I hope every VC is lobbying for this. What's the point in investing in tech if the market is full of big fat gorillas that will just copy everything you do and put 10X the capital behind it, not to mention hiring everyone at 10X the salary a startup can afford to pay.
But the tech conglomerates don't just copy and kill you, first they ask to acquire you and then when they get rejected they copy and kill you. It costs less to acquire a company with an existing project and team that is successful than it costs to stand up a new team on a new product that is unproven.
VC's like having conglomerates that have lots of cash to throw around and can acquire their investments at nice multiples. Even if the startup sucks, they are almost guaranteed a decent exit as long as it doesn't suck TOO much.
VCs don’t rely too heavily on this. In fact, taking a early buy out is one of the outcomes that can be very good for a founder but terrible for a VC. VCs need outsize returns to boost the market overall portfolio, which has many zero outcomes. Getting acquired for 110% of your series A valuation doesn’t do anything for them.
That said, getting acquired as a strategic acquisition is a good outcome for VCs. However that’s much more rare and isn’t specific to big tech companies.
This is the 'outsource our R&D to venture-backed startups' model, rather than the 'have actual innovation and competition' model. Hey, it's still better than our defense contracting industry, which explicitly outsourced their R&D expenses to Congress.
> not to mention hiring everyone at 10X the salary a startup can afford to pay.
This is how a functioning talent market works. It isn't unfair to the startup that big companies pay more, it's unfair to the startup employees that the startup isn't paying more. I'd argue that if a startup can't pay market rate for the employees it wants (be it cash or equity) then it wasn't properly funded in the first place.
Uber and Lyft are allowed to run permanent losses because they have privileged access to cheap capital. If you have a better platform but you actually need to turn a profit, your ship is sunk before you leave the harbor.
And a lot of the people earning "10x" at the RAMJAC companies would almost certainly earn more in equity appreciation in a competitive market.
This era is bizarre. All the free market rhetoric from the 1980s is being recycled to defend central planning that is now totally cool because the central planner has a corporate charter.
VC's won't fund anything in Big Tech's "kill zone", and bootstrapped projects need profits to sustain themselves. It is very difficult to turn a profit while facing a competitor that can run perpetual losses.
I find the "kill zone" theory plausible and supported by available evidence [1,2,3]. Others (a large consulting firm) disagree [4].
Central planning is about risk and force; if someone want to take a risk with their own money then it's not central planning.
In fact that there are many different companies in the transportation market: byrd, lyft, uber, taxis, spacex, tesla, nikola, cruise, boring company, etc... Shows it's not centrally planned.
Yes, but if we equalize the tech industry on the company level, startups will be able to pay more, and a lack of monopsony around high-level programmer talent will further drive up wages.
Unless FAANG is unionized or something, the trust-busted alternative of the status quo is definitely better for labor.
The OP's proposal is that startups should be able to pay less and hire talent, if it wasn't for those pesky FAANGs driving everyone's wages up. If only they were able to pay less would VCs have been able to keep even more for themselves, I mean, would the market have been more equitable (?@!@)
Don't look at the market from the perspective of the one of the participants, look at it as a whole. And don't try to evaluate something like anti-trust in a marginal way, when the effects are so numerous. Better to take a more stateless / path-independent approach and just find the new equilibrium, for the first rough-cut analysis.
From those perspectives, higher Gini coefficient clearly means lower median, etc.
From your other comment it looks like you agree with my conclusions, at least.
There is also the end-user to consider. Big fat salaries for engineers to create shitty/sheisty marketing/ads while squashing real innovation is not a net-benefit to society. There has to be some medium.
By that standard, Putin's russia is a "functioning talent market" since it's a corrupt oligopoly. Or the CCP. "If they have not ties to the party, they shouldnt have tried to compete". It's functionally equivalent.
If you want a functioning market, you don't want an oligopoly
That's a huge stretch so that you could pull two boogeymen into the conversation and stand them next to my argument. The big tech companies may have undesirable effects on the world but paying individuals too much isn't one of them. Literally the only complaint is that other owners can't hire for under market rate? Who cares?
I do work for a FAANG company and bear that bias, yes. I haven't always worked at a FAANG company though -- before I did I appreciated the upward pressure FAANG companies were putting on salaries.
I took another look at your comment I replied to, I must have glossed over the "If they have not ties to the party, they shouldnt have tried to compete" part. I apologize. I want to be clear that I'm not suggesting these companies shouldn't compete, I'm glad for all of the employers we have in tech. What I am suggesting is that they pay the price the market for that talent is currently willing to bear and if that results in less concentrated ownership for the ones that eventually do come to dominate the industry I won't be losing any sleep. For those that think current giants are "unbeatable" -- current FAANG companies were tiny and irrelevant 20 years ago and the industry was dominated by a different set of "unbeatable" giants.
there 's nothing to apologize for. Its understanable we all have different biases on the issue (I'm a solopreneur so not particularly inclined to side with VCs either).
Concentrating tech in a few companies in a small area may have been good for that small ecosystem but a lot of people feel left out. A lot more also feel that tech has stagnated, largely because those companies have saturated the attention levels of users and are just regurgitating slightly modified versions of the same products. As for whether they are unbeatable -- they are less beatable today than they were 20 years ago, as the market has evolved and consolidated and the low hanging fruit have been reaped, as happens in all new industries. In my view the incumbents are as old and established as car brands or banks -- the internet grew so fast that it's already old.
I think it's the other way around. One of the reasons tech companies got so big in the last 10 years is that there have been no startups emerging to compete with them because either (a) VCs have funded for the short term and encouraged exits to big companies over waiting it out for an IPO and (b) VCs have made mega funding rounds diluting out employee equity and making it a no-brainer to work for a FAANG
As an industry, going from vertical integration -> vertical modularity with interfaces that aren't just 80s microcomputers + layers of back-compat will also be revolutionary.
(How will that happen? Well say Apple is forced to allow Samsung to install iOS on their phones. You can sure bet Apple will break a gazillion interfaces to make this as difficult as possible for Samsung. But Samsung will do it anyways, and now we'll get way less legacy-encumbered commoditized building blocks as a result!)
