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Questions about successful company's lifecycle

Saurabh Pillai
Ranch Hand

Joined: Sep 12, 2008
Posts: 509
1. Why a successful company would sold out to another company? For example, YouTube sold to Google. What could be YouTube's goal and motivation? YouTube was doing good without Google.

2. Why a successful company would go public? For example, Google was doing great(citation needed) when it was privately owned,why to go public? I know one obvious reason that to speedup the company growth by getting public money but is this the lone motivation?
Henry Wong
author
Sheriff

Joined: Sep 28, 2004
Posts: 18896
    
  40

Saurabh Pillai wrote:
2. Why a successful company would go public? For example, Google was doing great(citation needed) when it was privately owned,why to go public? I know one obvious reason that to speedup the company growth by getting public money but is this the lone motivation?


Well, it was "privately" owned by venture capitalists, and other entities, who invested to make money. If it didn't go public then how can these entities reap the profits? All investments need an exit strategy -- putting money into something that you can't take out isn't really liked by investors.

Henry


Books: Java Threads, 3rd Edition, Jini in a Nutshell, and Java Gems (contributor)
Henry Wong
author
Sheriff

Joined: Sep 28, 2004
Posts: 18896
    
  40

Saurabh Pillai wrote:1. Why a successful company would sold out to another company? For example, YouTube sold to Google. What could be YouTube's goal and motivation? YouTube was doing good without Google.


To an investor, there really isn't much difference between going public or selling the company.... actually, there is a difference -- they chose the better option. If a company like Google comes along and offers something much more than they are likely to get by going public, why not?

Henry
Maneesh Godbole
Saloon Keeper

Joined: Jul 26, 2007
Posts: 10451
    
    8

1) Money, money, money.
2) Money, money, money.


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Henry Wong
author
Sheriff

Joined: Sep 28, 2004
Posts: 18896
    
  40

Maneesh Godbole wrote:1) Money, money, money.
2) Money, money, money.


Other reasons....

3) Employees are investors too. Many times, startups get the best people for very little salary. The company needs a way keep these people -- as if these people realize that they ware working ridiculously long hours for very low pay, they will leave if there is no end in sight.

Ok. So point 3 is also "money, money, money" ....


4) A startup company needs to be a big company in order to play with the "big boys". Big companies buy from companies that are stable, can support the product at an international level, have a large integrated product line, etc. For a startup, this is a way to quickly get to that point.


Henry
Saurabh Pillai
Ranch Hand

Joined: Sep 12, 2008
Posts: 509
I was completely unaware about any possible involvement of "investors" into a company. So this has brought end to many arguments that I had. Does every company need investment? I mean, is it really hard for a company to be successful on its own?

A startup company needs to be a big company in order to play with the "big boys". Big companies buy from companies that are stable, can support the product at an international level, have a large integrated product line, etc. For a startup, this is a way to quickly get to that point.

Once the company is sold to another company, doesn't it lose its own "identity" (thinking emotionally :-) ). You put efforts to start a company and now people say Google (for example) does amazing things! No, people, it's me, my company. Damn!
Tim Moores
Rancher

Joined: Sep 21, 2011
Posts: 2408
Saurabh Pillai wrote:YouTube was doing good without Google.

No, they were losing money, and they continued to do so for years after they were owned by Google. All that disk space and network bandwidth they need costs a lot of money.
Campbell Ritchie
Sheriff

Joined: Oct 13, 2005
Posts: 39415
    
  28
All companies need investment, to obtain stock equipment and premises, and to pay salaries until they are in profit. The investors can either buy shares in the company, or lend money. In the first case, they will want a dividend, and in the second case they will demand interest. In the case of shareholders, they are entitled to reports on how the company is doing, and to appoint the directors. This applies even to very small companies where the directors may be the only shareholders, and the directors are risking their own property setting up the company.
Eventually the original founders of the company will wish to do something different, or grow too old to continue running the company. Only a very small company can be wound up when the founders retire or die.
 
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