Silicon Valley after a Microsoft/Yahoo merger: a contrarian view
Marc Andreessen pictures life after a Microsoft/Yahoo merger.
This post is not about the potential Microsoft/Yahoo merger.
Instead, let's just assume for the moment that Microsoft succeeds in its bid for Yahoo.
What would a Microsoft/Yahoo merger mean for startups in Silicon Valley?
Says Bill Burnham, for example: "By swallowing up Yahoo, Microsoft will be removing one of the biggest and most active acquirors of start-ups in Silicon Valley... [making] M&A less competitive in general and [reducing] the # of potential exits... [which is] bad news for Internet [startups] and their VC backers anyway you look at it."
I respectfully disagree; I think that a Microsoft/Yahoo merger would have practically no impact on any high-quality Silicon Valley startup.
And here's why:
First, Yahoo has simply not been all that active in buying Silicon Valley Internet startups -- nor, for that matter, has Microsoft and Google -- contrary to popular perception.
Since Terry Semel's arrival as CEO, and continuing since his departure, Yahoo has become quite conservative when it comes to buying startups.
Yahoo only bought a relative handful of companies in 2007. The big ones were Right Media and Blue Lithium in the advertising space -- where Yahoo was highly motivated to make progress -- and Zimbra in the email space. The small number of other acquisitions (three in the US, I believe -- Mybloglog, Rivals, and Buzztracker) were tiny enough that Yahoo didn't even have to disclose the purchase prices.
Similarly, Microsoft bought surprisingly few companies in 2007. aQuantive was the big dog, and Microsoft was similarly motivated by a high degree of urgency to get on the advertising bus. Apart from that, you're looking at a very small number of very small deals, such as Screentronic and Jellyfish -- fine companies, I am sure, but tiny deals.
And even Google, which did more deals than Microsoft and Yahoo combined in 2007, only did a coule of sizeable ones -- Doubleclick (again that advertising thing), and Postini in email. And, Feedburner got a fine exit from Google given that it hadn't raised much equity funding. But most of the other companies Google bought largely to acquire engineers, and perhaps nascent products that hadn't yet shipped -- not doubles or triples or even necessarily singles from the perspective of venture-funded Valley startups.
Microsoft, Yahoo, and Google are only buying a relatively small number of smaller companies at all today -- so given that, taking Yahoo, or even Microsoft for that matter, out of the M&A races isn't going to reduce the number of deals going down each year by very much.
Read more at Marc Andreessen's blog.