I’ve been learning a fascinating thing in 2014 regarding two ways to grow technology startups. Either do it all on your own organically (Microsoft, Google, Facebook) or do it collectively via the collaboration of otherwise independent groups who come together to pull off something larger than any of them could do on their own.
No matter what label you happen to prefer, the notion of independent groups coming together to work on a project – and form a business – is here. It may not be the way of the future, but it is certainly a way by which things are increasingly working. And here’s the interesting part: it’s been around for decades.
Consider these business formations:
- General contractors (construction from small to large)
- Hollywood producers (actors, directors, grips, editors, sound and camera people coming together to make a movie)
- Promoters (concert events)
- System Integrators (assembling computer systems)
- Mission Impossible (Tom Cruise as Ethan Hunt, saving the world)
- Professional athletic leagues (athletes, agents and owners assembling for-profit teams)
It is not simply a matter of hiring independent contractors. It is about engaging independent entities for fee and profit to function as if they were housed under a conventional business structure as managers and employees.
One difference is that the lifespan of such entities is not indefinite. These formations last for quarters and years.
Another difference is that each entity joining the party has a stake in the outcome – a share of the profits and rewards. Maintaining their independence so as not to be beholden to others, yet sharing in the proceeds of success on the projects upon which they collaborate is a pretty good deal.
I read about this several years ago, and am seeing it in practice today. Right here in Silicon Valley. My sense: on a large scale it has the potential to be powerful, and to represent a way of competing with larger, organically organized and run enterprises.
The challenge lies in achieving scale under such a business model.
That Major League Baseball is approaching revenue of $9 billion annually, and that the San Francisco Bay Bridge can be built for over $6 billion under such a model, suggests that scale is achievable.