Start-ups backed by industry peers almost never work out. The latest example being “U3″:http://www.u3.com/, a start-up that was pushing the concept of running applications off a USB flash drive. U3 was co-promoted by M-Sytems and Sandisk. (Read U3 to U-Zero
The Sandisk decision made me think about the relationship between start-ups and the big brother. I have seen it time and again, the strategic investments or partnerships work against the start-ups. While it is alluring to team up a big brother, it also limits your options.
Remember how @Home, backed by large cable companies unraveled. More recently large media companies are promoting a big YouTube killer, but it is hard to imagine News Corp and NBC having similar end goals. Taking money from a large industry peer, such as Sandisk, can artificially shorten a staretup’s runway. If “Big Brother” decides the startup’s R&D conflicts with its own best interests, it’s game over. (Of course I’m assuming the most founders start their companies with more than just a quick exit in mind. That was the 1990’s!)