The Real Reason Why Big Companies Keep Buying Startups For Billions

It’s not what you think. Why companies keep spending billions to acquire startups and how you can position yourself to short sell

Illuration by Marina Mogulska

In the past year, there have been a number of high-profile acquisitions of startups by larger companies. Most recently, Facebook bought WhatsApp for $19 billion, and Microsoft acquired Nokia’s Devices and Services division for $7.2 billion. So why do big companies keep shelling out billions of dollars for startups?

Well, there are a few reasons.

8 Examples of Acquisitions

• Facebook buys WhatsApp for $19 billion
• Microsoft buys LinkedIn for $26.2 billion
• Amazon buys Twitch for $970 million
• Apple buys Beats Electronics for $3 billion
• Google buys Nest Labs for $3.2 billion
• Comcast purchases NBCUniversal for $37 billion
• Verizon acquires AOL for $4.4 billion
• Yahoo! acquisitions of Tumblr and Polyvore

Why Are Startups Worth Billions?