't want their
product to be averaged together with a bunch of others."

I have never heard that as a reason someone started a company. People start
companies because they want to have control and impact and work on interesting
things and have more ownership.

I just wonder if it might be interesting to combine a team that's working on
online collaboration, for instance, with another that's working on video
sharing and a third that is building a community of some sort. Think 37Signals
but from the bottom up.

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"People start companies because they want to have control and impact and work
on interesting things and have more ownership."

That's true. If these are the founders' main goals, they'll be less averse to
raising the acquisition price or working in bigger teams. They don't even need
to be a startup -- they could also be happy as an autonomous research project
under the wing of a big company.

I was talking about founders hoping to get rich by selling their companies
after a few years. In this case, they want the company to be small,
inexpensive, and have few strings attached, to attract as many acquirers as
possible.

Occasionally, two startups might be a perfect match for each other -- their
combined product is far greater than the sum of the parts. In these cases, it
makes sense to merge. It sounds like this is what you mean.

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madanella
Yeah. I just think about this every time a VC or some pundit says "but it's
just a feature". I think it would be interesting to see a combination of these
'features' become a major player.

The goal is to get acquired and have a relatively big payday. But I think it's
possible that a group of small players could merge and grow big enough to go
public and compete with the big players. Of course the biggest challenge would
be deciding who was 'in charge'.

If your company has 200,000 users and you can join forces with a few other
similarly sized projects the new company would have more thinking and more
manpower and resources and could benefit from some overlap in function and
might be able to grow beyond some theshold that increases valuation multiples
because of the viability of the company as an independent entity, and maybe
even profitability. I think those things could very well outweigh the ease of
fit of a feature. I'm sure it would depend on the buyers but it just might
open doors to buyers that wouldn't be interested otherwise.

