its only worrying if you can't make a sustainable standalone business at the end of the day.
Which should be the goal. A major acquisition should have always been seen as a last resort, only preferable to going out of business.
Startups hoping to cash out by selling to a competitor is its own kind of silliness in the first place and was largely fueled by lax regulation environments and 0% interest cash.
What ever happened to building durable businesses as an explicit goal
A lot of big businesses don't start off as sustainable ones. So they buy time, through venture capital, to become sustainable ones. This kind of news hurts the chances of that category of companies from being created.
I didn't posit that a business should start off as a sustainable one.
I asked what happened to building a durable business as a goal?
I understand the VC model enough to know that sometimes for years you run red because you need economies of scale or some other engine to finally turn over and then at scale the business will start to generate bigger cash flow once it reaches that tipping point. Even if a bit simplified as an explanation, this isn't what I'm talking about.
What I'm asking directly is why exiting to a big company became a goal in and of itself. Lots of VCs poured money into companies with the distinct hope that those businesses would at the very least be acquired. I think this is the silly part. Every investment should be from the perspective of can this be durable if standing on its own two feet? and a big acquisition is not something that should be taken into consideration as part of the investment and business building strategy of either the VC firms or the founders.
That all got lost. Building a durable business should be the ultimate goal, and selling the business to a big company should be seen as lower status than it currently is.
Its not that I'm saying acquisitions don't make sense sometimes, I'm not. However as far as goal setting and running a business is concerned, it shouldn't really be thought about as a viable fallback or exit strategy until its readily apparent and available, but that hasn't been true for some time now. VCs and founders often explicitly look at acquisition as one of their "success targets" and hopes for a business. Lots of people on HN have admitted that they started businesses with some hopes that they could possibly be acquired. That is the drift away from sanity I'm talking about.
Every single founder I know (and I know a lot of them) doesn't build a business for the specific reason to be acquired. Is it a thought that crosses their mind? Definitely. Is it something investors think about? Absolutely.
But the day-to-day, 12 hour+ grind for them is all about product-market fit and drawing revenue - the things that make a durable business.
Which big businesses are that? And how many categories of sustainable mid-sized companies creating a healthy competing market were hurt with VC cash flood, where VC fed companies dumped prices, killed healthy competition and then died themselves (together with whole product categories) when the VCs lost interest because they weren't a unicorn?
Those mid sized companies you refer to did fine for three reasons:
* If they were competing against venture backed companies, they were likely playing in big markets. My bet is they are still alive today.
* They got acquired by the bigger companies and ended up capturing even more short term economic value than they would have otherwise.
* These venture backed companies expanded the market, actually helping smaller players. I would bet money that VRBO's business increased as AirBnB got bigger.
I agree that there's something sleazy about injecting a ton of capital in a niche space; at the very least, it's distorts all the dynamics in it. But you can't deny that this short term chaos creates long term economic value for everyone else.
Uber demonstrated you could add a tech layer to the taxi business and make it more efficient for riders + introduce a whole new set of people to the driver business. Did this harm existing taxi drivers? Unquestionably.
I know it's hard to look at that business model as innovation but it is because now there's extreme price pressure on these companies (esp Lyft) to remove the costliest part of the equation - the driver. So as a result, you have a ton of very motivated energy towards solving that, via autonomous driving.
It took mediocre business innovation[0] (uber) to drive meaningful tech innovation (autonomous driving).
[0] - Purposely differentiating the tech innovation (which Uber deserves a lot of credit for) vs the biz innovation (which last I read is getting better, though still shaky).
Which should be the goal. A major acquisition should have always been seen as a last resort, only preferable to going out of business.
Startups hoping to cash out by selling to a competitor is its own kind of silliness in the first place and was largely fueled by lax regulation environments and 0% interest cash.
What ever happened to building durable businesses as an explicit goal