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Instagram had 13 employees[1] when FB bought it. IDK how you stop that kind of anticompetitive behavior without removing one of the big VC exit strategies. [1]

Instagram had 13 employees[1] when FB bought it. IDK how you stop that kind of anticompetitive behavior without removing one of the big VC exit strategies. [1]: https://www.businessinsider.com/instagram-first-13-employees-full-list-2020-4#maykel-loomans-was-one-of-three-employees-who-joined-instagram-right-before-it-was-acquired-1 https://www.businessinsider.com/instagram-first-13-employees...

gizmo686 3y ago
Who says you cannot remove the exit strategy? A business model of selling out to the monopolist is not innovation; it is a few investors extracting protection money from the monopolist. To the extent that VC produces genuine innovation, they should be able to extract profit by either drawing dividends from the profitable company they own, or selling their share on the open market to other investors who anticipate being able to collect dividends. That we have a whole class of investors whose strategy is to sell to a few monopolistic firms seems like a clear indication that the market is not healthy.
- JumpCrisscross 3y ago
  If exit to the dominant player is prohibited, and competing against them is prohibitive, you’re not going to get new entrants. This strengthens the incumbents’ positions. Blocking M&A (of start-ups) before committing to break-ups is worse than doing nothing at all.
  - bogwog 3y ago
    > competing against them is prohibitive Can you explain this part? Do you mean it's prohibited, as in the FTC's actions/policies mean small companies are not allowed to compete? Or do you mean that it is difficult, as in small companies are not able to compete? Part of the reason big tech does so many acquisitions is to reduce the amount of competition they face from what they see as competitive threats. We might not see startups with broken/unsustainable business models anymore, but that's a good thing. If big tech can't buy out their competition, they will need to actually compete. History has shown that entrenched monopolists can't compete with smaller and more innovative companies. Consumers and the economy will benefit more from those types of companies growing into their own things rather than merging them into the existing big tech behemoths. What would the world look like today if Facebook (or any other giant) wasn't allowed to acquire Instagram? Instagram could've continued to grow, they could've acquired more funding, poached users from Facebook, etc. That could've inspired some other social media startups, and they'd be fighting it out with Instagram/Facebook too. Everybody (except maybe Facebook) wins in that situation. Alternatively, imagine where TikTok would be right now if they were an American company and Facebook actually had the opportunity to buy them out early?
- deleted 3y ago
  [deleted]
bogwog 3y ago
> without removing one of the big VC exit strategies Are you saying that's a strategy that we should try to preserve? As a user of tech, have you never been screwed when a company suddenly got acquired by a tech giant and then went to shit/got shutdown/etc? This kind of thing leads to unsustainable bullshit companies that always end up harming consumers and markets in the long run.
theptip 3y ago
It was obvious at the time that FB buying IG was anti-competitive. Anyone not operating the main social network at the time could have bought them without competition concerns, or they could still have IPO’d. Sure, by enforcing this you decrease in expectation the maximum payout for a startup, but you plausibly increase the viability of small/medium payouts and viable non-VC models like bootstrapping.
- jldugger 3y ago
  I figure the tricky part is figuring out a rule that doesn't make buying any struggling 13 person startup an FTC enforcement risk.

gizmo686 3y ago

Who says you cannot remove the exit strategy? A business model of selling out to the monopolist is not innovation; it is a few investors extracting protection money from the monopolist. To the extent that VC produces genuine innovation, they should be able to extract profit by either drawing dividends from the profitable company they own, or selling their share on the open market to other investors who anticipate being able to collect dividends. That we have a whole class of investors whose strategy is to sell to a few monopolistic firms seems like a clear indication that the market is not healthy.

JumpCrisscross 3y ago
If exit to the dominant player is prohibited, and competing against them is prohibitive, you’re not going to get new entrants. This strengthens the incumbents’ positions. Blocking M&A (of start-ups) before committing to break-ups is worse than doing nothing at all.
- bogwog 3y ago
  > competing against them is prohibitive Can you explain this part? Do you mean it's prohibited, as in the FTC's actions/policies mean small companies are not allowed to compete? Or do you mean that it is difficult, as in small companies are not able to compete? Part of the reason big tech does so many acquisitions is to reduce the amount of competition they face from what they see as competitive threats. We might not see startups with broken/unsustainable business models anymore, but that's a good thing. If big tech can't buy out their competition, they will need to actually compete. History has shown that entrenched monopolists can't compete with smaller and more innovative companies. Consumers and the economy will benefit more from those types of companies growing into their own things rather than merging them into the existing big tech behemoths. What would the world look like today if Facebook (or any other giant) wasn't allowed to acquire Instagram? Instagram could've continued to grow, they could've acquired more funding, poached users from Facebook, etc. That could've inspired some other social media startups, and they'd be fighting it out with Instagram/Facebook too. Everybody (except maybe Facebook) wins in that situation. Alternatively, imagine where TikTok would be right now if they were an American company and Facebook actually had the opportunity to buy them out early?
deleted 3y ago
[deleted]

bogwog 3y ago

> without removing one of the big VC exit strategies Are you saying that's a strategy that we should try to preserve? As a user of tech, have you never been screwed when a company suddenly got acquired by a tech giant and then went to shit/got shutdown/etc? This kind of thing leads to unsustainable bullshit companies that always end up harming consumers and markets in the long run.

theptip 3y ago

It was obvious at the time that FB buying IG was anti-competitive. Anyone not operating the main social network at the time could have bought them without competition concerns, or they could still have IPO’d. Sure, by enforcing this you decrease in expectation the maximum payout for a startup, but you plausibly increase the viability of small/medium payouts and viable non-VC models like bootstrapping.

jldugger 3y ago
I figure the tricky part is figuring out a rule that doesn't make buying any struggling 13 person startup an FTC enforcement risk.