Why small companies will always have a chance

There was a great piece in the FT yesterday about Microsoft’s struggle with innovation. Despite some bold moves and substantial investments into new areas (most notably games consoles and mobile) it’s market cap has been stuck around the $300bn mark for some time now.

In that time Apple and Google have both exploited new areas theoretically open to Microsoft – digital music and search – and added $250bn to their combined market cap.

The problem for Microsoft? – in order to move the needle on a huge business like theirs they have no choice other than to go after huge markets. That takes them into areas which have already been proven to exist and therefore already have dominant players – where it is more difficult to compete. (In case you are wondering that is Sony in the case of games consoles and Nokia/Symbian/Motorola etc. in mobile.)

Google and Apple by contrast were able to go after markets they hoped and believed would be huge, but which could have turned out to be merely big. Even in that latter scenario their shareholders would have been happy – not so for Microsoft.

This is why small companies will always have a chance. If tens of millions of dollars will move the needle for your shareholders you can go after markets much earlier than your larger competitors – if you are good that will give you a leadership position which is yours to lose.

Most recently I have seen that at Tribold where we led a $15m round earlier this year. Simon and Catherine the founders there saw an opportunity in product management software for telecoms operators back in 2003. They set the company up in that year and are now in a leadership position in what remains a nascent market. The Microsoft equivalents in this space are Amdocs and Convergys – they only woke up to this opportunity last year which gives Tribold every chance of dominating this market as it grows.

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