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Ya well, startups are just low risk R&D facilities in service of big tech now https://centreforaileadership.org/resources/opinion_startups_are_just_big_tech_rnd
by gmerc 10mo ago
Ya well, startups are just low risk R&D facilities in service of big tech now https://centreforaileadership.org/resources/opinion_startups_are_just_big_tech_rnd_now/ https://centreforaileadership.org/resources/opinion_startups...
- oh_my_goodness 10mo agoI don't understand what "low risk" means here. For a start-up, 99% risk of failure is low. What are we comparing that to?
- xgulfie 10mo agoWell usually they only get acquired when they have something the purchaser wants, revenue was obviously not the get here
- oh_my_goodness 10mo agoI don't exactly disagree. But the word "obvious" doesn't work very well during a bubble. Sure, yes, the current revenue doesn't justify the purchase price. But that doesn't mean that anything justifies the purchase price. We can't work backward rationally from "this deal makes sense" and get to "here's why". Corporate acquisitions often don't work that way, even when there's no bubble. The price is often just not justified at all. By anything. In many cases they're just capitalizing testosterone.
- xgulfie 10mo agoYeah I'm with you, didn't mean to imply there was any sort of underlying wisdom or truth behind the choice. People just love to rationalize
- lostlogin 10mo agoThe tv series Silicon Valley has a good episode where they discuss the importance of a start-up not having any revenue. Being pre revenue apparently means unlimited potential, with any level of revenue being bad, as you always have to grow it.
- oh_my_goodness 10mo agoYeah. That's totally real. (But I get that it was also funny, and I loved that show.)
- vidarh 10mo agoI have been in actual conversations where the topic was whether to avoid revenue to prevent being measured on it... That show was very on the nose about a great many things.
- klysm 10mo agoLow risk for the large companies
- oh_my_goodness 10mo agoTotally. I understand what the claim is. I don't understand why anyone would believe it.
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- scotty79 10mo agoMaybe the loses are limited to the amount of the investment in the startup? No risk of consuming more resources than intended before dying. If those things were integrated into the giant there would be political risk of it eating all of the money of the giant.
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- pdpi 10mo agoIt's low risk from the acquirer's point of view. Somebody else paid for that research, you just get to buy it once it's proven itself sufficiently to your liking.
- oh_my_goodness 10mo agoSure. But at that point the purchase price is much higher than the cost of the research.
- pizlonator 10mo agoIt could mean different things I guess, but here’s my take: If you do very risky R&D in a big corpo then the risk creeps into other things: other projects might look at the R&D and say, “we will just use that when it’s done”. It’s a lazy kind of move for tech leaders to make, because it makes you look like a team player, and if the R&D goes belly up then you have someone else to blame. This ultimately leads to risky R&D in a big corpo not being compartmentalized as much as it should be. If it fails, it fails super hard with lots of fallout. But risky R&D at a startup is compartmentalized. Nobody will say they use the output of the startup until there are signs of life, and even then healthy caution is applied.
- conradev 10mo agoBig pharma has worked like this for a while now
- joshcsimmons 10mo agoExtremely well put - this is my assumption as well having worked at many of them!
- skrebbel 10mo agoThis is not new in any way. Famously, Cisco has done this for decades, having been on a nonstop mad acquisition spree since the nineties, and more than once even acquiring companies that started as Cisco spin-out. Also many of Google’s flagship products come from acquisitions. Eg Android, Docs, YouTube, their entire ad network, Firebase, DeepMind, lots more. This isn’t easy! Equally famously, Microsoft routinely botches acquisitions, eg Skype, Nokia etc. Seems to me the only MS acquisitions that don’t fail are the ones they mostly leave alone (eg LinkedIn, GitHub).
- throwup238 10mo agoAlmost the entire biotech industry has been this way for decades once the small molecule patent cliff hit pharma and the R&D costs for therapies skyrocketed. If you look at biotech IPOs, the majority of the startups IPO pre-revenue, long before they’re even legally allowed to sell anything. Which is totally fine: anyone who is a biotech investor knows this and everyone makes tons of money in this arrangement. Investors (both public and private) take on the science risk and some of the regulatory risk, and the pharmaceutical companies provide a guaranteed (big $$$) exit and take over scaling manufacturing to bring a drug to market. Most people with retirement accounts and pensions and index funds rarely touch this stuff except as a diversification strategy that pools the risky stuff to get the upside on the whole industry.
- iancmceachern 10mo agoIt's the same in medical devices. Most startups take it from idea through R&D then go public or are acquired right as they go through FDA approval or submit for it.
- lizknope 10mo agoCadence is one of the big companies in EDA (Electronic Design Automation - semiconductor chip design software) I met someone that left to go to a startup and was bought by Cadence. He did this 5 times and about 2-3 years later Cadence would buy the startup he was at. He just couldn't get away.