Can start-ups compete directly with the giant gorillas?
When Transmeta Corporation finally stopped manufacturing and selling its Crusoe microprocessors back in the summer of 2005, with its losses of $106 million on sales of $29.4 million and reduction of staff by 25 percent, the question raised by The Chilli and which was also on many peoples’ minds was this: can start-ups or young companies effectively compete in large volumes markets or with large incumbent players?
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This article examines the underlying issue that founders, entrepreneurs, and investors need to consider when assessing volume propositions that are aimed at stealing some lunch from the big giants. As the saying goes “when big elephants go on a rampage, little innocent ants gets crushed underneath, unless……” – see later in this article.
In the case of Transmeta when it stopped manufacturing and selling Crusoe and focused on licensing IP and design services with its remaining 200 staff, the company was trying to compete directly with Intel and AMD in the low power microprocessor market. It was heavily backed with a huge injection of venture capital prior to its IPO, and at that time its accumulated losses amounted to a colossal $649 million since its foundation in 1995. The company had launched its low power microprocessors with huge fanfare and its publicity was at that time based on a misguided ‘David and Goliath’ theme. The remainder of this article covers the following:
* Stay away from cash-rich gorillas
* Find your expanding niche
* Bells and whistles
* Moving fast
* Channels, channels, channels
* Can start-ups compete with Giants? The Chilli perspective
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