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Comment by neworbit | Hacker News Reader

MS would do a lot better to buy 200 promising startups (especially in the mobile space)

I get the sentiment, but do you really think a) that there are 200 worthwhile startups in the mobile space, or b) that there are 200 promising startups that you could acquire for an average of $350 million each that would have anywhere near the chance of establishing a network effect as big as Skype's in any kind of reasonable internet timeframe (say, in the next 5 years)?

35 million each, not 350

Ackppttthtt, my fail. Still not a lot of $35 million exits, but significantly more of those than $350 million. The point still holds though--not sure there are 200 of those $35 million exits either. (Isn't that still almost twice the size of a CDBaby exit?)

Yeah but come on, CD Baby is a warehousing and fulfillment company with a niche market that basically gets paid by starry-eyed musicians to let CDs gather dust and paid again to encode their music and send it to iTunes. Some small fraction of the bands actually sold enough to restock inventory. That's not a recipe for high margin success.

a) Probably, though I bet I don't know most of them. If I were MS M&A I would bet disproportionately on mobile, though, because that's an area they need to nail if they want to stay relevant. If they could get 70 out of 200, that'd be a darn good start.

b) Individually, not terribly likely. Collectively? Sure. (And it's $35M each, but the exact number isn't the point - let's say you could offer every ycombinator and techstars startup an average of $35M each, you'd likely end up getting two or three Dropbox-esque gamechangers, a few dozen decent products, and 150 otherwise good ideas folded into MS and dead-ended.)

To the extent that my math was way wrong, I think your point carries more weight (meaning: you're an order of magnitude better than I thought). I'd say if they bought the top 10 mobile plays for $70 million each they'd have a much better expectation (assuming that the acquisitions could be digested--risk which itself carries a significant reduction in expected value).

As far as network effect, I would pay a bundle for Twilio if I was in an M&A position.

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