I was thinking the other day about the impact of today's market on the public and private markets more longer term. I shared this with my partners, but here are some of my thoughts:
This weaker market is creating a wider moat for the strong public companies. Actually, let me clarify - the ones that operate in capital intensive industries. Why? Well, let's use Cisco since I just bought some shares a few days ago using the logic I am using here. Those guys have over $30 billion in cash. But their private competitors have a harder time accessing capital and certainly can't go public. Going public gives their competitor sthe ability to press the pedal down on development, sales, marketing, etc and the currency to make acquisitions themselves! But now that same private company is dependent on the private markets to carry it through to compete against .... Cisco? Ouch.
As I mentioned in a previous post, I see a lot of larger companies focusing on their core products and cancelling new projects. This creates a GREAT opening for the smaller startup to attack. But then the costs factor in and that can significantly hold back the challenger. The advantage for the smaller startup in this market really only exists if the product isn't so capital intensive. The ability for a capital intensive business to effectively compete today is significantly limited.
Good for Cisco, bad for startups.
There is always a market for a better solution. Even Google was a startup 10 years ago.
Big public companies are often blinded by their own success. Some re-invent them selfs like Apple and Nintendo. But most don't. There's the little guy's chance to shine.
Posted by: Daniel The Scheduling Wizard | November 06, 2009 at 10:30 AM
there has never been a better time to compete with an industry giant.
companies that are doing *billions* in revenue are hurting. im still trying to wrap my head around that.
Posted by: jeremy | April 15, 2009 at 06:08 PM