And for most founders, taking that offer is a rational move, even when the company is quite mature. For a non-diversified human, a 100% chance of $50m is worth enormously more than a 10% chance of $500m.
What fascinates me is the strategy, pioneered by Facebook, of pushing that logic as far as it will go, and spending hitherto-inconceivable amounts of money to acquire any social networking or communication product that could possibly compete with it, long after they achieve product/market fit but before they're so big as to be a sure thing. I remember when $1bn for Instagram was a lot...
If you don't sell, then the big companies don't get bigger. Unfortunately in that case if you do get big enough despite that, they will just target you and take a chunk of your market (Instagram Stories vs Snapchat) so that you can't dominate.
Look, it's brilliant and exactly what every firm should do. The question is really, if it's a net positive to have 5 companies run everything* in consumer technology. I don't know but history seems to not like that.
ML in its current form - efficiency optimization across a ton of different vertical industries - is also a reaction to decreasing productivity. If you can't grow your revenues, you need to shrink your costs, and ML/analytics do that well.
Once we see a new technology or infrastructure driver that jumpstarts productivity growth (distributed electricity, refrigeration, plumbing/running water, public roads, combustion engines, more recently the internet and mobile phones) startups will be able to once again flourish and will be able to return to the public markets with their own company/brand rather than look for acquihire exits as many do in the current climate.
Something that makes sense to me would be some form of basic human sleep/energy acquisition optimization. We spend 1/3 of our time asleep - is there a way to use VR/AR to enhance productivity during this time, or to avoid it altogether without killing us? It seems unnatural, but many facets of our current lifestyle would have seemed unnatural to someone 50, 100, 200 years ago.
It isn't that you can't dominate, but the thing is, you need to have a product that others can't copy.
I think he says what he means here; these largest companies "have powerful advantages that are still not fully understood by most founders and investors." And it's compounding. Given that, I think being a bit more cautiously considerate and unpresumptuous about these issues as well as on any views or insights one might have makes a lot of sense.
Basically this is a shitshow still in progress. There are startups that in hindsight had a too early, under-valued liquidity event. And there are many many startups that turned down acquisition offers never to see that many zeros offered again (I think Pebble just sold under these conditions). Whoops.
Also don't forget how a startup's risk profile and internal planning changes dramatically when/if an acquisition offer is turned down. Too early is not the problem here. If Amazon or FB wants to buy you and you say no, well good luck. Competitor risk is a real business cost and it can weigh you down no matter how fast you may be growing. If anything I see uneasiness more than complaint as the playing field has warped where hills are now mountains only giants can cross. The rulebook has changed too, startups aren't even playing the same game as large tech companies anymore. As the letter suggests, startups can play at the fringes and margins, then maybe try to sneak into grown-up business land but this is increasingly, laughably unlikely if you model it. What is more likely is startups miscalculating how big and lucrative their idea is and they are screwed, or they miscalculated how fast and easy Google can crush their prospects once Lar and Serge notice what you're up to. The options are lose now or lose later, with only the rarest of startups as exceptions unless someone or something steps to address the underlying structural realities.