We all know that Facebook has massive growth goals.
In fact, last month, Facebook was valued at $75 Billion on SecondMarket (a secondary market for private company shares). And its current revenues don’t nearly support that.
But, Facebook is doing something that it hopes will allow it to continue to grow like wildfire and grow into its $75 Billion valuation. And it’s probably NOT what you think. No, it’s not investing all of its resources in R&D to find new tools and technologies to continue its growth.
Rather, Facebook is buying companies, at a huge premium, who have already built these tools. In fact, over the past 3 months, Facebook has purchased FOUR companies. For the latest one, Snaptu, Facebook reportedly paid $70 million. Yes, a nice payday for Snaptu’s founders.
So what does Snaptu do? It allows mobile devices that are less sophisticated than smart phones to use mobile applications. Which allows users with these mobile phones to use Facebook more.
And Facebook’s other recent acquisitions over the past 3 months? Well, it acquired recruiting service Pursuit, group messaging service Beluga, and local mobile advertising service Rel8tion.
Can you see what Facebook is doing? It’s building out its services so it can reach more users more frequently and monetize them better.
And to gain these new tools, Facebook is paying handsomely.
Now Facebook is not alone in its thinking and practice of buying lots of smaller companies.
It’s a generally accepted principle that individual entrepreneurs and small companies are MUCH better at innovation than larger companies. So the big companies want the nascent ones to create new products and services. And once they prove that they can be successful on a larger playing field, the big guys will pay millions for them (and then put them on the larger playing field).
So, what does this mean for you? Do something that the big guys can’t. Innovate. Create new products and services and test them out. And get PROOF. Get proof that customers want to buy your product or service. Because once you get that proof, tons of big buyers will want to purchase you. For they have the advertising budgets and distribution networks to put your product or service in front of millions of new customers. Which will make them, and you, boatloads of cash.
Here is my recommended action plan:
1. Conceive your new product or service idea
2. Create your business plan detailing why it’s a good idea, your target market and your game plan for success (note: there’s quite a bit more to a winning business plan, so check out Growthink’s Ultimate Business Plan Template for help on this)
3. Create your product/service, or at least a prototype of it; raise angel funding as needed to finance it.
4. As needed, raise venture capital to further prove out your company so that large buyers see its huge potential.
5. Retain an M&A advisor to find tons of potential buyers, create a bidding war, and get you top dollar for your company.
6. Enjoy the fruits of your labor by spending more time with your family and friends, buying anything your heart desires, and giving back.