With a steady stream of head-shaking acquisitions, Google, Facebook, and other Internet Giants are speedily transforming themselves into web conglomerates. While this is unquestionably making fortunes for the venture capital industry, it does beg the question whether is can be good news for everybody else.
The giants’ buying sprees have not only created a handful of powerful young millionaires; it has revolutionized the venture capital business model. Outside the tech-bubble, it used to be that someone struggled for years to build a company before it went public. Now the idea is to move into the social media hot-spot by developing a product that the new web conglomerates buy at prices never before seen in private deals.
Consider the following transactions:
- WhatsApp sold to Facebook for $16 Billion;
- Instagram sold to Facebook for $1 Billion; and
- Beats Electronics sold to Apple for $3 Billion.
Would you like a piece of that pie? If you answered in the affirmative (let’s assume that you did), the goal is no longer building a business to compete with these tech giants, but work to be established within their orbit and share in their success.
It will be interesting to observe how this strategy morphs and develops in the years ahead. Click here to view the related article by Steven Davidoff Solomon in the New York Times.