Back in the good old dot-com days, companies runtinely uses its balance sheet (more specifically its ability to raise money and put it in the balance sheet) as an competitive advantage to acquire companies that has either better traction or revenue but not the access to cash. This strategy is often used by buyout shops to roll up companies without the sophistication to know how much they are worth or the ability to put together a business plan and financial model to pitch to PE shops. As much as we would like to believe capitalism is without friction, the VC or buyout circle is small and requires specific language, behavior, and access.
A classic example of “tail wagging the dog”, by virtue of raising a ton of cashing, the cash rich venture has essentially “sucked up” all the cash that VCs are willing to dump into a space. Even if a competitor comes along and achieve better traction, VCs are loath to invest because of the cash hoard that the original company has amassed. (its like competing against MSFT vaporware in the early nineties)
Well today, Obopay acquired BillMonk. A cool little app that seemed to have gathered a small but loyal group of users. Not to take anything away from obopay, (its succesfull in its own right), this is a case book study on “throwing your weight around” to gain (additional?) traction.
