Kills Zones And Venture Funding

There is a debate going on about the impact of Facebook, Google, and Amazon’s growing dominance on the consumer internet on the supply of venture capital to entrepreneurs.

Facebook funded this report that was published back in July and concluded that “big tech” was not impacting the supply of venture capital to entrepreneurs.

Ian Hathaway, a researcher who studies venture capital formation, recently published this blog post that challenges that assertion with some data obtained from PitchBook.

I have skimmed the Facebook funded report and read the Hathaway blog post and come away believing, as Hathaway himself does, that we don’t really know because the analyses done to date are not conclusive.

But as a market participant, I can certainly say that we shy away from funding startups that are going up directly against the large tech incumbents.

But we also are attracted to startups that are competing against the big incumbents with a fundamentally different model, like DuckDuckGo in search, or ShopShops in commerce.

So, anecdotally, based on our activity and other venture capital activity that I have observed, I would say that the big tech incumbents have most definitely shaped where venture capital is going and where it is not going. 

That does not mean it has decreased the overall supply of venture capital. It most certainly has not. 

And, I would venture, that big tech is increasingly vulnerable to a number of attack vectors, many of them self-induced, which should be attracting entrepreneurs to more directly go after the core franchises of big tech.

Whether those courageous entrepreneurs will attract the capital they need to launch those attacks is an open question. But I have a fundamental belief in capital markets to do the right thing over the long term and I also have a fundamental belief that entrepreneurs, software engineers, and new innovations will undo these increasingly dominant franchises in ways that regulators will never be able to.