Congress is writing a bill right now to make it harder for big tech companies to buy startups. Ironically they want to promote competition, but this will inevitably hurt innovation and competition for some very obvious reasons:
1. Let’s say a new startup called WhatsUp launches and Meta decides it’s a very important market. Now, instead of Meta even considering that they should acquire WhatsUp and dramatically benefit WhatsUp’s investors and employees financially, this law forces them to copy the app.
2. Now, WhatsUp has an instant large scale competitor in the category, and they are looking for help from someone else with resources to compete with Meta. Well, also because of this law, Meta’s big tech competitors likely won’t be suitors due to the regulatory complexity.
3. Sucks for WhatsUp, but that’s competition, oh well. But then, when the next great new social product innovation pitches investors that were involved in WhatsUp, they’re too spooked to invest. Why take the risk that your asset can only go public as its only exit opportunity?
4. And soon, before you know it, entire categories of software are just “off limits” for new invocation and well funded startups because large incumbents already exist in that market. Ultimately, ironically, doing exactly the opposite of what the bill was intended to do.
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