Launchpad Israel Web Conglomerate

Web Conglomerate's mission it to consolidate multiple web and internet-centric firms into a large conglomerate corporation to then enable the component firms to 'insource' various functions to the degree that would suit them best, eg, marketing & pr, R&D, QA, corporate website functionality, payroll, biz-dev, finance, legal, localized geographic presence, office infrastructure, IT Infrastructure HR.

The full benefits are as follows:

1) 10 eyes are not as good as 100:
– by being involved with other firms, they are looking out for your interests and similarly you have your eyes and ears on the ground for them too. Everyone is in it together ownership-wise, so it makes sense to help all others in the conglomerate.

2) Lowers costs: your firm stays the same size, but costs and complexities decrease.
– by having people work for you in the “core” part of the conglomerate, they are doing work but being paid by the core, not your firm. IT and tech support are examples of one of many functions that can be used. None have to be used in theory.

3) Exposure: quickly role out a feature or product to a single user base of conglomerate users
– web properties are rolled into one front-end, like Google or Yahoo. Also, a single sign-on can be created. It is easier and more straightforward from the user’s point of view to then access new products: they are pushed out and the users need to make little effort to find new products, as seen with Google. Also, ideas can be tested in this way too in a ‘labs’ program.

4) Strategy sharing.
– You know what other WebC companies are doing. You can then work around their strategies to produce complimentary and supplementary services, eg: cloud storage, video delivery, music: the conglomerate can grow into a seamless set of services. Report meetings become a norm, which are kept confidential to outsiders.

5) The power of many.
– With many web properties working together, better advertising deals can be found. Also, it is easier to IPO as the burden of minimum revenues for a public company is shared across multiple firms.

6) The ability to fail is possible without unemployment.
– If a company fails, its staff can move to other companies within the conglomerate, or they can leave altogether. Their company’s slice of the conglomerate essentially becomes zero and they walk away, its resources don’t need to be liquidated as they are consumed by the rest of the conglomerate.

From another point-of-view, by joining the conglomerate, firms are in a position to:

- better satisfy customers
- increase shareholder wealth
- gain an enhanced identity
- achieve economies-of scale
- move toward simplification
- obtain routes to growth
- access in-house expertise
- find further financial backing
- create a clear IPO exit strategy

The idea is based on the fact that single corporations are most often comprised of integrated sub-organizations, and that Google, Microsoft, Yahoo and Amazon have been formed from the result of a multitude of Web and IT startup acquisitions:

http://www.shmula.com/blog/timelines/google-microsoft-yah...

Also, web services have lowered the cost and complexity of integrating disparate systems.

The amount of equity received in the new corporation by its component firms depends on the quality and quantity of resources that each firm maintains and therefore contributes to the corporation as a whole, and also the degree to which they can be shared and ultimately utilized and valued by other component firms. In due course, this conglomerate corporation is designed to quickly become public equity via IPO once all its internal equity allocations are complete, which occur as awards to firms throughout their integration into the conglomerate according to certain milestones.

In order to join the conglomerate, each candidate firm creates an alternate business plan that is to be executed in context of being part of this corporation and in view of attaining a portion of its planned upcoming IPO capital. Each proposed plan is approved and adjusted by consensus with the other firms already part of the conglomerate for inclusion to occur. With expertise in firm integration institutionalized, additional firms may join after the IPO but in a more conventional M & A style.

Other requirements possibly needing to be met to fully integrate into the corporation may be:

- contribution of a proportion of ongoing earnings to support core corporate functions.
- giving and accepting employees from other component firms as part of expertise sharing.
- opening APIs internally.
- participating and contributing to the corporate website (news, blogs, jobs, events, press mentions, help forums, contact details)
- public cross-promotions.
- single sign-on.
- sharing source code.
- accessing common groupware and IT infrastructure.
- contributing and provisioning team members to recreate business functions as corporate core competencies.
- transparency of financial, business and website metrics.

Furthermore, to begin with, ideally component firms are:

- not VC backed
(this is because a firm moves in an unconventional direction away from its business plan, and ties itself up with the combined fate of other companies. Also, a VC can alter a component company in a way that disrupts the operation of the conglomerate, so in order to lower complexities, removing VCs helps attain this goal.)
- direct to consumer
- is not involved in significant consulting
- built with IT based on common standards
- still seeking traction or market validation
- can internally contribute a proprietary technology
- located solely in Israel

A firm may decide at first to only insource 1 or 2 functions to the core. Then, as new core corporate competencies are created and ensured, the relinquishment of functions to the core by individual firms can proceed as equity in the conglomerate is simultaneously awarded. This insourcing of certain functions may entail meeting certain requirements, eg: moving location, contributing staff, name changes, etc.

Once the majority of firms have maximized their integration into the corporation and flux is low, an IPO is directed.