Bill Flitter, co-founder of RSS advertising firm Pheedo Inc., admitted he gave pause after he heard that Microsoft Corp. was offering $44.6 billion to acquire Yahoo! Inc.

"Being a potential acquiree of both companies, it did cross my mind," he said of the potential effects a Microsoft-Yahoo! marriage might have on his firm's future. Google Inc. acquired Pheedo rival Feedburner Inc. last year for $100 million.

"But it doesn't concern me too much," he added. "Even with the combined strengths of both they've not caught up to Google, so they're still going to have to look at startups and hot-growth companies to catch up."

Now that the initial shock of a potential Microsoft-Yahoo! merger has worn off, speculation is rising about what such a deal might mean for young technology companies in Silicon Valley.

In a blog this week, Netscape Inc. founder Marc Andreesen posted a lengthy piece arguing that the proposed merger "would have practically no impact on any high-quality Silicon Valley startup." He contended that neither Yahoo! nor Redmond, Wash.-based Microsoft has been particularly active acquiring Silicon Valley startups; that there remains a large and diverse group of companies actively acquiring Internet companies; and traditional media companies will need to pick up the pace of Internet acquisitions as their core businesses deteriorate.

But others argue that eliminating such a large company as Yahoo! from the pool of potential acquirers is bound to have some impact.

"If you remove one of the chairs in a game of musical chairs, the game becomes harder," said Bill Burnham, managing general partner with Menlo Park, Calif.-based Inductive Capital.

Jeff Clavier, founder and managing partner of SoftTech VC in Palo Alto, Calif., said even though he expects both Microsoft and Yahoo! to "check out from the M&A process" for 12 to 18 months if a deal is signed and wends its way through the regulatory process and integration, he's not overly concerned if they don't participate.

"I don't think the impact on startups will be material," he said. "I really think the list of potential acquirers will be long enough to make up for the 10 to 20 companies that Microsoft and Yahoo! acquired over the past year."

Indeed, Yahoo! in 2007 spent more time and money on large acquisitions of advertising firms in order to counteract buys made by Mountain View, Calif.-based Google, which has agreed to buy DoubleClick Inc. for $3.1 billion, and Microsoft, which paid $6 billion for aQuantive Inc. Sunnyvale, Calif.-based Yahoo! spent $680 million for the 80% stake in Right Media it did not own, while shelling out $300 million for BlueLithium. It also spent $350 million on an e-mail technology firm, Zimbra Inc.

Yahoo!'s acquisitions of startups in 2007 were confined to the $10 million purchase of MyBlogLog, a site that combines aspects of blogging and social networking, and news aggregation site Buzztracker, which it bought for $5 million. It was more active acquiring startups in 2006, buying RSS, or Really Simple Syndication, reader SearchFox; online music playlist service WebJay (which has since been shuttered); computer-to-television technology firm Meedio; video and photo uploading firm Jumpcut.com; advertising technology firm AdInterax; mobile social software company Kenet Works; online video contest site Bix.com; and Taiwan social networking site Wretch.

MyBlogLog was a SoftTech portfolio company. But Clavier cited the sale of another company SoftTech invested in, parenting Web site Maya's Mom, as a more accurate harbinger of merger activity in the future. Maya's Mom was sold to BabyCenter LLC, operated by traditional consumer company Johnson & Johnson of New Brunswick, N.J.

"I really believe you're going to start seeing those less traditional acquirers taking out consumer startups," he said. "If those nontraditional players start thinking about bringing in talent and communities and companies we have in our portfolios, they make our auctions better and broader."

Clavier said traditional media companies also have yet to delve into the Web 2.0 arena in any substantive way and present another group that could become more involved, pointing to New York-based Hearst Corp.'s acquisition of social shopping Web site Kaboodle last year as one example of the changing landscape.

While acknowledging that there are plenty of other acquirers that can pick up the slack, Burnham said Yahoo! fills an important role as one of the premier Internet technology companies.

"Yahoo! is in an elite group of M&A acquirers with the luxury of dropping $50 [million] to $100 million on 'features' because they have such a large distribution platform," Burnham said. "You have a $30 billion net cap acquirer willing to purchase features that don't really have a business behind them and pay good money for it that could be going away. That's just not a good thing."