Can You Successfully Build To Flip?
from the tough-sell dept
Tim Bishop writes "Om Malik has a very interesting article in Business 2.0 about the current trend of large companies acquiring small startups to obtain new technology or to fill out their product line. He tells the stories of the founders of Oddpost and Lookout, and how they built their products on a shoestring budget, then sold the products to big companies for a good return on their investment (and good jobs for themselves, in some cases). But he only gets the story half right. As Malik describes, a lot of entrepreneurs are finding that once they finish the first version of their product, it makes a lot of sense to sell their product or company to a larger company, instead of trying to become the next Microsoft or Google. However, that doesn't necessarily make it so. As he asserts, there are "massive new opportunities for entrepreneurs who can spot things the heavyweights need, develop them rapidly, and be willing to sell out quickly" and "to get ahead in the postbubble world: Build a company cheap. Flip It fast. Repeat." What the founders of Oddpost and Lookout both had in common was a desire to fix a problem they personally experienced, and a passion for the product that they were building, a passion that was transmitted to their early adopters. It's pretty hard to manufacture that passion for a product that is only being built to flip, and that passion is key to creating a great new product that someone will want to buy." Indeed, while it makes a good story, and the end result may look like what the article describes, it doesn't look like these products were "built to flip." There were plenty of companies during the boom years that were built to flip, but got no attention. Generally, the companies that do build with that in mind don't get far enough, as the products have nothing really to differentiate themselves. However, for the companies that do build up a strong and loyal following, when a large company with cash comes calling, it's often difficult to resist the offer.
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The Problem With Flipping
I'm happy a Furl user to...
...but the trend that I tend to see happening with these companies is that their product goes to shit after being flipped. There are numerous other examples, but there's a entire cadrey at MS that treat acquisitions like their personal insect collection, nicely bottled up and never to see daylight again.
If you believe in your technology, license it. If you're a serial filpper, you possibly won't get as rich as quickly, but everyone will be better off for it.
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