Brad Feld

Brad Feld: Don’t get too excited about all those “new” acquisitions by non-tech companies

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Before renowned venture capitalist Brad Feld embarked on a digital sabbath, he stopped by a San Francisco event hosted by this editor last week, where he talked with fellow investor Semil Shah about a wide range of things. The whole sit-down was a big hit with attendees and worth watching if you have time this weekend. (You’ll find it below.)

In the meantime, it might be of particular interest to TC readers to know that from Feld’s perspective — and he’s been in the startup world for 30 years — non-tech companies acquiring tech startups is neither a new nor sustainable trend, despite the vast amounts of ink such acquisitions have recently received in the press.

Here’s what he had to say on whether we’re seeing a fundamental shift right now — or a fleeting one:

You mean big industrial companies buying tech companies for way too much money because they don’t know what else to do? [Laughs.]

In any cycle, you have big movements that are directional, and those movements, when they happen, are often happening after it’s too late to actually have the appropriate impact.

I’ve been doing this for 30 years; I’ve been investing for 20 years. There are continuous cycles of non-technology companies entering into the world of trying to buy technology companies going back well before I started even my first company. And a small number of those companies extract significant value out of [those deals] because they buy well at the right time on their curve and they’re able to do something with it. And a whole bunch of companies don’t get a whole lot of value for their investment.

It will depend on which category. You could talk about the auto industry, the consumer products industry, retail… I think they are in different phases of the cycle. They’re doing different things. They are spending different money for different reasons — all of them chasing innovation.

But the idea that creating innovation within their companies — doing it in a way that’s acquisition only — I think is kind of nonsensical. I think it’s a strategy. As someone who’s very involved in TechStars [as its co-founder], a strategy we’re using is to partner with large companies and build accelerator programs — not for the large companies but for the companies that are building things around the ecosystems of those large companies is a very inexpensive way (versus spending capital and buying a team of people that’s effectively a startup and an early product).

All of those things can work, and all can fail.

If you are an entrepreneur and you’re trying to time that, you will get f*cked.

And if you’re an investor and you’re relying on that from an investment perspective, it won’t work. You’ll either get lucky or you won’t. If you get lucky, you’ll start to believe that that’s an extrapolated trend, and then the cycle will change on you again.

Photo: Dani Padgett