The Problem With The Platforms

Giant tech companies love founders. Until they start getting too successful.

- Jeff Bercovici

Jeremy Edberg has some advice: Don’t build a business on Amazon’s digital turf. Edberg, a veteran infrastructure architect for Netflix, Reddit, and PayPal, has seen the movie many times: A software startup launches, catering to the millions of companies that use Amazon Web Services, and quickly attracts customers—and then Amazon, with its God’s-eye view of its platform, spots it and trots out a cheaper product boasting full AWS integration. Within six months, the startup folds. But, contrary to his own advice, Edberg chose to build his new cloud-management startup, MinOps, on the AWS platform. “My hope is I can diversify faster than they can build the same functionality,” he says. 

These days, what can founders do but hope? Starting a business now invariably means going through one or more of the biggest tech companies: Amazon, Apple, Facebook, Google. Those giants say they give startups what they crave— instant access to vast markets, efficient ads, cheap and reliable infrastructure. This isn’t a fiction. Tech startups once bought servers; now they rent Amazon’s and Google’s cloud computing power. Facebook is the most cost-effective marketing tool in history. Apple’s and Google’s app stores let developers reach hundreds of millions of customers overnight; Amazon Marketplace does the same for makers of physical products. “You can get wind in the sails for an early stage idea much faster, and at lower cost, than ever before,” says Justin Hendrix, executive director of NYC Media Lab.