YouTube, the second most visited website worldwide, is one of the most successful examples of acquisition. It was bought by Google for 1.65 billion USD  just a year after its establishment in 2005 and is estimated to be worth up to 160 billion USD in 2022. How could a mere startup blow up its net worth about 100 times in less than two decades? Despite the idea that an easy-to-use video platform for non-experts was a niche market back then, the acquisition allowed Google to provide massive support for YouTube, such as partnership opportunities and better organizational structures. Aside from YouTube, there are numerous other successful cases of startup acquisition.

The biggest motivation behind selling a startup to a conglomerate would be safety: a startup can get significant financial support under a conglomerate's wing. The chance of becoming a unicorn company is only three out of five million, while 90% of startups fail. Considering these statistics, it can be said that a successful entrepreneur is one who not only initiates and manages business in its original direction but also recognizes the right time to yield the management rights to those who can do it better. According to CB Insights, startups have attributed running out of cash, failing to raise new capital, and misreading the market demand as the top few reasons for their failure. As being a standalone startup restricts the business in terms of resources, experience, and credits, the acquisition provides the startup with substantial financial support to perform without disruption due to budgetary shortage. 

Under a big company, a startup is given greater opportunities to partner with bigger corporations and projects, allowing for the broadening of market reach and even fulfilling ideals that cannot be done as a mere startup. In addition, an acquisition offer itself implies that the startup has achieved substantial results and has a promising vision. In the hands of a conglomerate with existing credibility, it may attract even more investors and improve the image of the company, making it easier to harness the potential of the startup.

Of course, selling a startup cannot always result in success: there is a non-negligible threat that the original purpose and identity of the startup may be corrupted in the process. But the change in identity is not necessarily always a bad thing: acquisition can be the opportunity for rebranding of the company that clarifies their new vision which allows attraction of new demographics into the market and talented workers in the industry, revitalizing the company’s image.

Not only does the integration of companies directly benefit the startup, but its primary goal changes to seeking greater synergy among the startup, the conglomerate, and the economy as a whole. For the conglomerate, too, a well-prepared acquisition of a startup opens up opportunities for bigger success, although the initial costs of acquisition may be massive. The acquisition may be able to reduce the main company’s production cost if the startup was its subcontractor, supplier, or business partner and increase efficiency — for instance, Tesla managed to increase its global production compared to 2022 from vertical integration. Additionally, the conglomerate can streamline its business management or adopt the new technologies of the startup and advance them further. 

One may say that selling a startup to a conglomerate poses a potential threat to the economy due to an increase in monopoly power. This concern is gaining popularity especially after US tech giants were accused of abusing monopoly power, leading to cartels of higher prices and reduced options for consumers. However, significant social costs also result from startup failures, such as unemployment and consumer proposals. Another possible benefit of selling a startup is that it allows its founder to apply their successful approach and strategy to initiate another project, such as a new startup or investment in another business, thus allowing a virtuous cycle in the economy. 

The strongest reason against selling a startup might be the hope that it will gain greater offers and that its value will skyrocket in the near future, but this happy outcome is extremely rare and the startup may lose its best time for an exit. Considering safety, the synergy with the conglomerate, and the virtuous cycle in the economy, selling the startup to a conglomerate at the right time may be the best option.