Market Ending Moves

Every once and a while, there is a move that end questions and competition for startups in a market. A single move can effectively win the market, or “end the market”.

Market ending moves may include:

Merging with your main competitor to remove pricing pressure and options from buyers. The merger between X.com and Paypal in the 1990s consolidated the main payment providers on the internet at the time. Uber and Lyft are rumored to have almost merged at the height of their competition in the 2010s. The rumor is Uber walked from this deal, but then went on to merge its subsidiaries with the major player in multiple international markets to increase leverage of the combined player in the market (China, Russia, etc). Private to private mergers, when companies are still young, are much easier to get past regulators than public/private buys. There are other dynamics to contend with however around ownership, leadership, and ego[1]

Buying a key supplier (of unique data, a bespoke sensor or component, etc) to starve others of a key input to products, prioritize yourself for volume, or get a cost advantage

Key distribution deal. IBM distributing Microsoft’s early O/S, or Yahoo! distributing Google were two “king making” moves in an industry.

Destroy a competitors cash cow. Sometimes your incumbent competitor will have a legacy cash cow business the funds everything else. Offering a free or cheap version of this, or changing business models to destroy their cash flow can be quite effective. This is part of the concern for Google in search/ads relative to some genAI products[2].

Capital. Sometimes you can raise an enormous sum to buy distribution or saturate a network effect market. Tiktok notoriously bought traffic early on at large scale, and Google invested billions in early search distribution. One could argue the current SOTA LLM models are reasonably locked into an oligopoly market due to ability to raise billions or tends of billions of dollars for the next giant model.

Other moves. Lots of other things can be done as well.

When you are thinking about market ending moves, be creative! You can brainstorm literally any scenario. Can you convince a large public company to spin out a key subsidiary to merge with you? Can you put aside ego with your main competitor to combine forces and stop competing for everything? Think broadly. Even if doesn’t happen, this often sparks key thinking on M&A, partnerships, and key hires that you may not have considered otherwise.

Notes

[1] Private to private mergers are notoriously hard between fierce competitors. Usually three topics come up - (a) relative ownership post merger, and (b) who is in charge (c) hard feelings between founders if one felt the other copied them, trash talked them, or the like.

[2] I think Google is most likely to transition just fine (ie survivable vs existential), but many worry this will be an issue

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