From a macroeconomic viewpoint, thousands of individual software developers taking on entrepreneurial risk voluntarily with a few lucky entrepreneurs striking it rich and the rest chalking up their losses to experience is tremendously beneficial. No one but the individual entrepreneur pays for the failures, and everyone has a chance to benefit from buying and using the few products that succeed. But how can an individual company harness this dynamic? What company could possibly afford to fund thousands of individual entrepreneurs during a gold rush phase just to find the one or two that successfully develop new gold rush technology? Even companies with extensive research facilities like AT&T, IBM, Microsoft, and Xerox can't afford to fund thousands of projects in each new technology area, which is one reason that software company acquisitions during a gold rush phase are more sensible than they at first appear. Some industry observers thought Microsoft was crazy to pay $130 million to acquire Vermeer Technology, original creators of FrontPage, when Vermeer had only about $10 million in annual revenue. But from the entrepreneurial gold rush point of view, paying $130 million for the one success in a thousand is a cheap alternative to funding a thousand internal dead-end entrepreneurial experiments. |