The losers in MSFT/YHOO - employees of small web companies

Assuming the Microsoft takeover of Yahoo goes through, it's a really bad time to be at a small web advertising startup. As Jeff Bussgang from IDG points out, the number of possible exit paths has shrunk by one, and the two remaining primary acquirers (Microsoft and Google) are both going to be busy digesting their other deals (Yahoo/aQuantive and Doubleclick) for awhile.

In addition, Microsoft sees $1B in synergy. Not all of that will be in people, but it probably means at least a few thousand job cuts (on top of the previously announced Yahoo job cuts). Those cuts will be in a bunch of overlapping businesses (many of which are funded by advertising), so you’ll have talented people in the market looking for jobs or starting companies at the same time you reduce the number of exit paths. It’s not a great time to be a small, independent web advertising business model. With some heft, exit via IPO or large acquisition will still be possible, but I’d be wary of ad companies with tens of employees and dozens of customers.

(Added later in the day, after I got out of the airport): Marc Andressen has a somewhat contrary view. It's a compelling post in its own right, but given he started two >$1B companies, it's especially compelling. I agree that any "hugh quality" startup is unaffected by the MSFT/YHOO merger. I don't think small, web ad startups necessarily meet that qualifier. Those that can get to scale while independent (essentially building real businesses) will do fine. The quick flip small web ad startup, never a good place to be anyway, is looking even less attractive.