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UK Needs An Acquisition Culture To Have a Sustainable Startup Culture

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Re: UK Needs An Acquisition Culture To Have a Sustainable Startup Culture

#31

Post by mikebutcher »

hardwaresofton wrote: post #17

This article should have been called "The UK Needs An Acquisition Culture If It’s To Have a Sustainable Venture Capitalist Culture" +1 to what anovikov and KaiserPro have said already -- If these founders are building things they love, to solve real problems, they should be building sustainable businesses and doing what they set out to do, not waiting on a VC to buy them out.

Thats fine for some. Run on revues and retire in 40 years satisfied. But sometimes other founders need financing to build the things they love, and that require capital. European banks are not good at risk capital. So you're going to have to get it from somewhere. If eventually a founder has a big exit, maybe they can finance their OWN NEXT STARTUP? How about that for you?

Re: UK Needs An Acquisition Culture To Have a Sustainable Startup Culture

#32

Post by hardwaresofton »

mikebutcher wrote: post #31
hardwaresofton wrote: post #17

This article should have been called "The UK Needs An Acquisition Culture If It’s To Have a Sustainable Venture Capitalist Culture" +1 to what anovikov and KaiserPro have said already -- If these founders are building things they love, to solve real problems, they should be building sustainable businesses and doing what they set out to do, not waiting on a VC to buy them out.

Thats fine for some. Run on revues and retire in 40 years satisfied. But sometimes other founders need financing to build the things they love, and that require capital. European banks are not good at risk capital. So you're going to have to get it from somewhere. If eventually a founder has a big exit, maybe they can finance their OWN NEXT STARTUP? How about that for you?

Without being combative, who, exactly needs the financing that badly? Certainly not the large percentage of social startups, right?

And also, if they need the capital to enable/manage growth, a reasonable business model should get them SOMEWHERE close to sustainability. What I mean to say is that if people are falling themselves to use your creation (so much so that you must expand infrastructure significantly -- keep this in mind that many of the open source software that is available these days "scales" to thousands if not millions of users without much more than one guy sitting behind a computer) it should not be difficult to get some portion of people to PAY for the service.

Now, of course, this is very different when it comes to something like a manufacturing-based startup, in which someone is looking to achieve mass-production from the get go (which I don't even think is a reasonable approach) -- or break into some sort of heavily "regulated" area and needs money for patents/licenses/whatever. But even to that, I'd say more introspection is needed -- VCs are not just looking to hand out money without prototypes, and if you have prototypes that are good, and work, and show that you know what you're doing, even regular banks can give loans with a good enough business plan (especially with all that internet money everyone's been trying to get a hold of recently.

Also, I think that maybe this ultra-transient mentality to startups might be wrong, unless you are in the business of incubating. You don't often enter relationships with the mindset of gathering experience for the next one right? Most people would like to think that people enter relationships with the intention to make them successful. I think startups are the same way, especially given how people think about them on sites like these and others.

Also, keep in mind that building something you love and making money from it instead of taking VC cash doesn't mean you'll be poor by a long shot, it's very possible (and I'd like to say probable, but I don't have a link to an article posted on here last week about non-VC exits being generally worth more to the founder). If your idea really is good, then it will make you a LOT of cash, even if you collect $10 from 1000 people on a yearly basis, you'd only need 3000 people to think your app is useful to make somewhere close to min wage in the US (which is higher than many around the world are paid)

But anyway, that's just my opinion

[EDIT] - Also, another point worth thinking about here -- what about your users? These are the people that subscribed to you, your methodology, your culture. I think there's more than enough proof out there to show that users don't get quite treated the same after acquisitions (to put it mildly)

Re: UK Needs An Acquisition Culture To Have a Sustainable Startup Culture

#33

Post by petenixey »

Nursie wrote: post #28
pg wrote: post #22

Earlier quoted context omitted.

If by "viable long-term businesses" you mean ordinary slow-growing ones, people already do start lots of those in the UK. But if you're talking about startups, meaning super fast growing companies like Google, Facebook, etc, what you seem to be claiming implicitly here is that there is a way for the UK to become like Silicon Valley in the sense of becoming a place where such companies are started, without also acquir…

I'm afraid I'm not 100% convinced that Google and Facebook are great examples of these sorts of startups. Google was certainly disruptive to the established search industry at the time, which was drowning in poor results and nested portals. But it took years to take over and did so by being clearly better than everything else and sustaining that. FB was locked down to academia for years and even then played second fi…

You're certainly correct in that neither Facebook or Google were acquired and it's not the cash from smaller acquisitions which make the real jobs and the real revenues.

However it was the fast sale of Paypal which put enough money in Peter Thiel's pocket to put $500k straight into a young and green Mark Zuckerberg's pocket. It was also the acquisition of Granite Systems after only a year which put $132M in Andy Bechtolsheim's pocket such that he was happy to write a $100k cheque to the Google founders on his doorstep.

Acquisitions are like occasional rainfall in deserts. It may take plants which are focussed on arid survival to make it and you need to be a tough survivor. Without the occasional life-bringing rainfall though everything dies.

There is a growing number of high quality entrepreneurs and engineers starting to bed in in London (and the real ones are not the noisy ones you read about in the UK press) and given the right conditions they can create some substantial, revenue generating companies.

This is a pretty special opportunity. For what is comparatively very little funding indeed, there is the chance to get the brilliant engineers who would otherwise go into banks and getting the money that would otherwise go into property and creating some really interesting high quality new companies and job-creators.

While I think the odds are probably stacked against it happening, one essential ingredient either way is some acquisitions. Bring enough of those and the giants will follow.

Re: UK Needs An Acquisition Culture To Have a Sustainable Startup Culture

#34

Post by shubb »

mikebutcher wrote: post #30
shubb wrote: post #16

Earlier quoted context omitted.

I get these sense that the UK has a startup culture, but Silicon Roundabout isn't it. Several major exchanges (in energy, commodities) are recently ex-startups, and there is an ecosystem of innovative, fast growing companies servicing the city. Because finance is what London does. Outside Central London, often clustered around universities (Cambridge, Surrey, and the Thames Valley) are interesting non-internet start-…

Which shows how much you know about the area. Datasift is not even based in London, it's in Reading. Here's a list for you to peruse http://www.builtinlondon.co/

Yeah, they are based in Reading, on the UoR campus, which is in the Thames Valley area I mentioned. I though they were exciting, and considered using them for a project.

I guess my comment was a bit negative. I wish good luck to anyone trying to make it. You'll have the last laugh when you cash out.

Re: UK Needs An Acquisition Culture To Have a Sustainable Startup Culture

#35

Post by anovikov »

pg wrote: post #21
anovikov wrote: post #14

My belief is that the focus on exits in startups is an American effect in nature - because it matches the VCs business model. Why not just building sustainable businesses and make VCs do with dividends on them? That will be way more beneficial to the economy than building Zynga-style bubbles.

That is a common misconception, but it's usually founders who are eager to sell, not VCs. There is a power law distribution of outcomes in startups. The big successes are so big that that's where all the returns are for investors. VCs routinely reject startups because they worry that the founders are only interested in selling the company. We tell founders who are about to present to VCs never even to use the word "e…

I think in part this is because the founders reach the point where they feel it's 'enough' way before VCs do, because VCs are risk hungry (distributing their risk across dozens of deals makes that easy) and want to roll the dice again and again. In the end, i believe that timeline of the VC's fund existence preclude them from meeting their return goals otherwise than through exits.
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