Headline September 18, 2018/ '' ' STARTUPS FOR SERENADES ' "

'' ' STARTUPS FOR SERENADES ' "

ANOTHER SOURCE of market information comes from investing in startups, which helps tech firms gain insights into new markets and possible disrupters.

Of all American tech firms, Alphabet has been the most active. Since 2013 it has spent $12.6 billion investing in 308 startups.

Startups generally feel excited about gaining experience from such a successful firm, but some may rue the day they accepted funding, because of conflicts.

Uber, for example, took money from one of Alphabet's venture capital funds, but soon found itself competing against the giant's self-driving car unit, Waymo.

Thumbtack, a marketplace for skilled workers, also accepted money from Alphabet, but then watched as the parent company rolled out a competing service, Google Home Services.

AMAZON AND APPLE invest less in startups, but they too have clashed with them. Amazon  invested in a home intercom system, called Nucleus and then rolled out a very similar product of its own last year.

Recruiting is a second tool that giants will use to enforce their kill zones.

Big tech firms are are able to shell out huge sums to keep top performers and even average employees in their fold and make it uneconomical for their workers to join consider joining startups.

In 2017 Alphabet, Amazon, Apple, Facebook and Microsoft allocated a combined a whopping $23.7 billion to stock based compensations.

Big companies' hoardings of talent stops startups scaling quickly.

According to Mike Volpi of Index Ventures, a venture-capital firm, startups in the firm's portfolio are currently 10-20% behind in their hiring goals for the year.

A third reason that startups may struggle to to break through is that there is no sign of a new platform emerging which which could disrupt the incumbents, even more than a decade after the rise of mobile.

For example, the rise of mobile wounded Microsoft, which was dominant on personal computers, and gave power to to both Facebook and Google, enabling them to capture more online ad dollars and attention.

But there is no big new platform today. And the giants make it extremely expensive to get attention.

Facebook, Google and Amazon all charge a hefty toll for new apps and services to get in front of consumers.

Seeing little opportunity to compete with the tech giants on their own turf, investors and startups are going where they can spot an opening.

The lack of an incumbent is one reason why there is so much investor enthusiasm for crypto-currencies and for synthetic biology today.

But the giants are starting to pay more attention. There are rumours Facebook wants to buy Coinbase, a cryptocurrency firm.

Regulators will be watching what the giants try next.

Criticism that they have been too lax in approving deals where where tech firms buy tiny competitors that could one day challenge them has been mounting.

Facebook's acquisition of Instagram and Google's purchase of YouTube, before it was obvious how the pair might might have taken on the giants, might well have been blocked today.

To fight against the Kill-zone, regulators must closely consider what weapons to wield themselves.

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