Startups Grow Organically, Large Firms by Acquisition

Virtually all tier-one telcos and data centers grow more by acquisition than organic growth. That has been the case for many decades, but also from 2000 to 2020, with a few firms as exceptions. 

Company	Acquisition Growth	Organic Growth
AT&T	60%	40%
Verizon	55%	45%
CenturyLink	45%	55%
Equinix	75%	25%
Digital Realty Trust	65%	35%

The same trend holds for other global telcos, which since 2000 and up to 2020 have grown much faster by making acquisitions than by organic growth. 

Company Name	Acquisition Growth (% CAGR)	Organic Growth (% CAGR)
China Mobile	15	2
Deutsche Telekom	12	1
Orange	11	2
Telefonica	10	2
NTT	9	2
SoftBank	8	2
Singtel	7	2
Hutchison Whampoa	6	1
Bharti Airtel	5	2
VimpelCom	5	1
Etisalat	4	2
TeliaSonera	4	1
KDDI	3	1
Telstra	3	1
TDC	2	1
Telenor	2	1

Contrast that split of revenue growth drivers with firms in the less capital intensive software industry. In the first five years, most firms grow organically.

Company Name	Organic Growth (% CAGR) First 5 Years	Acquisition-Fueled Growth (% CAGR) First 5 Years
Dropbox	45	0
Zoom Video Communications	100	0
Slack	75	0
Atlassian	50	0
Stripe	100	0
Twilio	75	0
Shopify	50	0
Square	75	0
Instacart	100	0
Airbnb	75	0
Uber	100	0
Lyft	75	0
Pinterest	50	0
Reddit	75	0
Discord	100	0
ZoomInfo	50	0
Datadog	75	0

Hence the importance of merger and acquisition activity in the data center and connectivity businesses, compared to the software business, especially for startup firms.