Almost the entire biotech industry has been this way for decades once the small molecule patent cliff hit pharma and the R&D costs for therapies skyrocketed. If you look at biotech IPOs, the majority of the startups IPO pre-revenue, long before they’re even legally allowed to sell anything.

Which is totally fine: anyone who is a biotech investor knows this and everyone makes tons of money in this arrangement. Investors (both public and private) take on the science risk and some of the regulatory risk, and the pharmaceutical companies provide a guaranteed (big $$$) exit and take over scaling manufacturing to bring a drug to market. Most people with retirement accounts and pensions and index funds rarely touch this stuff except as a diversification strategy that pools the risky stuff to get the upside on the whole industry.

Cadence is one of the big companies in EDA (Electronic Design Automation - semiconductor chip design software)

I met someone that left to go to a startup and was bought by Cadence. He did this 5 times and about 2-3 years later Cadence would buy the startup he was at. He just couldn't get away.

Well usually they only get acquired when they have something the purchaser wants, revenue was obviously not the get here

Low risk for the large companies

Maybe the loses are limited to the amount of the investment in the startup? No risk of consuming more resources than intended before dying.

If those things were integrated into the giant there would be political risk of it eating all of the money of the giant.

It's low risk from the acquirer's point of view. Somebody else paid for that research, you just get to buy it once it's proven itself sufficiently to your liking.

It could mean different things I guess, but here’s my take:

If you do very risky R&D in a big corpo then the risk creeps into other things: other projects might look at the R&D and say, “we will just use that when it’s done”. It’s a lazy kind of move for tech leaders to make, because it makes you look like a team player, and if the R&D goes belly up then you have someone else to blame. This ultimately leads to risky R&D in a big corpo not being compartmentalized as much as it should be. If it fails, it fails super hard with lots of fallout.

But risky R&D at a startup is compartmentalized. Nobody will say they use the output of the startup until there are signs of life, and even then healthy caution is applied.