After a yearslong drought, a wave of technology startups — Uber, Lyft, Pinterest and more — are going public, evidence that the sector is thriving. But there's a shadow hanging over almost all of them.
Seventeen of the 22 tech initial public offerings that aimed to raise $100 million or more in the last 18 months mention Amazon or Google — and sometimes both — as a competitor or risk to their business.
Many, such as cybersecurity software maker Tenable Holdings, are operationally dependent on Amazon's cloud. Others, such as photo-collection site Pinterest, compete directly with one of the giants, in this case Google's image search.
Critics, including U.S. Democratic presidential candidate Sen. Elizabeth Warren, said big-tech companies have created a "kill zone" that prevents startups from getting past a certain size without being bought or pushed out of business. But filings from newly public tech startups suggest a more nuanced picture is emerging: Companies can escape the "kill zone." But if they do, they're likely beholden to the tech giants in other ways.
Consider Lyft. The ride-sharing company needs to get people to download its app, so it turns to the biggest advertising system in the world — Alphabet Inc.'s Google.
In 2018 alone, Lyft spent more than $90 million on Google ads. Those ads sent people to Google and Apple-owned app stores. When they open the app, the map they see inside is driven by Google technology, for which Lyft also pays. Much of Lyft's systems run on Amazon's cloud — to the tune of $300 million in fees through 2021. Moreover, Google owns more than 5% of Lyft.
"Some of our competitors or technology partners may take actions which disrupt the interoperability of our platform with their own products or services," Lyft said in a filing. "We expect the types and levels of competition to increase."
It's true that big-tech companies helped create the current wave of startups. Cloud providers such as Amazon Web Services make it possible for businesses to grow quickly without having to build their own server farms. Google and Facebook enable companies to target likely customers. But as the tech giants expand and enter new markets, they are increasingly disrupting smaller businesses they may have helped foster.