Today, some rather large «startups» like Uber, Airbnb, and even Dropbox have gone through extensive and complicated mergers and acquisitions to expand their businesses and provide their business models with more strength and sustainability.

1. Is merging two
early-stage startups
something
advisable?
By Suzzanne UhlandImage courtesy of freestocks.org at Pexels.com

2. The other day Suzzanne Uhland wrote an
interesting and compelling post about three
different paths that could lead startups and
entrepreneurs to consider a merger given certain
circumstances. Today, some rather large «startups»
like Uber, Airbnb and even Dropbox have gone
through extensive and complicated mergers and
acquisitions to expand their businesses and provide
their business models with more strength and
sustainability. Of course, in light of the definition of
the term startups, these businesses are not
particularly startups per se in the traditional and
classic sense of how most individuals conceive its
connotation.

3. Since not so long ago, Microsoft has been in
what seems to be a never ending acquisition
spree. The company is acquiring all sorts of
businesses and talent to successfully integrate
mobile first into their software. It is definitely much
easier for them to look out for different
companies, startups, and businesses and buy
them than spend a lot of money on researching
and developing it in house. The result, however, is
yet to be seen.

4. Nonetheless, the question still lingers here: is it advisable
for startups and entrepreneurs to acquire a similar
company (another startup)? Groupon, for instance,
went through this process. They spent millions of dollars
acquiring and buying up other companies that decided
to try their luck in the same industry and business just
before they went public. Of course, this was no easy
task: they had to spend millions to buy all these
companies, especially the one owned by the Samwer
Brothers. The Samwer Brothers are two Europeans that
just copy and then implement successful startup ideas to
subsequently launch them. In this case, Groupon bought
it. Nevertheless, many times some companies act like
smart additions instead of competitors.

5. It is not rare and uncanny to see competitors merge. In
fact, it happens all the time: they merge and end up
doing successful businesses—combining strengths is the
perfect way to create a more meaningful business
model. Maybe a company has a very strong presence
in certain areas of the country while the other may be
renowned in other areas. What is important here? Well,
prior to rushing into merging procedures, it is advisable
to figure out how to split the equity, how to integrate
both teams and reconstitute business status. Merging is
rather an extremely sticky, challenging yet beneficial
process, especially for startups. Actually, when it comes
to mergers, big companies pose the least risk and
toughness.

6. Generally speaking, it is not a wise idea for startup
companies in different funding ranges to merge if they
are direct competitors. It tends to be somewhat disruptive
for the business and hard to handle, and failure becomes
rather high—the integration process will lead companies
astray. During the early stages, it is quite possible to
combine competitors if the entrepreneurs manage to
work out the issues around the process. These companies
find themselves in such an easy-to-handle flux that the
merging process will not probably matter; however, once
the startup has managed to find a sustainable product
market and is going up the scaling chart, they rather
focus 100% on continuing the escalation while setting
aside all sorts of distractions.

7. Identical companies, also known as copycat startups,
are one thing. Startups engaged competing within the
same market for the same share are another. In the
case of Uber, the company has been acquiring other
companies that were initially found beyond the
boundaries of its market: now they provide a plethora
of different services, ranging from rides to couriers who
are capable of delivering food. Meanwhile, the
company also focused on developing its background.
Uber has acquired all sorts of technology companies in
hopes of strengthening its routing technology and
payment integration. And it does not stop there.
Deliveries went from simple couriers to a myriad of
household and domestic products like groceries.

8. Through Uber, users can now book a hotel, transport
and acquire their favorite food without exiting the app.
It is quite remarkable how the company has managed
to seamlessly integrate the additional services into a
single app.
Image courtesy of
Tookapic at
Pexels.com

9. As mentioned above, when it comes to mergers and
acquisitions, startups, and pretty much every company in
general, has to ask and then answer a simple question: is
it cheaper for startups to buy the competitor or go
through an exhausting and consuming merging process
than compete with them and supply necessities on their
own? Another question that deserves attention would be:
is this company (competitor) the perfect way to
strengthen the startup’s business in order to become a
key player in a specific market? Pondering these
questions is crucial prior to making up the mind regarding
acquiring competitors or merging with other companies.
Doing otherwise, however, could bring disastrous
consequences and jettison all the efforts made.