We have all been watching the shopping sprees of three tech giants in the past year; heck their shopping trolleys have been driving news in the industry for the past year. From the purchase of smaller startups like Snip.it by Yahoo! to Facebook’s costly acquisition of Instagram, it seems the new mission for startups isn’t just to have a super cool concept; it’s to find a home in the most sought after office blocks of Silicon Valley.
After a while, the creators of quirky tech concepts have to answer the same question all businesses need to answer: How do we make money? Without a clear revenue building strategy, investors become rather shy with their money and the conquests and achievements of many startups end up in the place great ideas go to die — an un-updated Wikipedia page.
It’s clear that acquisition is one of the simplest ways to making startups sustainable. So how does becoming a small fish in a big pond impact startups and most importantly, their people?
Can I get this culture in a different size — it doesn’t fit
Facebook and Google are no longer the startups down the road. No matter how much they may call themselves companies with entrepreneurial cultures, they are essentially shareholder having, stock exchange sensitive big businesses. This is bound to change things. So how does the startup — still in entrepreneurial euphoria — fit into this culture?
According to Chris Morris, a writer with CNBC, “What culture-sensitive founders want is the ability to stay independent as much as possible. They want to get the benefits of the bigger company … but still be able to operate in a way that is fairly independent, so they can preserve that culture.”
So, does the acquirer honour this? Morris goes on to say that startups should do their due diligence beforehand if autonomy is important to them.
So how does a change in strategic direction impact the people within the company? The onus is on the startup to deduce whether the acquirer will embrace the current vision, or force a conversion to its own vision. This is important because a change can lead to positions being made redundant and possible failure of the acquisition or merger completely.
The maverick gets a boss… or several
So the pioneer of said startup, the visionary leader upon whose shoulders the dreams, motivation and awe of his/her people rest suddenly has a boss. How easy is it for the maverick to “tow the line” and fit in when he himself has carried the vision? According to an article by Ben Popper on The Verge, Google for example, has created an environment that allows these founders to maintain a large degree of autonomy. They get to select the elements within Google that give them access to resources and scalability, but still keep their startup fire within the large organisation. Google also gives the leaders of their acquired startups to guide the strategy and decisions behind other future startups, an excellent way to let leaders continue to lead.
According to an Entrepreneur.com article, approximately 65% of mergers and acquisitions fail. The reason? A lack of a focused integration strategy.
The success of acquisitions is less about the coolness of the companies involved, even in tech. We often glorify tech companies pretending they don’t have to conform to the basic principles that govern the petrol station down the road or a big bank for example. Like any other organisation; the key to success is effective change management.
You're on Ventureburn, so we're willing to bet you love startups. So why not enter our 2015 Startup Survey, in partnership with FNB, Clifftop Colony and Qurio? You'll receive a guaranteed startup goodie bag and the chance to win an iPad Air worth R8 000. Click on the image below to enter: