

How does distance affect acquisitions? - drewvolpe
http://sansovi.ch/2014/03/27/acquisitions-geographical-locations.html

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lmkg
Before making conclusions, this graph needs to be controlled for at least one
outside factor: the overall geographic distribution of companies.

If one were to take the complete bipartite graph of [All Startups, All Fortune
500s] and plot the distances between connected vertices, I would not be
surprised to find a distribution graph similar to the one shown above. Most
companies are in population centers, and most population centers are on the
coasts.

I have no reason to doubt that the subset of that graph that contains
acquisition relationships is, in fact, more heavily skewed towards proximity.
But, that is currently a conjecture, and the data does not support the
conclusion (although it does not disprove it, which is something).

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tormeh
Exactly. Poor analysis. It basically says "Things happen either on the west or
east coast, and they particularly happen in SF". Yeah, we kind of knew.

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jmathai
Distance/proximity is, from my experience, one of the largest factors you can
control for your startup. Not specifically for acquisitions but also for sales
(if you're B2B).

I've done two startups in the same space. The first was located in Cincinnati,
OH and my current one in SV. They are frighteningly similar though the space
has changed dramatically.

It depends on your market to know where the optimal location is for fostering
relationships. Hint: it's not always SV (though it often is).

You hear it time and time again that relationships happen very
serendipitously. And by serendipitously I mean you meet someone in a coffee
shop that will later introduce you to someone that changes the course of your
start-up forever.

The depth of the network in SV is extremely deep. My experience in Cincinnati
(albiet 8 years ago) was that it wasn't as serendipitous and it wasn't nearly
as deep. Things may have changed and in places like NYC it might actually be
similar to SV.

My $.02 is that relationships are critical. Making location equally critical.

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kapilkale
This is interesting, but I'd love to see an analysis that proves some sort of
treatment effect of colocation.

Zynga has acquired 20+ companies on crunchbase. Is Zynga biased towards
acquiring companies in the bay area, or are companies that Zynga would be
inclined to acquire mostly located in the bay area anyway? Or is it that bay
area startups tend to perform better / receive more funding than their non-bay
counterparts?

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michaelochurch
If you've ever played a German-style game like Puerto Rico or Catan, you're
familiar with the concept of needing a set of resources, all at once, to
advance.

The Bay Area has capital, talent, customers, users and (most of all) clueless
corporate executives who will acquire anything, rescuing the careers of even
the most brazenly failed founders. You're not taking much of a risk because
everything is there.

Other regions have some or most of those resources, but the VC is skewed
heavily in favor of the Bay Area and that shows no signs of abating. NYC
venture capital exists, but there's even more pedigree-whoring in that scene
(mostly favoring MBAs and banking flame-outs) than in SV.

I don't like that it's that way, but it is. If you want to do a startup,
you're best off to be there.

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michaelochurch
One thing that is really hurting tech (as we see, in the distribution of
capital and acquisitions) is _placism_. It's not good for the advantaged
places (San Francisco and possibly New York) nor for the 99% of the country
that's losing out.

VCs (the only investors in this game, sadly, because bank loans require
personal liability, precluding anything that has any real risk) assume that if
you're not in the Bay Area, you're not serious because "all the talent" wants
to be there. It causes a vicious cycle. You hear a lot of murmuring about
second- or third-tier hubs picking up when, in reality, things are probably
the _most_ skewed they've ever been.

It's not healthy for all the innovation to be allowed only in one area. The
real investors (the people with the money) don't care where their money is
spend as long as it makes a profit. But we have a system that forces people to
compete for scarce space in what has become a congested and hideously
overpriced part of the country... even though rent and living costs exert a
gigantic drag on new business formation.

The only people who win under placism are VCs, big-city landlords, and HR
departments (because they can look at a resume and evaluate it based on
geography).

