VCs warn that startups may suffer antitrust bills targeted toward Big Tech

US lawmakers have kept close tabs on big tech companies including Amazon, Apple, Facebook and Google, over antitrust issues. There have been several proposals to curb the excesses of these companies — proposals which could actually affect the smaller companies that the laws are supposedly meant to protect.

Venture capitalists warn that these smaller companies might just be caught in the middle of two powers — the government and the largest tech companies. These VCs are particular about lawmakers' decision to restrict mergers and acquisitions by dominant platforms, according to CNBC. Some of the proposals would require shifting the burden of profit to smaller firms in merger cases to prove that the deals would not sabotage competition. 

There are also growing concerns among tech investors who say the bills could destroy the buying market for startups and discourage further innovation. Their concerns are despite the proponents argument that the proposals would prevent so-called killer acquisitions where big companies acquire growing companies with potentials before they can grow. A typical example is Facebook's acquisition of Instagram and WhatsApp.

Reform advocates say the instance of Facebook and Instagram is not always the case for many of these startups with potentials. Bigger companies have market leverage and industry expertise to grow smaller companies better than the companies would if left on their own.

"They all think they could be public companies one day, but the realities are, it's not realistic for most of these companies to achieve the size and scale to survive the public markets as of today," Michael Brown, general partner at Battery Ventures.

On the contrary, many of these startups are likely to fail and an acquisition deal is an exit strategy for them. VCs that invest in such startups take the risk of putting their money in them with hopes to make large returns. Even if the startups fail, the VCs can still bank on the startups having a exit strategy to fall back on.

If the bills are passed, some VCs have said that they would exit their investments in affected companies. The National Venture Capital Association, a trade group representing VCs counts several big tech in its portfolio including Comcast, the owner of CNBC parent company NBCUniversal.