
The Rise of Micro Startup Acquisitions - carlchenet
http://techcrunch.com/2015/04/15/rise-of-micro-startup-acquisitions
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beat
The problem with this was explained to me by a M&A consultant... it's roughly
the same amount of work for the acquisition team of a large company to buy a
tiny company as it is for them to buy a much larger company. The problem isn't
the cost, but rather the due diligence and bureaucratic bandwidth of the
acquisitions team.

So this is unlikely to become much of a trend, simply because it's too much
work for the acquiring companies.

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vonmoltke
I don't understand. Why doesn't the amount of work required to perform all the
due diligence activities not scale with the size of the company?

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drb311
I'm foxed too. Due diligence is about assessing risk. The lower the valuation
the less you're risking. Hence I'd expect early acquires to require far less
due diligence. What am I missing?

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nerfhammer
Liabilities. While a lower valuation company would presumably be less likely
to rack up some huge liabilities somehow, that is not necessarily the case.

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amelius
An increase in number of acquisitions means a decrease in competition, a
decrease in product diversity (random product discontinuations, with higher
probability for good products) and a decrease of market modularity and
flexibility.

We should oppose this.

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yesimahuman
The way we oppose this is by educating, training, and supporting bootstrapped
and aspiring startups. You'd sell, too, if things weren't looking so great.
Pinterest would be an awesome opportunity in comparison.

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rdlecler1
You're assuming that every entrepreneur wants to build a company. Maybe it was
a couple of engineers who were just really passionate about a product that
they'll get to continue working on with more resources and a nice cushion.
This may be especially true for companies that are not going to be unicorns,
but more like my little ponies. If you're capping out at a $50m business in 8
years and someone comes along and offers you $8m today that might be a pretty
good deal.

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angelbob
Founding a company with this in mind seems foolish.

If you only have one likely acquirer, that's worse for you. If you're building
a feature that depends on that acquirer, they will kill you off if you get big
(see Twitter and other data suppliers.)

So you're choosing a startup idea which can be lowballed on the offer (only
one acquirer) if they like it, and you can't get big and succeed on your own.

This looks great for big companies -- free R&D if the idea was bad. It looks
awful for most founders.

