Don’t worry! Big companies won’t “steal” your entrepreneurial idea

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A common question startups ask is, “Why didn’t (Jobs, Elon Musk, etc.) use our ideas right from the start, instead of slowly suppressing us?”

Compared with the resources of startups, large companies have sufficient funds and talents. However, in fact, large companies do not want to defeat startups at the beginning. They want to wait until startups have made something valuable before starting to attack.

Let's analyze the reasons:

1. Innovation is a bet

No one really knows if your idea is good or not. You can only become a great entrepreneur if you have enough funds at any stage. VCs don’t invest in companies, they invest in markets and people (especially CEOs). They know which markets are hot, and they will try to invest in unicorns that can become market leaders. If the market is hot enough, they will not give up even if you lag behind.

Innovation projects are one of the VC portfolios, which are very risky, and many VCs will only invest $100-500 million. You can't "only" invest $10 million in Facebook in 2004, this is rare, you need to have a wide portfolio, which requires a lot of money, and even market leaders will hesitate when trying to launch new innovation projects.

This model also requires "survival of the fittest" - if the project runs out of money and progress is not going well, then the VC can only abandon the project. For large companies, it is very difficult to disband an underperforming R&D team, both psychologically and practically. We often use Google as a counterexample. Google often disbands projects according to many rules, but even Google will be more patient with the Google+ project than any VC. Large companies are like mammals with cubs; VCs are like fish, they are more cold-blooded (this is not an insinuation), but more efficient.

Big companies are not competing with a $5 million startup, they are competing with a multi-billion ecosystem, which is why many startups often come to the fore. Big companies cannot treat new projects like VCs treat their portfolios and give up on them.

2. Everyone is avoiding losses

No one wants to rip Peter’s Wall to pay Paul’s Wall. Startups have limited funds, so they will not slow down the progress of other projects to launch new projects. By comparison, it is uncertain whether this novel product can eventually reach the market, so it is better to invest in projects that are already developing.

3. Large companies have more restrictions

Everyone can say no, but no one can say yes. Specifically, "all departments" of the company need to reach an agreement, and "all departments" here refers to departments scattered around the world. This is an inherent phenomenon. Middle-level managers are more concerned about their own retirement plans and just want stability. Senior managers are too far away from the market reality to identify who is more aggressive. The bottom-level employees have no weight in their words and just focus on their own work. Another option is to quit and start your own business.

4. Big companies need big projects

Fundamentally, all big companies are conglomerates. When you become a market leader, you need to open up new markets to grow. If you have several multi-billion dollar projects, only big projects can work. Big companies focus on large, capital-intensive projects - such as Google Street View, which are difficult for startups to compete with.

This approach also affects development strategy. Oracle has transformed from a database company to a full-service IT provider today - hardware, software and services. SalesForce is often considered a leader in the CRM field, and it will continue to be a CRM company in the future. But now SalesForce is a platform-service company and is developing in other directions such as big data. It wants to be the Oracle of cloud services.

5. Your project is not innovative in the eyes of big companies

In 1999, Google wanted to sell it to Excite for $1 million, but Excite refused because they thought the project was too simple to implement. Interestingly, this was indeed the case, but they never had the chance to acquire Google. After that, Excite went bankrupt.

As a product manager in a large company, it is hard to accept that a few geeks solved a problem that hundreds of developers failed to solve by eating a pack of instant noodles. So they will not choose such a project.

6. Big companies aren’t really big

Big companies have many departments. Each department may not be big. "But they still have a lot of resources." Yes, but they only do their own thing and they may not have the skills that are really needed.

When I joined Sybase (1,500 employees) from IBM (300,000 at the time), I was surprised that Sybase (which only did databases) had twice as many people working on databases as IBM (which did many projects, including transporting military helicopters). When I joined Illustra (less than 80 employees), I was not surprised that the company had more network database experts than Informix, Oracle, and Sybase combined.

7. Time is money

Why didn't Facebook simply copy Instagram (which had only been in operation for two years) instead of acquiring it for $1 billion?

Facebook wasn’t just acquiring 13 talented people, nor was it about market share, since every one of Instagram’s 30 million users was already on Facebook (out of 845 million at the time). And it certainly wasn’t about revenue, which was virtually nonexistent.

Because Facebook realized that Instagram was the future of sharing pictures, and that it was a threat to their business. They knew that it would take at least a year to copy Instagram, and that it was a big choice for Facebook, and the purchase meant additional expenses. In 2014, Facebook's third quarter revenue was $3 billion, and considering the importance of Instagram to Facebook's value proposition, spending only one month's revenue to buy Instagram now looks like a good deal.

Care about users, not competition.

You can’t expect to grow a tree from just one seed. You need a tray of seeds, remove the bad ones, and then cultivate the remaining seeds, hoping that at least one of them will sprout. This is how VCs operate, and this is why big companies don’t suppress startups, because they don’t know which seed will eventually grow into a big tree.

The risk faced by a startup does not come from the large company it wants to replace, but whether the product it provides can be accepted by the market.