Better to Make a Few Users Love You than a Lot Ambivalent
"Ideally you want to make large numbers of users love you, but you can't expect to hit that right away. Initially you have to choose between satisfying all the needs of a subset of potential users, or satisfying a subset of the needs of all potential users. Take the first. It's easier to expand userwise than satisfactionwise. And perhaps more importantly, it's harder to lie to yourself. If you think you're 85% of the way to a great product, how do you know it's not 70%? Or 10%? Whereas it's easy to know how many users you have."
Focus on Your Users, not Potential Acquirers
"Building your startup with a goal of getting acquired is foolishness anyway, in my opinion. Smart people disagree with me on this, but I'll make my case in two points:
Big companies don't want to buy startups that want to get bought. Instead, big companies buy startups that have built something of value that they decide is important to them.
You can't possibly guess what things of value big companies are going to want to own in one or two or three years. The world is changing too fast -- witness the Microsoft hostile bid for Yahoo itself! -- and besides, big companies are Moby Dick and you can't understand the reasoning behind their decisions anyway.
Combine those two points with the fact that no big company buys that many startups each year anyway, and it's easy to see that the odds of you successfully anticipating something that a big company is going to want in the future and then actually selling your company to them -- as your strategy -- is a very risky proposition that is highly prone to failure.
And in fact, in my experience, most startups that start with the goal of getting bought, fail.
The formula for success in startups is the same today as it's always been, and it will be the same post-Microsoft/Yahoo:
Build something of value -- something that people want, and something that will be profitable at the appropriate point -- and the world is yours."