Startup Assets Which May Get You Required

If you're an entrepreneur or perspective founder, and getting acquired is your dream, here are five assets which -- if you already have them, or are nurturing them-- could get you acquired.

1. A superior team

With the boom in startups, the technology industry has started to experience a serious shortage of talent. What we now see as the rising trend is companies "acqui-hiring" startups. That happens when a company, typically an early-stage startup that failed to gain significant traction, is acquired primarily for its talent. According to John Sullivan, a professor at San Francisco State University: "The normal recruiting marketplace is fighting over the most skilled workers, so there is other no easy channel left to recruit talent."

Google, Facebook, Apple, Yahoo and others have been silently acqui-hiring startups for the last seven years. Tim Cook has even publicly stated that this has been Apple’s strategy - “to bring in companies that not only contribute a product but a superior team to add value.'

2. Disruptive innovation

The theory of disruptive innovation was first explained by Clayton Christensen, of Harvard Business School, in his book The Innovator’s Dilemma. Christensen used the term to describe innovations that create new markets by discovering new categories of customers.

When new opportunities arise, big companies face what Christensen calls the innovator's dilemma. That's a choice between holding on to a profitable, existing market and investing in new, emerging markets with the potential to become lucrative.

This decision is incredibly important for the future of a company. For example, when Kodak ignored digital cameras, that missed opportunity led it into bankruptcy. Likewise, the launch of the iPhone has made the likes of Nokia, Motorola, Sony Ericsson pretty much obsolete.

Big companies are slow to react, because the bureaucracy that grows with size finds that chasing every opportunity is a huge risk. Thus, the way to solve the "Innovator's dilemma" is to let startups chase opportunties, and then, once they prove valid, acquire the leading startup. Examples include Instagram, Periscope and Vine.

3. Market share

One of the main goals of a business entity is to grow. Growth can be vertical: that is, selling more to your existing market and expanding your share of that market, or expanding horizontally by entering new markets. Typically, companies achieve both vertical and horizontal growth in two ways: organically, and through mergers and acquisitions.

A great example of vertical growth through acquisitions is the recent attempt by Facebook to acquire Snapchat for $6 billion. Facebook's user-base is aging, and it's no longer as popular among teens. On the other hand, teens are Snapchat's strongest user demographic. So, for Facebook, this acquisition would have been a good way to grow its existing user base.

An example of horizontal growth through acquisitions is Groupon buying out its clones around the world that are entering the market. Another example: FoodPanda, a food delivery service and one of the most active acquirers, buying out other food delivery startups to build its own market in Asia.

4. Complementary product

Sometimes a startup succeeds in solving the problem of an existing startup. For example, when Twitter became popular, some startups built complementary products, some of which ended up being acquired -- e.g., Twitpic. Another example is Google buying out various analytics companies to improve the targeting of its advertising services.

5. Intellectual property

The last and probably the least frequent reason a startup gets acquired is its patent portfolio. The US patent system is broken and there are a number of patent trolls trying to capitalize on that. Also, big companies use their intellectual property (IP) portfolios as weapons against each other. So, in many cases, a company with an IP property relevant to an acquirer gets acquired just to prevent others from getting their hands on its rich resource.

(article written by Josiah Humphrey)