The FTC Declares War on Entrepreneurs
By attacking Meta's offer to acquire Within Unlimited, the bureaucrats are eliminating the driving force behind most startups--that somebody much bigger will someday rain cash on them.
BY HOWARD TULLMAN, GENERAL MANAGING PARTNER, G2T3V AND CHICAGO HIGH TECH INVESTORS@TULLMAN
In a midterm election year, could there be a more obvious target
for politicians and their ambitious regulatory flunkies than Facebook/Meta?
Talk about low hanging fruit -- picking on the techies is always good for a
cheap shot by the know-nothings in D.C. Meta (formerly Facebook) is quite
a tasty morsel, especially since everyone already hates co-founder/CEO Mark
Zuckerberg as well as the other billionaire bros, and for a million good
reasons. Zuck, of course, seems to go out of his anhedonic way to make himself
as insufferable and unpalatable as possible. What a morale booster to tell
everyone in your company (and the world) at all-hands meetings that "there
are probably a bunch of people at the company who shouldn't be here." And
to advise them further that his feelings, if he had any, wouldn't be hurt if
they left.
So, as much as Mark and his minions sorely deserve their
comeuppances, it's still sad and disappointing, but not surprising, to see the
Federal Trade Commission sue to prevent Meta's latest minor
acquisition. Meta is trying to buy a tiny company and its video
fitness app, which is built to work with Meta's own products. This bogus action
relates to a miniscule segment of two broad markets -- fitness and training-;
with hundreds of competitors already producing similar video-augmented and
enabled fitness apps.
Lina Khan, the new wunderkind and chair at the FTC, has invented
and defined this imaginary and hyper-narrow market while carefully and stupidly
ignoring the presence of any number of other major players in these spaces. Do
the names Sony, Microsoft and Nintendo ring any bells at all for these bozos
who apparently believe that no one in the real world will notice their curious
omissions. Saying something's a market doesn't make it so unless you're doing it
for self-serving reasons, which pretty much defines this FTC.
Meta's plan is to acquire Within Unlimited, a
small virtual reality company that produces a fitness app called Supernatural,
which is specifically designed to work with Meta's own Oculus Quest headset.
The FTC objects. Or, perhaps more accurately, as Bloomberg has reported, Ms.
Khan alone objects and has ignored her own staff's recommendations against pursuing
such a fatally flawed and publicity-motivated action.
I guess in a do-nothing DC enforcement world, we should in
theory be grateful for anyone willing to act on behalf of the citizenry, but
this action is rank stupidity. With the Supreme Court blowtorching regulatory
overreach, now seems like a terrible moment to be trying to make new law,
invent bizarre market definitions and limitations, and expand the reach of any
government agency. But there's nothing better or easier for an
"aggressive" regulator to do to generate noise and headlines than to
launch a useless and time-wasting lawsuit against a giant tech company.
This action is wrongheaded for so many reasons. It actively encourages
re-inventing the wheel rather than building off existing tech. It ignores the
tremendous boost in distribution, exposure, and access the deal will provide
for the current and future offerings of Within, which would take years for any
startup to build on its own. And, most of all, the FTC ignores the best
interests of Within itself, which built a product expressly for Meta's new VR
universe.
This whole process couldn't be worse news for entrepreneurs and
startups. No self-respecting entrepreneur wants anything to do with helpful
government regulators inserting themselves into the complex and rapidly
changing marketplaces for new technologies. Thanks, but no thanks --you've
never run anything or worried about making a payroll as funds disappear.
The real problem and the underlying truth come from an earlier
tech era when an aggressive startup never knew whether Microsoft was going to
buy them or bury them. That is exactly the sweepstakes and the lottery ticket
life that every entrepreneur signs up for and dreams about. The odds are long,
the journey is even longer, but the rainbow at the end in the rarest of cases
is real and unbelievably rewarding. Going it alone rather than going for the
gold is a bad bet in 99% of the cases and everyone out there in the real
startup world knows that.
Having the FTC trying to prevent selected market-driven
transactions and "level the playing field" in emerging spaces that
their own technical personnel barely understand is every developer's worst
nightmare. Sure, the odds are harsh and the risks of being rolled over or left
behind are high, but they're no worse or more imposing than the everyday ups
and downs and challenges of building any successful business.
Bureaucrats barging in to block deals and whisk away the brass
ring at the last minute for the few young companies on the cusp of actually
winning the brutal battle to build something better than the big guys --
something so attractive that Meta would rather buy it than try to build it
themselves -- is exactly what we want to encourage, not preclude. That's what
creates the external pressures on the bigger and more complacent companies and
ultimately drives the growth and continued innovations we see all around us.
Protecting startups from themselves and the big bad tech
companies and removing the pot of gold that an acquisition represents after
years of risk, pain, and hard work is a foolish and uninformed approach that is
far more likely to discourage and diminish competition and innovation than
promote it. The smartest and best thing the FTC can do these days is to look
the other way and not try to make up for past oversights and inaction by
initiating ill-considered and damaging enforcements that will ultimately come
to nothing.