Topic: Scale
Tech sector rally has been great — but only if you’re big – Financial Times (Apr 7, 2017)
There’s some good analysis here from the FT around a couple of different metrics relating to the performance of larger and smaller companies in the US tech industry. Specifically, the FT suggests larger companies’ shares have performed better, and that they vastly outspend smaller companies on R&D, something that makes it extremely tough for smaller companies to compete on a level playing field. This absolutely rings true: over the last few years, not only scale but also broad scope have become extremely important as competitive differentiators as companies increasingly build not just individual products and services but interconnected ecosystems. Those companies also regularly acquire smaller companies that develop interesting new technology, using M&A as another form of R&D on top of the billions they already spend organically. All of that makes it extremely difficult for smaller companies not only to compete but to grow to any decent size. Snap is one of the few big consumer tech companies to get large enough to reach IPO stage in recent years, and only because it has explicitly rebuffed acquisition offers along the way. Even then, it’s still a tiny fraction of the size of the big players in terms of revenue or user base. Companies that make it this far have always been the exceptions, but that’s only going to become more extreme going forward.
via Financial Times