“I would suspect that (Skype) could have achieved more if it had been an independent company” said Danny Rimer, a partner at Index Ventures” in the Financial Times 29th August (Skype’s first decade reflects a trail of missed opportunity).
We asked six leading entrepreneurs how critical was independence to success?
“In order to introduce a new service which makes an impact in a global market, you have to think in a different space. Once you have achieved your own USP, it is imperative that you regularly update it in order to stay well ahead of the curve, and indeed the competition. Although it is crucial to respect all of the relevant feedback which financial controllers such as stockholders advise; ultimately, without your own voice you can’t take your vision to the finish line.”
CEO of sooqini.com
“Independence per se isn’t really the issue, what is crucial is the right environment for what you’re trying to do. Most startups, like Sooqini, aim to be disruptive. In our case it’s changing the way people get stuff done, but doing something that radical doesn’t work well as an offshoot of someone else. If you’re looking to push out the latest and greatest of Brand X, then having the infrastructure, support and resources of the mother ship could make all the difference to being successful”.
CEO Snap Fashion
“If you do eventually become part of a larger organization I believe that the key to success is making sure that you still have the flexibility and the influence to drive your product in the way that the founder and the core team believe it should go, and then leverage the power of the larger organisation to help it succeed. I think that a great example of this is Instagram: it’s maintained its independence whilst being part of the Facebook organization, allowing themselves to accelerate but still maintain their all important company identity.”
“Independence is critical to success when a company either has all the resources needed or knows how to acquire them in order to achieve its goal. These resources include the right human capital and financial capital. In these circumstances, independence gives the drive, the ambition and the freedom to be nimble and achieve the greatest visions. However, there are circumstances when the opposite is true. Times when companies and people are subject to information inefficiency, when they cannot access the necessary capital, or when the macro economic environment is stacked against smaller players, finding an ally who will provide the missing resources is the only way to make their vision a success.”
“It’s interesting to see Danny’s comment on Skype’s lost opportunity. Obviously, at the time of the sale (to eBay and then Microsoft), the boards on both sides of the deal thought that the biggest opportunity lay in the partnership. However, many acquisitions just don’t work out and fail to deliver the 1+1=3 promised at the time.
Some deals work out really well for both sides. We sold Apertio to Nokia Siemens Networks for $240 million, a high price which satisfied us at the time given that we had only been investors for a couple of years. NSN, in turn, managed to sell 4x more Apertio business in the first year following the deal through their sales force. This would have been hard to replicate with the company remaining independent, so it was a great deal for both sides. However, I suspect this is quite rare.
There is no doubt that the original sale of Skype to eBay was a great exit for the shareholders. You can imagine that they had the opportunity to remain independent (maybe a private equity deal, or a public listing) but decided to go down the sale route. It’s clear, though, that the acquirer probably failed to get the best out it.
One of the most exciting aspects of working with technology companies is that the small guy can often out-innovate and out-pace the incumbent. This is why the tech industry supports M&A exits so well – the buyers like to acquire the innovation that they cannot replicate in-house. However, delivering on the promise is a tough business, for both sides.
It would be great to see more independent UK businesses out there of scale – $billion value companies – but this will be largely dependent on strong public markets to support these companies and allow them to thrive. Initiatives such as the government / TechCity Future Fifty programme absolutely deserve our support.”
“From the point of view of an early stage entrepreneur, I think that having your own views of the market and strategy is absolutely crucial.
It is quite common to be influenced by what the big players in the market are looking to invest or buy. That is logical, a potential millionaire exit is a great temptation for every entrepreneur, and in many times it affects your strategic decisions in a wrong way.
This is why you have to be brave enough to believe in your thoughts and move forward to what you think is the right path for success.”
Thank you to Shahar, Raj, Jenny, Avid, Ben and Juan.
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