Silicon Valley Disruptors: Impact of Leading Tech Companies Stifling Disruptor Development

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.

Key Questions Answered:

– 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?


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 are essential.

Reasons to buy


Table of Contents

Table of Contents

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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