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Comment by barnabee | Hacker News Reader

This argument makes absolutely no sense to me.

The large tech acquirers have extremely high market valuations partly because of the expectation that they continue to get away with doing exactly this.

If we had more competent competition regulators and this sort of acquisition was basically not on the cards at all, ever, once a company reaches a certain size then that value would stay in the innovating startups until they IPO or are acquired by a smaller, less predatory/monopolistic company. Either way there’s still an attractive exit.

We need to stop inventing reasons to tolerate and justify this behaviour that is clearly bad for society and start pushing for a more diverse tech ecosystem with proper antitrust enforcement.

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I don't want to get into an argument with you and didn't explain the argument very well, however, it's not as if I'm just coming up with weird opinions on my own here.

The basis of my argument comes from the director of competition policy at the International Center for Law & Economics, who explains it all in depth here: https://www.ft.com/content/b7fdbb35-e104-47bf-9e03-ef5d8b324...

  > Moreover, start-ups depend on acquisitions. Along with
  > an initial public offering, being bought is the main 
  > way entrepreneurs and venture capital investors can 
  > “exit” the firms they have built. The harder it is to 
  > sell your company, the harder it is to make a 
  > return. Fifty per cent of US start-up executives said
  > that being acquired was a long-term goal, and 90 per
  > cent of US start-up exits in 2008-18 happened thanks
  > to acquisitions. 
  >
  > Empirical evidence suggests investment in start-ups is 
  > sensitive to rules on acquisitions. One paper found 
  > venture capital activity grows by about 40-50 per cent 
  > in countries that enact pro-takeover laws, and US states
  > that introduced anti-takeover laws saw a 27 per cent 
  > decline in VC investment deals compared with those that 
  > did not.

Interesting and fair enough, certainly should be a consideration.

Obviously it's easy to think of laws that could be enacted that would make founding a startup more attractive and increase the number of startups and amount of investment in them that everyone would agree would still be bad and shouldn't exist.

This is obviously not such a clear case, but I personally fall on the side that reducing startup formation/investment would be an ok price to pay here.

I have some (but not 100%) confidence that this could mostly or entirely be offset by other improvements such as making going public easier for smaller companies (perhaps similar to London's AIM for example) or creating market/tax incentives that favour startups and smaller companies, and/or penalise companies that become larger, especially by acquiring other companies or entering many relatively unrelated/independent verticals.

> This argument makes absolutely no sense to me.

There are some business models where acquisition is the only viable way to make money.

Deepmind, Shazam, and Giphy were largely valuable because they create value for other big tech companies with respect to customer acquisition, market positioning and intellectual property. These companies had limited ability to make profits on their own.

One can still argue though that such acquisitions are still against the public interest even if they’re helpful to a class of startups.

Seems like companies that could have made money through licensing their product instead of being bought out?

The licensing would need to be exclusive and long term, otherwise the big tech companies would've (and should've) feared the risks of being deeply integrated and dependent on a third party.

Google would never have allowed a third party to use search results as training data, for example. Shazam might've had more flexibility unless Apple wanted to link it with customer data.

Exclusive long term licensing is effectively acquisition by another name.

>There are some business models where acquisition is the only viable way to make money.

Maybe so, but blocking a dominant company from buying out its closest competitor is not quite the same thing as banning all acquisitions.

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