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Why There Aren't More Googles (2008)

paulgraham.com

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Re: Why There Aren't More Googles (2008)

#81

Post by ekanes »

ricksunny wrote: post #65
adamsmith wrote: post #2

> I've tried to explain this to VC firms. Instead of making one $2 million investment, make five $400k investments. Would that mean sitting on too many boards? Don't sit on their boards. Would that mean too much due diligence? Do less. If you're investing at a tenth the valuation, you only have to be a tenth as sure. This turned out to be absolutely right, and the That said with the benefit of more hindsight I think…

Which firms filled the $400-$500k gap Paul Graham outlined the niche for? Not asking for a friend.

I would expect it's the category known as "micro-VC".

Re: Why There Aren't More Googles (2008)

#82

Post by adventured »

benlivengood wrote: post #4
adamsmith wrote: post #2

> I've tried to explain this to VC firms. Instead of making one $2 million investment, make five $400k investments. Would that mean sitting on too many boards? Don't sit on their boards. Would that mean too much due diligence? Do less. If you're investing at a tenth the valuation, you only have to be a tenth as sure. This turned out to be absolutely right, and the That said with the benefit of more hindsight I think…

> That said with the benefit of more hindsight I think the reason there are no more Googles is that FAANG has a stronghold on the largest technology markets. And the FAANGs are willing to pay very large amounts of cash to acquire promising startups. EDIT: Also why is it that the majority of the large tech companies are essentially marketplaces? Is there really that much friction in traditional markets (physical goods…

> Also why is it that the majority of the large tech companies are essentially marketplaces?

They're not.

Non marketplaces: Apple, Microsoft, Huawei, SAP, TSMC, ARM, Intel, Samsung, SK, Cisco, Nvidia, AMD, IBM, Texas Instruments, Salesforce, Oracle, ASML, NXP, Netflix, Zoom, Dell, VMWare, Adobe, Applied Materials, Broadcom, Micron, Qualcomm, Intuit, Foxconn, Snapchat, Ant Financial, PayPal, Square, Stripe, Fiserv, Ericsson, Tesla, SpaceX, Activision, Electronic Arts, Nintendo, Sony, Twitter, Lenovo, HP, HP Enterprise, Lam Research, ZTE, Xiaomi, Western Digital, Seagate, Workday, ServiceNow, Veeva, Analog Devices, Canon, Spotify, Datadog, Cloudflare, Akamai, CrowdStrike, Elastic, DocuSign, Okta, Palo Alto Networks, Atlassian, Twilio, Fortinet, MongoDB, plus a hundred other companies.

Mixed marketplace conglomerates: Google, Facebook, Tencent, Baidu, ByteDance.

Marketplaces: Amazon, Alibaba, eBay, Etsy, Shopify, Craigslist, MercadoLibre, Uber, Lyft, Didi, Pinterest, Booking, Upwork, Fiverr, Redfin, Zillow, Expedia, Trip.com, Yelp, TripAdvisor, Groupon, and a few other small players.

It's not close at all, marketplaces are the modest minority of large tech companies, both in terms of market value and particularly when it comes to sales (giants like Sony, Dell and HP have relatively smaller market values and massive sales and large numbers of employees).

Re: Why There Aren't More Googles (2008)

#83

Post by rexreed »

> Tip for acquirers: when a startup turns you down, consider raising your offer, because there's a good chance the outrageous price they want will later seem a bargain.

There's no evidence that this is the case.

Indeed, after founders are acquired their fierce competitive spirit and drive often starts to dissolve once the founders have gotten their exit and the teams run into the inevitable corporate realities that exist when teams are merged / integrated into a new culture.

Simply "offering more" does not address the reason why there aren't more Googles.

The hard truth is that technology incumbents fiercely defend their space making it very hard for new entrants to compete. Strong entrants either get acquired, and merged into the Borg, or are sidelined as the incumbents defend their turf sometimes through enhancements to the product / feature set, but often through somewhat anti-competitive actions that bar entry from new entrants.

While I would like to think the world is a meritocracy ("let the best product win"), the truth is far from that. And I think a lot of this piece from 2008 rests on half-truths and wishful thinking.

Re: Why There Aren't More Googles (2008)

#84

Post by CuriouslyC »

baxtr wrote: post #64
adamsmith wrote: post #2

> I've tried to explain this to VC firms. Instead of making one $2 million investment, make five $400k investments. Would that mean sitting on too many boards? Don't sit on their boards. Would that mean too much due diligence? Do less. If you're investing at a tenth the valuation, you only have to be a tenth as sure. This turned out to be absolutely right, and the That said with the benefit of more hindsight I think…

This seems to be in stark contrast to some of Peter Thiel’s theses. Would love to know if someone can clarify that. He argues since returns are distributed by a power law, more due diligence and fewer invests make more sense for VCs.

The truth is that regardless of how well put together a firm is, break-out success is a crap shoot. A VC strategy that maximizes potential revenue (by heavy due diligence) is almost always going to end up with lower actual revenue than a VC strategy that attempts to maximize actual revenue, by having a larger, diversified basket. If the terms of the initial funding give the VC first crack/options for later rounds, all the better.

Re: Why There Aren't More Googles (2008)

#85

Post by JohnJamesRambo »

rexreed wrote: post #83

> Tip for acquirers: when a startup turns you down, consider raising your offer, because there's a good chance the outrageous price they want will later seem a bargain. There's no evidence that this is the case. Indeed, after founders are acquired their fierce competitive spirit and drive often starts to dissolve once the founders have gotten their exit and the teams run into the inevitable corporate realities that e…

I know lots of founders will read this, please for the good of humanity stop being acquired. I know the money is so alluring, but how much is your soul worth and will that money make you happy? The future of humanity depends on tech people making tiny principled stands like this over and over. Don’t believe the lies spewing out from the acquiring company. Nothing will ever be the same again and your product will be either killed or mutated into something hideous. Read the WhatsApp and Oculus and Nest stories over and over again.

Re: Why There Aren't More Googles (2008)

#86

Post by grishka »

jonplackett wrote: post #76

Isn't it also that Google/FB/Apple just buy all the startups that could conceivably threaten them. Even the ones where the founders did hold out for a lot of money they just buy them anyway. Like WhatsApp (they got about $22 billion in the end!)

Now, I have no idea how this actually works, but everyone seems to be implying that startups don't have a say in whether they at all want to be acquired, regardless of the price. I don't understand why are there no companies that refuse any acquisition offers because they want to retain their independence.

Re: Why There Aren't More Googles (2008)

#87

Post by ClumsyPilot »

pbronez wrote: post #71
brownbat wrote: post #53

Earlier quoted context omitted.

I like the Coasean analysis. Now someone needs to build the Uber for unifying affected populations to demand rents for suffered negative externalities.

Yes. Although that’s basically just a competent, empowered, uncorrupted government. Still working on that one...

I would be happy with just competent. Would make a nice change

Re: Why There Aren't More Googles (2008)

#88

Post by agustif »

MaxBarraclough wrote: post #56
johbjo wrote: post #39

No. The reason there are few FANGS is that they are platform businesses, and the value of their services is proportional (or more?) to the size of their user bases. This means winner-takes-all. There were others, but they did not grow users as fast, so they lost. Another thing to point out is that while search and ads is Google's revenue, with chrome, gmail, android, etc they are achieving a form of lock-in. If anyon…

> they are platform businesses, and the value of their services is proportional (or more?) to the size of their user bases. I don't have much to add here, but this is known as a network effect . https://en.wikipedia.org/wiki/Network_effect

nfx.com is a great source of different thesis on well, network effects in tech. They're also a VC

Re: Why There Aren't More Googles (2008)

#89

Post by rexreed »

JohnJamesRambo wrote: post #85
rexreed wrote: post #83

> Tip for acquirers: when a startup turns you down, consider raising your offer, because there's a good chance the outrageous price they want will later seem a bargain. There's no evidence that this is the case. Indeed, after founders are acquired their fierce competitive spirit and drive often starts to dissolve once the founders have gotten their exit and the teams run into the inevitable corporate realities that e…

I know lots of founders will read this, please for the good of humanity stop being acquired. I know the money is so alluring, but how much is your soul worth and will that money make you happy? The future of humanity depends on tech people making tiny principled stands like this over and over. Don’t believe the lies spewing out from the acquiring company. Nothing will ever be the same again and your product will be e…

While I totally agree with this comment, especially from experience knowing that the reality of an acquisition is far from the rosy picture promised to everyone, the truth is that founders and especially investors are motivated by the exit.

Some founders start their companies to be flipped. Some start with the intention of going for the long-game but find the reality of competing in the market exhausting and emotionally draining. Some realize that they won't be able to capture the market share they want. Other times internal strife or conflicts with investors get in the way.

There are many motivations for acquisition and the realities of the difficulties of startups make any good offer very appealing. It's very hard to resist.

Re: Why There Aren't More Googles (2008)

#90

Post by minikites »

JohnJamesRambo wrote: post #85
rexreed wrote: post #83

> Tip for acquirers: when a startup turns you down, consider raising your offer, because there's a good chance the outrageous price they want will later seem a bargain. There's no evidence that this is the case. Indeed, after founders are acquired their fierce competitive spirit and drive often starts to dissolve once the founders have gotten their exit and the teams run into the inevitable corporate realities that e…

I know lots of founders will read this, please for the good of humanity stop being acquired. I know the money is so alluring, but how much is your soul worth and will that money make you happy? The future of humanity depends on tech people making tiny principled stands like this over and over. Don’t believe the lies spewing out from the acquiring company. Nothing will ever be the same again and your product will be e…

>I know the money is so alluring

It's the only motivation. Why do you think wealthy and high income people fight so hard against repaying the society that educated them and provided the infrastructure to allow their business to flourish?

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