Why Google or Facebook Buying Your Favorite Startup

Time Techland wrote:

When I learned this morning, via Twitter, that the small company behind Mac/iOS e-mail app Sparrow was being bought by Google, I almost didn’t need to read the startup’s announcement to know the upshot.

Google and Facebook buy itty-bitty web companies all the time. And the acquired businesses typically convey what’s happening in an eerily consistent five-step ritual:

  1. Announcement of thrilling acquisition
  2. Reiteration of startup’s wildly ambitious founding notion
  3. Explanation that either Google or Facebook is the best place to change the world
  4. Acknowledgement (or sometimes non-acknowledgement) that the startup’s product is being discontinued or is going into limbo
  5. Expression of heartfelt gratitude to various supporters, usually including the consumers who are losing their something they liked

So it seems to be going with Sparrow: Its five-person team will be working on Gmail henceforth; the existing Sparrow apps aren’t being discontinued, but they apparently won’t get any updates, either.

…[SNIP]…

Why does this keep happening? There are several related factors at work:

Google and Facebook are already pursuing ginormous dreams of their own and don’t need new ones. They’ve got the resources they need to turn them into reality, and hundreds of millions of users who are already on board. Which is why they’re rarely all that interested in the actual products produced by the companies they snap up, especially if they cater to relatively specific needs and small user bases, such as Sparrow’s signature creation, its Gmail app for OS X.

Tiny startups are full of smart, ambitious people. To keep growing, Google and Facebook need to hire armies of  smart, ambitious people–and the most efficient way to do so is often to buy small companies and thereby acquire their teams.

Large, well-established companies are envious of small, young companies. Both Google and Facebook remain more intrepid and innovative than your average great big company. But when you’re huge, you obsess over the the possibility of becoming bloated, lethargic  and bureaucratic. You also get paranoid that some little-known upstart will create the next big thing. Buying startups is a way to address all these fears–or at least seems like one.

Getting bought by Google or Facebook is a viable business model. Many startups with cool products don’t have a clear idea of how they’re going to make money with them. Cashing a check for a few million dollars is an expedient way to do it.

Working for a powerful web giant probably does sound appealing. I don’t think the startup founders are fibbing when they say that joining a huge company will help them fulfill their founding missions. Still,the scrappy renegades who found startups and invent new things rarely seem to be content at bigger companies forever. One example that springs to mind involves Twitter rather than Google or Facebook: Loren Brichter, creator of the amazing app Tweetie, left Twitter only 19 months after he joined it.

Continue Reading: http://techland.time.com/2012/07/20/why-google-or-facebook-buying-your-favorite-startup-means-its-probably-toast/

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