Scaring off the young'uns?

[RoseGoesToYale]

I've was looking at lists of companies that big fish like Google, Apple, Facebook, Amazon, etc. have acquired over the past decade or so. Holy cow, I had no idea just how many companies out there that I thought were independent are actually subsidiaries of these ginormous corporations. The lists are staggering.

 

E.g. I had no idea Twitch, Zappos, and Goodreads were all acquired by Amazon, or that LinkedIn was owned by Microsoft. Some ownership lines are even more convoluted: Tumblr is owned by Yahoo, which is owned by Oath Inc., which is owned by Verizon. And then there are the airlines... the US has 10 major passenger airlines, with four biggies (American Airlines, Delta, United, and Southwest) that all snapped up/merged with other biggies (though Southwest hasn't really done this).

 

If I were a young entrepreneur, I'd be really weary of entering into any market right now. Before starting a business, I'd want to be sure I had as fair a chance as any new company at becoming big and successful. Today, there seems to be three options: a) the business will be unsuccessful and fade into dust, b) the business will flounder and be rescued by a ginormous company, or c) the business will succeed but be bought out by a ginormous company. Doesn't matter if I want to march into the world of designer dog collars or color-change socks... I would be eaten by Amazon. If I came up with some new drawing program, Google would ram my door down. Most countries have competition laws or preventions against monopolies, but like with Amazon, it's not a monopoly because it hasn't cornered the market on any one product... it just sells nearly every product.

 

Do you think young people are being scared away from starting businesses due to this climate? If so, do you think it will significantly affect the economy in coming decades?

[Epitaph]

The big mergers in business won't only affect the economy, it'll disrupt everything you can probably think of. Politics, media, social trends, sciences and industry, everything. We already see what a monoploy does to some places on a smaller scale, but in the next decades if this keeps up as is, there's going to be problems.

[daveb]

Going by the company I used to work for, some (most?) of the startups that get bought up are willing participants in that (in the cases I know of the smaller companies weren't competitors - they did things like develop technology my old company was able to make use of and get out to a much wider audience/clientele). I would venture to say that some even have that in mind as a potential desirable outcome. Entrepreneurs often do what they do because they love the challenge of it or have some passion for something. I doubt they would be scared off by the prospect of being bought up, since they usually aren't scared by the prospect of just failing. Some will go on and start-up multiple times. Some will be happy to get things going and then settle into a more stable life with a larger parent company (for example, if they settle down and start a family they might prefer the stability).

 

That said, big mergers that in effect become monopolies are not really good for anyone, in my opinion. Big companies in and of themselves aren't necessarily a problem, as long as there is competition. Of course, it's natural that a company with products or services that people want will do well. In the marketplace that means other companies have to come up with competitive goods and services of their own if they are going to survive and thrive, too. The trouble comes in when companies have a stranglehold on a given good or service in a given area, and are able to basically overpower smaller competitors.

[Xayah]

The concept of capitalism is good, but once the wealth distribution gets out of hand (with major company monopolies owning most of the world's wealth) it quickly turns into corporatism, which is basically what we have now. A few people/families owning massive monopolies with tons of wealth that influence politics, media, and trends as stated above. People also often put way more trust in popular brand name products. Look how many people only buy Apple products, even though the hardware isn't superior to anything else on the market. But it's more trusted because it's familiar. Also, most corporations have mastered the art of emotional marketing and cult branding, which makes it difficult for the little companies to survive - especially when they don't know these things exist. 

On top of having to compete with huge monopolies/corporations with teams of lawyers and professional marketers, the costs of starting a business are quite overwhelming. If you create an invention, you would be well-advised to get it patented to prevent potential customers (especially big corporations) from stealing the idea and patenting it themselves. It costs $5k to purchase a patent on an invention for one year (if you hire lawyers who understand how to get the most out of your patent). It costs $10k for 5 years. You also need to incorporate your company for around $500, and usually purchase a business licence to operate in a specific city ($500). That's peanuts for a rich person, but that can be pretty devastating and risky for the average person. And that's before you've purchased the materials and staff needed to build/complete the product. 

I don't think the younger generation has thrown in the towel. They're just looking for accessible lower-risk options available to them. The internet makes it much easier to get exposure and customers. I think that's why a lot of people are gravitating toward trying to become youtube and twitter celebrities. There's not much at risk aside from your pride and ego. Which is great, but it's not encouraging innovation and technological advances. Creating apps seems to be another relatively safe bet, but there's some heavy competition there because it's accessible to all programmers. There's also Kickstarter. Ultimately, as you said, some big company will offer you a huge chunk of cash to purchase your product if it becomes popular enough. 

[Sally]

 In the US, Sinclair Broadcasting has been buying up small-market radio-TV stations to the point where they recently forced "their" station anchorpeople to all read on air the same conservative statements.  Someone made a video of all those people reading the same thing, as though they'd all happened to write it themselves.  Disgusting.  

[Guest]

didn't googIe buy YouTube off it's creators for Iike, a biIIion doIIars? That seems Iike success to me, even if they onIy controIIed their company for a year! they can now go and do anything they couId ever dream of with that money  If you come up with something that's good enough, you'II succeed some way or another! That's how I Iike to Iook at it anyway

[Skycaptain]

I agree with @FictoVore. here. If you start a small business, and a big corporation wants to buy it for serious money that's a success, and an incentive to others.

Some people may want to persevere and stay independent, others may be innovators not business people and just want to cash in, and either retire, or use the funds to try something new. 

Also to be remembered is that there's a whole industry financing startups, who may invest a few million in tens of companies, knowing that only one in one hundred may be a success, but when one is they need to cash in by selling out 

[fuzzipueo]

1 hour ago, FictoVore. said:

didn't googIe buy YouTube off it's creators for Iike, a biIIion doIIars? That seems Iike success to me, even if they onIy controIIed their company for a year! they can now go and do anything they couId ever dream of with that money  If you come up with something that's good enough, you'II succeed some way or another! That's how I Iike to Iook at it anyway

And Youtube lost a lot of its creativity as a result. The only ones who won here were the creators (by making $$$$$) and Google.

[Euna]

I'm no entrepreneur, but even as a consumer, it's concerning to see where this is going.

 

One silver lining is that culturally there is still a desire for (what we call today) "niche" products.  For example, no one particularly expects to overthrow the Microsoft and Apple empires.  However, you've got companies like System76 and Purism offering new approaches (and features) to consumer computers and which aren't being fulfilled by the big companies.  They've identified actual needs - that's the first step of a successful business.  And large companies - in part due to their size - are geared towards the masses and whatever has mass appeal.  That leaves some people out in the cold.  Small businesses should step in and market to those folks. 

 

Over time, if there is a real desire for the product, it will become less and less "niche."  Organic food is a great example - only about 10-15 years ago, organic was something you got through a co-op.  Then the grocery stores introduced the "organic aisle."  Now it's all over the store....

[gisiebob]

On 04/10/2018 at 4:20 AM, FictoVore. said:

didn't googIe buy YouTube off it's creators for Iike, a biIIion doIIars? That seems Iike success to me, even if they onIy controIIed their company for a year! they can now go and do anything they couId ever dream of with that money  If you come up with something that's good enough, you'II succeed some way or another! That's how I Iike to Iook at it anyway

sometimes, like how tesla and spacex came about. sometimes not.

[Telecaster68]

Many tech startups have selling out to a big company in their business plan from the beginning. Serial entrepreneurs want to develop new disruptive products, make a big pile of cash by selling the company and its people and IPR, then move on by using that money to do it all over again, or sometimes becoming business angels to other startups.

[Pramana]

There are two issues here. Entrepreneurs might do fine, especially if their business plan involves getting bought out by a large player once they've achieved a certain valuation. Consumers will still be left with only a few main service providers at the top. I've been hearing comparisons between big tech and Standard Oil (which was ruled an illegal monopoly in 1911). I would assume that the big tech companies are aware of the Standard Oil history and have invested sufficiently in legal departments to avoid running afoul of anti-trust laws. But I anticipate that we might see new legislation in this area.