Don Dodge has a post about how innovators fail and their followers succeed. He presents an impressive list to make this point:
- AltaVista -> Google * Napster -> iTunes * VisiCalc -> Lotus 123 -> Excel * Word Perfect -> Word * Netscape -> Internet Explorer * Apple Newton -> Palm Pilot -> Blackberry * IBM PC -> Compaq -> Dell * Double Click -> Google Ad Sense * Ofoto -> Flickr * Compuserve -> AOL -> @Home -> Comcast & Verizon
These companies didn’t fail because their successors had better technology, but because management didn’t understand how to take the companies to the next level. DEC didn’t know what to do with AltaVista and VisiCalc wasn’t ported to DOS.
This got me thinking how new companies are set up to be flipped. During the bubble, everyone wanted to go the IPO route and now they just want to be bought out. Sure, the potential gain of being flipped is smaller compared to an IPO, but are new start-ups smarter? They’ve seen how most of the start-ups from the boom aren’t around anymore. Do they understand that developers who have a technical background don’t necessarily make good managers?
Without VCs funding every new fangled start-up nowadays, it takes more time and money to reach the stage where an IPO would be appropriate. Its a major transition from a start-up to a growth company. So are the people who are making the Web 2.0 apps (mostly a few technical guys) deciding its simply easier to flip the company? Then this time around, we won’t see another Google or Yahoo! emerge?