Startups also provide brand isolation. If you get the Microsoft AI to say things it shouldn't say then that tarnishes the MS brand, if a MS associated startup has prompt hacks, then there is a layer of isolation.

Large companies are sadly not good at innovating themselves, probably this is an emergent effect from the size alone and the bureaucracy such size sadly requires. Especially when people sue you for millions when you search their name and lies show up, you must erect barriers. You also cannot let every PM in the company launch potentially disappointing products. Instead proposals need to get reviewed at least from legal points of view, but usually by a larger set of departments.

By the time half of the reviews are done, the competing startup has already launched the product, gotten direct user feedback, and established itself as the "innovator", all this while the big tech company where someone might have had the same idea is busy with getting it through its bureaucracy.