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The Trend of Micro-Acquisitions

[source: TechCrunch]
This article by Amit Paka for TechCrunch talks about large companies acquiring small teams (like, really small teams), sometimes even before the small team raises Series B financing, then use their existing resources to launch products to their existing users. The major benefits of this are:

  1. Product – “This team of subject-matter experts with execution momentum is better than an intracompany bootstrap. It makes more business sense to instead bring the team in-house and supplement it with further resources.”
  2. Talent – “Micro teams can further amplify this talent proficiency exponentially. Since they’re already ramped up in the domain while working on their product, you avoid the learning curve that is typical for new hires. This productivity multiplier commands a premium. Now imagine this team’s throughput with all the resources an acquirer has to offer.”
  3. Cost – “Micro teams are generally pre-Series B with an average funding of under $10 million, with seed-stage ones running a tab of just a few million in raised capital. Their small size simplifies product and team integration. You can even rationalize booster acquisitions from a corporate strategy standpoint – it’s a bargain if you can keep it from falling into the hands of a competitor or even becoming one in the future.”
  4. Attitude – “The first few people in a startup are the quintessential risk takers who inherently think differently; no goal is unattainable, no obstacle is insurmountable. That mindset is precisely what jaded teams need at regular intervals.”

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