Does acquisition beat innovation and recruitment when building a tech business?

Posted 4/2/2022 by Benet Hanley

The reality is that the tech space is highly competitive, and creating a thriving 21st-century tech business is certainly no walk in the park. The range of tech companies being established over the past decade is seemingly endless, each one attempting to solve problems in a variety of sectors from finance to healthcare to housing to transportation and many more. Despite the range of opportunities and the  many success stories, it has been reported that about 90% of startups fail.

In this time, we have seen companies like Apple raise their market cap from $337 billion as of 2010 to $3 trillion in 2021. Alphabet, Google's parent company, is another notable mention, with its market cap reaching $2 trillion late this year

Recruitment: A significant challenge in building a tech business

Talent is one of the most vital pillars of any thriving technology company. A company's workforce is the key driver of its corporate vision and plays a significant role in determining its progress over time. Most tech company executives and founders would agree that talent is one of the industry's biggest needs, and finding and retaining these skilled individuals is key to maintaining your relevance within the industry. 

As tech companies begin to expand their offerings and explore broader markets, there will always be the need for a commensurate increase in staff strength to cope with the demands of such efforts at scale. The challenge, however, is that building teams and hiring staff is a slow process — one that doesn't come with any guarantees of success. A perfect example of this is the failure of KIOR, a green energy startup backed by well-known venture capitalist Vinod Khosla. Although analysts point to several reasons for the company's eventual closure, one thing that they can all agree on is that poor hiring decisions were one of the most significant contributors to KIOR's untimely demise.

Acquisition: A better approach

Several thriving tech companies opt for an acquisitions strategy to eliminate the risks associated with hiring and ensure quick and smooth operational transitions. In 2020 alone, over 5000 tech business acquisitions took place in the United States, with at least $603 million being spent on these purchases. The implication is that tech businesses are now beginning to realise the value of acquiring other companies instead of building their human and intellectual capital from scratch. Tech giants such as Google, Apple, and Microsoft have all made acquisitions running into billions of dollars, and these moves have proven to be highly successful.

In the UK photonics space, acquisitions are also becoming the order of the day, with one of the most popular cases being the acquisition of laser manufacturing company Elforlight by AMS technologies in 2017. This move has since helped AMS technologies quickly gather the right amount of momentum and critical know-how needed to expand their optics solutions and serve their customers better.

Aside from its photonics contributions, the UK is also widely regarded as one of the leading global manufacturers of semiconductors. As a result, several organizations seeking to break into this highly lucrative market have also chosen an acquisitions approach, opting to buy already established UK semiconductor companies instead of spending years establishing their own infrastructure. According to Bloomberg, up to $42billion has been spent on acquiring UK semiconductor companies since 2010.

It is easy to spot that in recent times, thriving businesses now favor acquisitions as a reliable way to scale, improve market penetration, and increase their offerings. As earlier examples have shown, this strategy has proven to be a wise decision. Of course, it is still to be seen if such rapid successes would have been recorded if these leading businesses had opted to build a team and product from scratch. However, we can be confident that in today's fast-paced market, acquisitions are the best way to hit the ground running, reduce the risks of failure, and provide the tested and trusted structure necessary for a tech business to thrive.

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Enigma People Solutions can help you improve the accuracy of your key hiring decisions. Central to our success in finding technical leaders for Emerging and Enabling Technology industries is our award-winning, innovative, tried and tested recruitment process, which enables us to reach out to the companies and people who matter in our market. Read more about our recruitment process here.

 

Enigma People Solutions is an award-winning technology recruitment consultancy. We find technical leaders for the emerging and enabling technology industries. Visit our job search page for the latest vacancies in photonics, electronics, semiconductor, software and IoT in Scotland and the UK. Check out our blog page for the latest in the technology industry. You can get in touch with us hello@enigmapeople.com or call us on + 44 131 510 8150

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