During my many years in the venture ecosystem I’ve never met a startup that did not rely on the capabilities of Big Tech for the core of its offering. This goes for AWS or Google Cloud powering back-end infrastructure; Facebook and Google Ads driving customer acquisition; GitHub facilitating software development; or most recently, Open AI powering their automagical analytics or content.
This growing dependence brings up questions about the vulnerability of startups that place too much trust in our Tech Overlords. Here are some of my concerns.
Digital sovereignty is under threat
There are many definitions floating around, but I use the term “digital sovereignty” somewhat uniquely. In a broad sense, it’s the ability to control and manage one’s digital environment – data, technology, and digital infrastructure. For startups, this means being able to operate independently of Big Tech, owning their digital capabilities.
There are many reasons why startups find themselves reliant on Big Tech. These platforms offer affordable, scalable, and robust services that can be quickly implemented, saving startups time and resources.
The obvious risks of this dependence are the potential for sudden changes in terms of service, positioning, or pricing models. For example, a startup using a cloud service provider may find themselves facing a substantial fee increase with little warning.
Similarly, a change in an advertising platform’s algorithm could result in reduced visibility of one’s products or services. Let’s take a far-fetched example of a ripped-from-the-comics super villain billionaire who buys, rebrands, and effectively kills the social media platform on which you built your audience and your product.
Control over data privacy and security
Another obvious concern is data privacy and security. By relying on Big Tech for services, you do not fully control data. This can expose you and your users to data breaches that could result in reputational damages and loss of customer trust.
There’s also the risk of becoming collateral damage in Big Tech’s slugfests. Large tech companies that face antitrust scrutiny, lawsuits from their competitors, or political pressures, might change policies or restrict access to their platforms, inadvertently hurting your startup.
But, the major risk that most early-stage companies overlook, especially startups helmed by immigrant founders, is “strategic clonings” of their ideas.
All U.S.-based Big Tech companies, including The Big 4 – Amazon, Apple, Facebook, and Google – have reached their colossal sizes not by growing their original businesses but through hundreds, if not thousands of strategic acquisitions and “strategic clonings” of other startups.
Apple’s first acquisition was in 1988, and according to media like the Wall Street Journal their cloning might go back nearly as far. Amazon’s acquisitions began in 1998 and they continually clone everything, from backpacks that startups sell on the marketplace to allegedly proactively looking at the traction of products hosted on its AWS platform, and copying the successful ones. Google has similarly been acquiring and cloning since 2001, and many say that Facebook itself is a clone of another startup.
The main risk that any startup takes by “opening their kimonos” to Big Tech is exposing confidential information that could be used to build competing products or get undue leverage in negotiations.
Diversifying your digital dependencies
In light of these risks, it’s important for startups to consider their digital sovereignty. This doesn’t mean completely severing ties with Big Tech. Rather, I suggest adopting a balanced approach where you leverage the benefits of Big Tech while developing in-house capabilities and data control strategies.
You can start by diversifying your digital dependencies so that you are not overly reliant on one platform. You should also invest in building in-house technical expertise, where feasible. Lastly, place a high priority on data management practices to ensure that you maintain control.
You should also be careful not to succumb to a state of digital serfdom. I recommend that you aim for a balanced approach, leveraging the advantages of Big Tech but concurrently developing in-house capabilities.
Pursuing autonomy offers startups resilience and flexibility in an increasingly uncertain and competitive digital landscape. Achieving a balance between reliance on Big Tech and maintaining digital sovereignty could be the key to long-term success.