Why some startups get killed after acquisition
Here's a very interesting explanation on why some startups that are acquired by bigger companies tend to disappear:
When a new startup comes into an established company, the first wall it typically hits is CorpDev, or corporate development: the group within a business that manages change. CorpDev is usually charged with planning corporate strategy—where a business will grow or shrink, the markets it will enter or exit, and what kind of contracts and deals it may strike with other companies. It often oversees acquisitions. It plans them. Approves them. And then it sets the terms.When a big company gobbles up a smaller one, often only a fraction of the money is handed over up front. The rest comes later, based on the acquisition hitting a series of deliverables down the road. It's similar to how incentives are built into the contracts of professional athletes, except with engineering benchmarks instead of home runs.Corpdev sets these milestones. They reflect the reason for the acquisition, and how the company—in Flickr's case, Yahoo—can leverage them. They're baked into the deal, and an acquisition integration team begins working immediately to make sure they are met. Typically, they're very engineering-based, designed to integrate the smaller company's product into the enormous corporate machine.And because payment schedules are based on achieving those CorpDev terms, it means both companies have a vested (pun intended) interest in putting those milestones ahead of new features. They are a sledgehammer applied with great force to the feet of nimble development. Worse, they often completely ignore what made the smaller target valuable in the first place.
via gizmodo.com
