Why "Big" companies acquire instead of just copying startups?


1

Most of us know the quote:

“Good artists copy, Great artists steal” - Steve Jobs
Copying and in extreme cases stealing is no news as a recipe for a successful businesses. Whether the term should be copy or innovation is not the issue here.

My question is why do sites such as Facebook, Google and Twitter who have quite a bunch of engineers at their disposal and we can assume they are very smart, bother to go through the process of acquiring rather than just "copying" or creating their own version of a application?

Most of this applications are made by a couple of programmers in a garage/basement and the application might not have a strong brand impact (yet), who of course are smart. When the "big" sites have hundred, if not thousands of programmers at their disposal and a strong brand and marketing impact.

Do the business mind on this companies with outstanding minds really don't mind offering millions/billions?

Note: I am aware that not all applications are acquired and most cases especially small features are plainly just copied.

Competition Small Business

asked Aug 9 '12 at 05:31
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Shed Meyers
6 points

2 Answers


2

Because the physical act of coding is easier that discovering & validating a scalable business opportunity.

Once the idea is hatched, research / proving / iterating around the concept and gaining traction is hard. Crossing the chasm and evolving to the point where you have a repeatable model is equally difficult - and once achieved, then the problem moves to scaling (funding and technology).

Acquiring a company with a scaling problem is easier to fix than vetting business opportunities. Larger companies (with resources and capital) can leverage their advantage and address scaling issues. Larger companies are at the same level as small ones when it comes to discovering new opportunities. Many say that large companies are at a disadvantage, since corporate culture, politics, etc. blind them of opportunities.

answered Aug 9 '12 at 06:23
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Jim Galley
9,952 points

2

Because when you acquire a successful product, you also acquire the user base. If you look at the purchases by Google and facebook., most were to complement their business. For example, Facebook and instagram, can capture the portion of the market that doesn't use Facebook, but does use instagram.

Additionally, it's to acquire talent, Google did that with (I forgot the name) and made the engineers sign like a 5 or 10 year contract. The actual startup they bought got absorbed into one of their services, but it was one of those things that really added so little value, that alone commercially the purchase made no sense.

Also there is a patent route, a good patent can be worth millions, and not unlikely held by a startup.

answered Aug 9 '12 at 08:52
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User60812
820 points

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Competition Small Business