Exit Strategy: Why Does Every Web 2.0 Company Have Only One?
by
on June 02, 2008,
Facebook fatigue. Have you heard the phrase? Are you suffering from it? Where once I logged into Facebook first thing every morning to check status updates and new links from tech-minded friends, I can't tell you the last time I logged in. And I no longer seem to get friend requests, although I regularly find adds on FriendFeed and LinkedIn.
Today is the first anniversary of the launch of the Facebook Platform, and it was marked with the official announcement that the development platform would be open-sourced. But much like they threw a party and no one came, the announcement (and anniversary) hasn't generated near the reaction in the blogosphere that the news that HP was ditching Yahoo's search for Microsoft's on their PCs.
Isn't this the company with the $15 billion valuation? With the CEO that everyone and their brother referred to as the next Bill Gates?
It's getting harder and harder to imagine an eventual Facebook IPO getting the touted valuation as time passes, and it may symbolize the ubiquitous Web 2.0 exit strategy: get someone to buy you.
It seems like most companies these days are being create in hopes of a big fish buying them. While the -killer title is appended to any number of established players when marketing a new company, odds are the new guy is fervently praying that the name in front of the -killer is the one who will offer them the lottery ticket buyout.
The early adopter crowd has a serious case of ADHD with a side of magpie, growing quickly bored with their former favorites and staking claim to the latest shiny object. If a company isn't bought out before the userbase moves on to the next cool thing, is there hope to continue to grow the company? We've already seen at least three business models out of Mahalo, for example, and I'm pretty sure that they trail LaLa in trying to find the one thing that will either take them to widespread adoption or at least get that limited timeframe bumped a little wider.
When is the last time we saw an IPO? And does the lack of IPOs mean that there isn't any company that will be around for the long haul as anything but a small corner of the Googleplex?
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Chris
Svetlana Gladkova
Michael Fidler 
jiri
The US government in their infinite wisdom killed IPOs with Sarbanes-Oxley. No one in their right mind considers an IPO at less than stratospheric revenue because of the reporting burden. Of course the slimebuckets that Sarbox was hashed together to “protect” against were from large corporations where the expense structure can handle the cost. The victims are the small companies–who were not a problem to begin with.
That door is closed. Perhaps you really knew that and you are asking some sort of rhetorical question that went over my head.
hmmmm.. I have a revolutionary idea - except M&A and quick IPO (with no revenues @ Bill) .. you can .. just build a company , slowly add revenues .. stronger market share, profits.. and then you might even get an IPO.. well the down part is that it might take 10, 15 years.. neah.. it’s too revolutionary.. forget it.
Revolutionary indeed. I believe the best exit strategy is no exit strategy. Do good work–the rest will come.
My company has been around for sixteen years, and I believe one of my many big mistakes was taking some of the chips off the table back in ‘99 by selling part to a private capital firm. They’ve been great partners, and remarkably patient, but it forced a set of choices that didn’t work well. If we’d had more faith in what we were building we’d have been better off (I think–that’s all just hindsight and it’s NOT 20-20).
We’re still doing great stuff though. Here’s a goofy landing page we just did for Intel’s Software Partner Program. http://www.mysoftwarefilm.com/
But all that aside, government regulation consistently creates more problems than it solves, especially for SMB’s which are the growth engine. I love the fact that we have a stable government that changes hands without violence, but it would sure be nice to find a way to rein in some of the pernicious regulation.
@Bill, yeah I agree. I’m leaving in Israel so only part of the companies needs to to comply with SoX , yet, we have our own type of SMB’s blockers. But more then regulation and taxation it’s the mindset, from the early stages as a young startup you are led to think of how quickly you’ll grab the “holy grail” and hit “The exit” rather then how to build a sustainable business that will produce good products and will make money long term. Of course this mind set effects the whole decision making process, and IMHO, the quality of products that comes out at the end.
ah.. yes.. i’m based in Israel.. but it is just the same here, even without SoX (except for those traded in the US) our gov. has its own ways to create problems
(likes that page:))