The next big thing is being rolled out by the thousands on almost a daily basis. To name them in the aggregate, we’re calling them tech-driven startups. They sprout up overnight, fueled by billions of dollars thrown at their models by crazed, casino-addicted investors. These risk-takers are willing to lose millions on nine out of ten they’re funding, hoping that one will be the next Facebook, Amazon, Uber, Airbnb and others who quickly have become unicorns and continually scale upward. However, the irony is that these accelerating speedboats-turned-megaships are still not showing profits. Jeff Bezos was the original posterchild of not making any money. He proclaimed to the world, and convinced them, that all of the revenues would be invested back in the business for growth. Accordingly, the financial world gave him a pass for a quarter century because he did indeed deliver incredible growth at warp speed.
So, the thousands of newbies who are convincing enough to the investors that they are investing in growth have created round after round of funding like a merry-go-round. Most of their money goes poof … and disappears. But the beat goes on. I have suggested that a big bubble was forming in Silicon Valley. Regardless, while the music is playing, we continue to dance.
Fleeing Entrepreneurial Destruction, and Finding a Business Partner
Most innovative entrepreneurs will admit that at some point in scaling up they need to partner with a left-brain business manager. And within the tech-driven space, among those who are seeing a path to success and profitable growth, more of them are seeking to be acquired by large, well-established, mainly legacy businesses. The good news is that the legacy world needs unique tech-driven models as well as the innovative skills of their founders, to appeal to the emerging young consumer cohort. And it is easier and less costly and time-consuming to buy than build.
According to a PWC report, consumer and retail industries have made more acquisitions of tech companies, accounting for 32 percent of cross-sector deals. And the number of deals larger than $5 billion so far this year is on track to double last year’s total.
Some highlighted acquisitions which are by no means all-inclusive: Walmart acquires Jet.com and Marc Lore’s e-commerce and technology savvy and, digital-native brands Bonobos, Modcloth and Moosejaw. Nordstrom acquires BevyUp and MessageYes. Target acquires Shipt and McDonald’s acquired Dynamic Yield. It’s important to emphasize that these acquisitions have a two-fold objective: a synergistic business model and tech-savvy talent.
As the legacy sectors accelerate their pursuit of startup acquisitions, there is a savvy firm that identifies startups looking to be acquired. The Lead’s business model is built around credibly aggregating the top 100 startups with the greatest potential for successful scaling and eventual profitability.
We call The Lead the tech hunters because they are a central source of potential acquisitions for the legacy industry. They research and identify these startups through a network of venture capitalists, private equity investors, retail leaders, accelerators and a broad ecosystem of other sources. The Lead has collected a portfolio of nearly 1,000 companies for acquisition.
Venture capital funded startups have the will, the means and the playbook to create disruptive products and services. Startups most often solve problems that big companies are too big to see. Since startups start with the consumer first and then solve the pain points and/or the consumers’ expectations, their synergy with the legacy industry acquirer is almost immediate.
The companies are evaluated for their ability to impact the industry. To do so, the companies must have a great product as well as superior business fundamentals. Essentially, The Lead looks at these companies as an investor would: innovation, total addressable market, media buzz, investor value creation, teams and competition.
Want to find out what’s on the cutting edge? You can meet these companies at The Lead Innovation Summit, July 9-10 in New York. The Summit zeroes in on the sweet spot in the fashion, retail & technology markets where innovation is shifting behavior and creating new business opportunities. The Lead and The Robin Report have joined forces to extend a special discount of 15% off our already discounted pre-registration rate. To reserve your pass, click HERE and use the code TRRTLIS15.
And with a degree of humility, you will get to watch me, live on stage, doing a fireside chat with Vince CEO, Brendan Hoffman and how he is transforming his business for success in the 21st century! Please join us for a great two days of networking and learning.