Microsoft, Yahoo! and what it means for startups

It is starting to look like Microsoft is going to be successful in it’s bid for Yahoo!. I say that on the back of reports that Microsoft will ‘do what it takes’ to win and that Yahoo! is simply holding out for a higher price. Further, Yahoo!’s second largest institutional shareholder came out in favour of the bid yesterday, albeit at a higher price.

All in all I don’t think this is espescially good news for startups and their investors.

I say that for two principal reasons:

• By reducing the number of options it will make it more difficult for startups in this space to partner and to get acquired
• I’m with Umair in thinking that this combination is unlikely to go down in history as a successful merger (remember most don’t) and instead it will make the industry as a whole weaker

It will, however, create a bit of a vacuum at the top of the internet industry, particularly if my second point above is correct, and we all know what happens with vacuums – they get filled. Which could lead to a pretty exciting time for the companies that come together to step into the empty slot.

As a final caveat, I wouldn’t overstate the impact of this development. Good startups will continue to be successful irrespective of the outcome. I just think that if the merger goes ahead it will be a little harder for a while, that is all.