As an Irishman living in Silicon Valley for the last 10 years, this blog is a forum for my M&A/funding observations.
Location of product teams plays a part in M&A
Many/most of the big US tech acquirers have their core product teams located in the US. Since they usually buy companies for their tech, rather than for geographical expansion or for customers there is a big hurdle if they are looking at potential M&A in Europe. No matter how great the tech is, there is a management challenge to have a product team in Europe away from the main product teams in US.
This is particularly true of companies that pride themselves on their culture, where they want everyone in one place to drink the Cool-aid. In order to open up a new location where they do not already have product people, many buyers need a team of a certain critical mass with a senior technical person of stature who will stay and be a leader.
So while you often see small teams being snapped up in the Valley, it is much less common to see an acquisition of, for example, a 25-person team in Europe. It’s not a show stopper, but it is often a significant consideration.
However the good news is that we do see increasingly that buyers are thinking that this problem is worth overcoming, because generally the talent market in Silicon Valley is insanely competitive and expensive, so if they can get the right European team in the right location, that can be very attractive.
This week in summary…
Brexit was everywhere on my European feed, but not such a big part of my Silicon Valley feed. When I talked to executives here the main view was that (a) they were shocked and disappointed, (b) really surprised the UK had no plan in place for an exit and (c) it was too early to say what the impact will be for them, although clearly the fact that UK companies are suddenly cheaper is attractive for buyers. For US companies expanding into Europe, we may see other European countries benefiting as per this Index Ventures piece: “Today, we recommend that companies also consider Amsterdam, Berlin and Dublin, in addition to London, for their European bases."
So now Silicon Valley is not just a place to come to raise big money and “go big or go home” it is also a tourist attraction as the local Mercury News announced "What you're seeing are people on a pilgrimage," "We just came from Oracle, then we go to HP, Google; we're going to do Tesla, Intel, eBay and Yahoo. And Apple, I forgot Apple." I expect that when the new Apple HQ “the space ship” is finished, it will be the biggest draw.
2 posts highlighting the cost challenges of Silicon Valley
If you're itching to start a company out of a garage, then you shouldn't pick up and move to Silicon Valley, according to Google cofounder Sergey Brin. Silicon Valley “can be very expensive” but "is good for scaling that opportunity," he said. "It's good for providing more capital and allowing more risk." In a similar view “As Costs Soar in Silicon Valley, San Diego Looks for Startup Gains”. As we’ve said before Silicon Valley is insanely expensive and competitive for talent, and this is a competitive advantage for European companies.
Message from LinkedIn
I got a nice email from LinkedIn this week “We've noticed that your first-degree network is getting close to LinkedIn's maximum limit of 30,000 connections. This limit was set to keep LinkedIn working smoothly for all our members. Exceedingly large networks impact site reliability and member experience”. The good news is that “exceedingly large networks” provide the access for making impactful connections for our clients!