Silicon Valley disruptors: Impact of leading tech companies stifling disruptor development

Silicon Valley disruptors: Impact of leading tech companies stifling disruptor development

Summary

Silicon Valley is known for being the home of the disruptive startup, but since the likes of Google (now under the parent company Alphabet) and Facebook emerged and became companies generating vast revenues, the treadmill for disruptors appears to have struck problems. The Facebook of tomorrow so far shows few signs of emerging from what is supposed to be the home of the tech startup. Numerous reasons exist for why what has been described as the ‘kill zone’ - a point at which the big players either copy or acquire a startup company, preventing rivals from developing - exists. Included are aggressive acquisition strategies from leading players and the capacity for replication they enjoy.

Hefty market shares in online activities such as internet searches has enabled the big players’ access to a scale of resources allowing rival products to be easily and swiftly copied. Avoiding being copied is now extremely tough for promising startups, restricting the likelihood of disruptors becoming the Facebook or Google of tomorrow.

If the big names in tech - Microsoft, Alphabet or any of the others - do not copy a promising startup, frequently the decision will be taken to acquire a startup before the products in development reach the point of becoming a serious threat and source of competition.

For disruptors to survive and thrive in the business environment in any location around the world, inhabiting a climate in which new ideas can flourish and grow to rival established players is essential.

Scope

- Examines the problems disruptors are having amid copycat tactics from leading players
- Looks at the impact of aggressive acquisition strategies from major tech firms
- Assesses the business climate in Silicon Valley for disruptors
- Examines the wider effects of intense competition between major tech companies
- Analyses the arguments regarding breaking up the big tech firms

Reasons to buy

- Why do major tech companies buy so many startups?
- What impact is intense competition having on disruptors?
- Why are so many features from startups being copied?
- Would breaking up the big tech players work?
- What are the prospects for disruptors?


Overview 2
Catalyst 2
Summary 2
Disruptors struggle for attention amid copycat tactics from tech giants 6
Major players have little to lose in copying hopeful disruptors 6
Investors and startups are both struggling in predatory environment 7
Fears of copycat products from tech giants is hurting innovation 8
Big hitters are buying out startups before any disrupting can occur 9
Best route to success for startups is now to be acquired by a tech giant 9
Tech firms are buying companies to assess creating internal alternatives 10
Prospects for disuptors are diminishing in current business climate 12
Securing funding is becoming ever harder to achieve, hampering disruptor dreams of success 12
Some are beginning to leave Silicon Valley, raising fears over future prosperity as home to innovative disruptors 13
Leading players are copying one another, making it harder for new entrants 15
After Snap rebuffed being acquired, several companies raced to copy key features 15
Intensifying competition among major players is toughening life for startups 16
Breaking up major tech players would help rejuvinate innovative startups 18
Sharing data from tech giants would help disruptors become major entities in their own right 18
Regulating leading tech companies as utilities could help to develop disruptors, but political reality suggests otherwise 18
Conclusions 20
Power wielded by leading tech companies is harming hopeful disruptors 20
Appendix 21
Sources 21
Further Reading 21
Ask the analyst 22
About MarketLine 22
Disclaimer 22


List Of Figures

List of Figures
Figure 1: Facebook revenues, 2010 to 2017 ($bn) 6
Figure 2: Percentage of establishment entry into US economy 2000 to 2015 7
Figure 3: Instagram purchase by Facebook announced 9
Figure 4: WhatsApp 10
Figure 5: Cloudflare 12
Figure 6: Fattmerchant 13
Figure 7: Snapchat 15
Figure 8: Alphabet revenues ($bn) 2011 to 2017 16
Figure 9: George Soros 19


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