Techcrunch posted an interesting article this morning on Facebook's acquisition of Parakey. Apparently, everything wasn't hunky-dory with that deal; some of the Parakey investors felt betrayed when the company was acquired by Facebook because the management team received a very generous compensation offer while they received only a 2x ROI. Consequently, these investors--one of which is Sequoia--are wary of making investments in companies that are targeting their apps exclusively on the Facebook platform. Why? They are worried that Facebook will snap up the most valuable of these companies like they did Parakey, leaving the investors out out in the cold.
I think there is a lesson to be learned here for startups. When you build an application for a proprietary platform, you greatly narrow the number of possible acquirers down the road. For example, if you build a successful force.com application, there is only one company in the world, Saleforce.com, that would ever consider acquiring you. And Salesforce.com will only acquire you if they believe that they cannot build your application for less than it takes to buy you. So your strategy should always include a multi-platform deployment approach (and, according to the Techcrunch article, you should be prepared to share that vision with potential investors).
The good news for social network apps is that it appears (again, according to Techcrunch) that Google is hatching a new plan to "out-open" Facebook. Google's open platform will be a natural secondary target for social apps, and could, over time, become the dominant player.
As we say here at DevHive...
...open is better than closed...
1 comment:
Mike,
Very insightful. I appreciate your thoughts.
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