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I always thought that a tech company buying another tech company was the strangest thing: if another company makes software, and you make software, and you want

I always thought that a tech company buying another tech company was the strangest thing: if another company makes software, and you make software, and you want software that does what that other company's software does... why not just write new software to do that? But, clearly, these guys know something I don't know.

fakedang 6y ago
Acquisition is not about buying the software, it's about buying the user base.
bhupy 6y ago
Because of the time-value of money. https://www.investopedia.com/terms/t/timevalueofmoney.asp https://www.investopedia.com/terms/t/timevalueofmoney.asp
wott 6y ago
Sometimes they don't want the software that much that they want the customers.
staysaasy 6y ago
I think that this is a very reasonable observation. It's definitely weird in theory, but the reasons that I've seen are: * Very large tech companies build software (relatively) slowly due to their size * Sort of like a toddler, you don't know what you want until you see that someone else has it. Another company hitting product/market fit + traction proves the value of a product that you might have just hypothetically wanted * You're often buying a go-to-market motion (marketing, sales, services, etc) that complements a product * In some cases, you're buying talent that would be difficult to hire + train on your own _fast_. Ie even if you could theoretically hire 50 traffic mapping engineers, you can get them onboarded onto your team faster by acquiring Waze
throwaway3699 6y ago
Software is about domain knowledge more than code. Also, userbase and customers are valuable.
schnevets 6y ago
I'm sure there's some accounting wizardry that helps make this viable, but it could just be the optimal strategy if a Big Tech company has a warchest of cash, but knows some of it could be hemorrhaged by taxes (or the costs related to transferring funds) if it isn't spent. $20 million to acquire a development team for a few new features may seem like a lot, but it is a more surefire thing than spending $10 million to hire, design, and build a competitor.
munificent 6y ago
Two key reasons: 1. You want to acquire the existing users of their software. 2. Buying them essentially stops progress on your competition. Let's say you don't buy them and instead decide to write your own software that does what theirs does. Maybe it takes you a year to write a program that does everything theirs does today. In that year, they've also made a bunch of progress, so you're still behind. If you have enough resources, you may be able to catch up and overtake, but they have the advantages of greater expertise, userbase, and lead time. Because of those advantages, it's often cheaper to buy them. In general, companies don't like to compete. Competition is spending resources to simply cancel out the expenditure of your competitor. Zero-sum games like that don't make you richer. Companies naturally prefer to be monopolies, or at the very least cabals. That way they can fully exploit their product area and can control prices as much as they want.

fakedang 6y ago

Acquisition is not about buying the software, it's about buying the user base.

bhupy 6y ago

Because of the time-value of money. https://www.investopedia.com/terms/t/timevalueofmoney.asp https://www.investopedia.com/terms/t/timevalueofmoney.asp

wott 6y ago

Sometimes they don't want the software that much that they want the customers.

staysaasy 6y ago

I think that this is a very reasonable observation. It's definitely weird in theory, but the reasons that I've seen are: * Very large tech companies build software (relatively) slowly due to their size * Sort of like a toddler, you don't know what you want until you see that someone else has it. Another company hitting product/market fit + traction proves the value of a product that you might have just hypothetically wanted * You're often buying a go-to-market motion (marketing, sales, services, etc) that complements a product * In some cases, you're buying talent that would be difficult to hire + train on your own _fast_. Ie even if you could theoretically hire 50 traffic mapping engineers, you can get them onboarded onto your team faster by acquiring Waze

throwaway3699 6y ago

Software is about domain knowledge more than code. Also, userbase and customers are valuable.

schnevets 6y ago

I'm sure there's some accounting wizardry that helps make this viable, but it could just be the optimal strategy if a Big Tech company has a warchest of cash, but knows some of it could be hemorrhaged by taxes (or the costs related to transferring funds) if it isn't spent. $20 million to acquire a development team for a few new features may seem like a lot, but it is a more surefire thing than spending $10 million to hire, design, and build a competitor.

munificent 6y ago

Two key reasons: 1. You want to acquire the existing users of their software. 2. Buying them essentially stops progress on your competition. Let's say you don't buy them and instead decide to write your own software that does what theirs does. Maybe it takes you a year to write a program that does everything theirs does today. In that year, they've also made a bunch of progress, so you're still behind. If you have enough resources, you may be able to catch up and overtake, but they have the advantages of greater expertise, userbase, and lead time. Because of those advantages, it's often cheaper to buy them. In general, companies don't like to compete. Competition is spending resources to simply cancel out the expenditure of your competitor. Zero-sum games like that don't make you richer. Companies naturally prefer to be monopolies, or at the very least cabals. That way they can fully exploit their product area and can control prices as much as they want.