Fred Wilson, of "A VC" recently sparked a great deal of controversy with his post: "We Need A New Path To Liquidity". Fred suggests that with the IPO market "closed," we now need new thinking about how to reward innovators for their work. Today, getting bought out seems to be the exit strategy that innovators build for, but buy-outs, while enriching those who sell, have tended to result in many innovative solutions languishing or being diluted in the process of assimilation into the purchasing organization. Luminaries such as Jeff Jarvis and Umair Haque have already commented on the main body of Fred's piece, so I'll limit my self to something he writes in response to comments:
Fred Wilson wrote:
The web is decomposing into smaller and smaller pieces And those pieces are sustainable as standalone opportunities
I think we'll find that these pieces aren't quite as sustainable as Fred would like them to be... Its a simple matter of economics.
As the pieces become "smaller and smaller," the barriers to entry are lowered and thus there are more opportunities to enter the market. Lower barriers lead to intensified competition, reduced differentiation and lowered returns for individual developers even as the overall market grows. In such a market, the qualities of your implementation eventually become irrelevant. Sustainability in such an environment comes from one of: lowered expectations, integration with a larger platform or branding. Getting bought out early is the best thing you can hope for...