Marc Andreesen, successful entrepreneur (Mosaic, Netscape, Loudcloud) and investor (Digg, Plazes, Ning) provides a nice analysis of the potential effects of a Microsoft-Yahoo acquisition to the likelihood of smaller startups being acquired. His conclusion is that there will be no effect :
The Microsoft/Yahoo deal, if it happens, means very little for the entrepreneurial climate in Silicon Valley, or the opportunities available to you and your startup.
His reasoning (to summarize) is the following:
- Yahoo and Microsoft weren’t buying that many companies anyway.
- There is a broad spectrum of companies making acquisitions.
- Traditional media companies will make more acquisitions in the next two years.
- Entirely new companies can emerge quickly and make acquisitions.
- Building a startup with the goal of being acquired is a stupid idea anyways.
- The practicalities and logistics of a merger would prevent Yahoo and Microsoft from aggressively developing new products and services, improving opportunities for startups.
All in all, he generally paints an optimistic picture for the consumer internet space.
I’m pretty confident guessing that the level of concern and even panic among many traditional companies — particularly media companies — is only going to escalate from here, as traditional non-Internet businesses in various sectors deteriorate and consumers continue moving en masse to the Internet.
And from there, it’s not hard to guess that Internet M&A is likely to heat up considerably over the next several years, compared to the last several years, across a very interesting and surprisingly diverse cross-section of buyers.
While many people are talking about a web 2.0 bubble, I tend to feel that the general trends look very good for consumer internet. By looking simply at the scale of the rise in online spending, and broadband penetration, I am confident that there will continue to be many opportunities for startups to be successful. The internet is here to stay and there are still miles of room for innovation and improvement.
By the way, here’s another interesting post discussing the Microsoft Yahoo Merger suggesting an alternative to a full fledged acquisition…