Technology

Start-ups will suffer from antitrust bills meant to target Big Tech, VCs charge

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4 years ago

July 24, 2021

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Many lawmakers are eager to rein in the power of the largest tech companies: Amazon, Apple, Facebook and Google.

But some of their proposals could actually hurt the smaller companies they’re meant to protect, venture capitalists warned CNBC.

VCs are particularly concerned about efforts in Congress to restrict mergers and acquisitions by dominant platforms. Some of those proposals would work by shifting the burden of proof onto those firms in merger cases to show their deals would not harm competition.

While proponents argue such bills would prevent so-called killer acquisitions where big companies scoop up potential rivals before they can grow — Facebook’s $1 billion acquisition of Instagram is a common example — tech investors say they’re more concerned with how the bills could squash the buying market for start-ups and discourage further innovation.

Of course, venture capitalists and the groups that represent them have an interest in maintaining a relatively easy route to exiting their investments. A trade group representing VCs, the National Venture Capital Association, counts venture arms of several Big Tech firms among its members. (Comcast, the owner of CNBC parent company NBCUniversal, is also a member.)

But their concerns highlight how changes to antitrust law will have an impact far beyond the largest companies and how smaller players may have to adjust if they’re passed.

Why start-ups get acquired

When venture capitalists invest in a start-up, their goal is to make a large return on their spend. While most start-ups fail, VCs bank on the minority having large enough exits to justify their rest of their investments.

An exit can occur through one of two means: through an acquisition or by going public. When either of these events occurs, investors are able to recoup at least some of their money, and in the best case scenario, reap major windfalls.

About ten times as many start-ups exit through acquisitions as through going public, according to the NVCA. Venture capitalists say that number shows just how important it is to keep the merger path clear.

The top five tech firms aren’t the only ones scooping up tech deals. Amazon, Apple, Facebook, Google and Microsoft have accounted for about 4.5% of the value of all tech deals in the U.S. since 2010, according to public data compiled by Dealogic.

Reform advocates have pointed to some acquisitions, like that of Instagram by Facebook, as examples of companies selling before they have the chance to become standalone rivals to larger firms. But VCs say that’s often not the case.

“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,” said Michael Brown, general partner at Battery Ventures.

While going public is a often the goal, VCs say it can be impractical for start-ups for various reasons.

First, some start-ups may simply not have a product or service that works long-term as a standalone business. That doesn’t mean their technology or talent isn’t valuable, but just means it could be most successful within a larger business.

Kate Mitchell, co-founder and partner at Scale Venture Partners, gave the example of a company called Pavilion Technologies that made predictive technology for manufacturers and agriculture, which sold to manufacturing company Rockwell Automation in 2007.

“That’s a company that just couldn’t get to escape velocity,” she said of Pavilion. “Because they were selling globally to large plants, we couldn’t figure out how to sell the technology cost effectively.”

It was still a useful technology, but needed the infrastructure of a larger business to accelerate further, she said. After Rockwell acquired it, it became incorporated into its offerings and several employees stayed for years.

Sometimes, she said, an acquisition is a last resort before bankruptcy, and at least helps investors get some of their money back.

“It is better that they’re sold for even 80 cents on the dollar than that they go bankrupt,” she said.

In addition, going public can be difficult. The IPO process is expensive and VCs said that small cap companies often struggle on the public market in part because of the lack of analyst coverage of such businesses.

Clate Mask, co-founder and CEO of venture-funded email marketing and sales platform Keap, said greater merger restrictions on the largest companies would likely “change the calculus” for start-ups. But the shift would not be between getting and acquired and going public. Instead, he said, it could make entrepreneurs think harder about whether to raise venture funding at all.

“When you have capital behind you, you can think and operate differently,” he said, adding that entrepreneurs can take more risks with that backing.

Loss of investment and innovation

Several VCs told CNBC they were worried about the trickle-down effect that merger restrictions on the largest firms would have on the entire entrepreneurial ecosystem.

Their fear is that if companies no longer have enough viable exit paths, institutional investors that back VCs — like endowments and pension funds — will shift their money elsewhere. In turn, VCs will have fewer funds to dole out to entrepreneurs, who may see less reason to take the risk of starting a new company.

The ultimate concern is for a loss of innovation, they say, which is exactly what lawmakers are hoping to fend off with merger restrictions on the largest buyers.

“If you restrict the potential to generate exciting rewards and returns from investment, entrepreneurs could find other things to do with their time,” said Patricia Nakache, general partner at Trinity Ventures.

Nakache said placing restrictions on the largest tech firms’ ability to make acquisitions could actually discourage entrepreneurs from building companies that compete with their core businesses. That’s because many entrepreneurs like having a back-up plan incorporating possible acquirers if they can’t go public. With greater uncertainty about whether the Big Tech companies could be potential buyers, they may seek to build businesses outside of the largest players’ core offerings, she said.

VCs also warned that without the biggest players in the mix, sale prices for start-ups would drop significantly.

But outside the industry, some believe these concerns won’t be as bad as VCs fear.

“These sorts of laws, if they work as intended, you’re going to have a more competitive marketplace generally, so there’s going to be more potential buyers,” said Michael Kades, director of markets and competition policy at the non-profit Washington Center for Equitable Growth. “I get it if you’re at the VC today, what you’re concerned about is the next couple of years or what your company can get, but increasing the number of potential buyers for firms … also means that there’s still a very thriving market for these sorts of acquisitions, just not by dominant firms.”

Bhaskar Chakravorti, dean of global business at Tufts University’s Fletcher School, said while venture capitalists are probably right that acquisition prices could slide under new merger restrictions, entrepreneurs will still have a drive to innovate.

“Ultimately people are going to adapt and yes, some of the valuations, some of the bidding may be stunted. Some of the acquisitions may go for ten, 20% less,” he said. “But ultimately, I don’t think it’s going to make that much of a difference because entrepreneurs are going to go after ideas, they’re going to build them, they’re going to put together teams, and venture money needs a place to invest.”

Kades agreed that good ideas will still likely get funding even if the largest firms can’t bid on them or would have a harder time completing an acquisition. Restricting mergers from those companies is about “trying to limit the anticompetitive premium,” he said.

Shifting capital

VCs are also concerned the new rules could accelerate the shift of venture investment outside the U.S.

Mitchell said while other countries including Canada have been adding incentives for entrepreneurs to come and stay in their borders, regulations under consideration in the U.S. will push them away.

“We would be making it difficult just at a time when everyone else is trying to make it attractive” to be an entrepreneur in their country, she said.

According to the NVCA, the U.S. has seen its share of global venture capital fall from 84% to 52% in the last 15 years. That’s why lawmakers shouldn’t rest on their laurels that U.S. venture capital can keep up with the rest of the world under new arduous regulations, VCs contend.

But Chakravorti disagreed the merger laws would push investment outside the U.S., as many alternatives are worse.

“There are very few alternative locations,” he said. Exits in China would come with heightened scrutiny, and Europe is known for a more heavy-handed approach on business regulation.

Still, Brown said, should stricter merger laws pass, he would have to consider casting a wider net for potential buyers when it comes time to exit an investment. That could include more international buyers than he’d otherwise consider.

Nakache said should merger reforms pass, she may consider investing more heavily in start-ups whose potential acquirers wouldn’t be impacted by the laws. For example, if enterprise platforms like Salesforce or Oracle didn’t meet the threshold for stricter merger enforcement, VCs might shift spending from areas like search and social media to software as a service.

Open to some reforms

Some of the VCs interviewed by CNBC felt existing antitrust laws were adequate, but others acknowledged that reforms outside of mergers could be beneficial.

Restrictions on platforms leveraging data they collect to compete with businesses that rely on them is one example that could help level the playing field if done correctly, Nakache suggested.

Mitchell said the most helpful change would be to create more consistency in enforcement of the antitrust laws, particularly from one administration to the next.

Mask, the Keap CEO, said he’s not opposed to Congress taking some action to curb Big Tech companies’ power, but that most entrepreneurs recognize those firms overall “are good for the ecosystem.”

“Those Big Tech companies are helpful in driving a lot of the momentum of the overall sector,” he said. “And I think to have them broken up in some kind of extreme aggressive way I’m not sure is a great thing either.”

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Technology

The investor behind Opendoor’s 190% run nearly shut down his fund

Published

23 mins ago

July 18, 2025

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The investor behind Opendoor's 190% run nearly shut down his fund

Courtesy: Opendoor

On June 6, online real estate service Opendoor was so desperate to get its beaten-down stock price back over $1 and stay listed on the Nasdaq that management proposed a reverse split, potentially lifting the price of each share by as much as 50 times.

The stock inched its way up over the next five weeks.

Then Eric Jackson started cheerleading.

Jackson, a hedge fund manager who was bullish on Opendoor years earlier when the company appeared to be thriving and was worth roughly $20 billion, wrote on X on Monday that his firm, EMJ Capital, was back in the stock.

“@EMJCapital has taken a position in $OPEN — and we believe it could be a 100-bagger over the next few years,” Jackson wrote. He added later in the thread that the stock could get to $82.

It’s a long, long way from that mark.

Opendoor shares soared 189% this week, by far their best weekly performance since the company’s public market debut in late 2020. The stock closed on Friday at $2.25. The stock’s highest-volume trading days on record were Wednesday, Thursday and Friday of this week.

Jackson said in an interview on Thursday that the bulk of his firm’s Opendoor purchases came when the stock was in the 70s and 80s, meaning cents, and he’s bought options as well for his portfolio.

Nothing has fundamentally improved for the company since Jackson’s purchases. Opendoor remains a cash-burning, low-margin business with meager near-term growth prospects.

What has changed dramatically is Jackson’s online influence and the size of his following. The more he posts, the higher the stock goes.

“There’s a real hunger for buying the next big thing,” Jackson told CNBC, adding that investors like to find the “downtrodden.”

It’s something Jackson’s firm, based in Toronto, has in common with Opendoor.

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When Opendoor went public through a special purpose acquisition company in 2020, it was riding a SPAC wave and broader gains driven by low interest rates and Covid-era market euphoria. Investors pumped money into the riskiest assets, lifting money-losing tech upstarts to astronomical valuations.

Opendoor’s business involved using technology to buy and sell homes, pocketing the gains. Zillow tried and failed to compete.

Opendoor shares peaked at over $39 in Feb. 2021 for a market cap just above $22.5 billion. But by the end of that year, the shares were trading below $15, before collapsing 92% in 2022 to end the year at $1.16.

Rising interest rates hammered the whole tech sector, hitting Opendoor particularly hard as increased borrowing costs reduced demand for homes.

Jackson, similarly, had a miserable 2022, coinciding with the worst year for the Nasdaq since 2008. Jackson said his key client withdrew its money at the end of the year, and “I’ve been small ever since.”

‘Epic comeback’

While his assets under management remain minimal, Jackson’s reputation for getting in early to a rebound story was burnished by the performance of Carvana.

The automotive e-commerce platform lost 98% of its value in 2022 as investors weighed the likelihood of bankruptcy. In the middle of that year, with Carvana still far from bottoming out, Jackson expressed his bullishness. He told CNBC that April that he liked the stock, and then promoted its recovery on a podcast in June. He also said he liked Opendoor at the time.

Investors willing to stomach further losses in 2022 were rewarded with a 1,000% gain in 2023, and a lot more upside from there. The stock closed on Friday at $347.52, up from a low of $3.72 in Dec. 2022, and almost triple its price at the time of Jackson’s appearance on CNBC in April of that year.

After Carvana’s 2022 slide, “then obviously began an epic comeback,” Jackson said. Opendoor, meanwhile, “continued to roll down the mountain,” he said.

Jackson said that the fallout of 2022 led him to pursue a different method of stockpicking. He started hiring a small team of developers, which is now four people, to build out artificial intelligence models. The firm has experimented with several models —some have worked and some haven’t — but he said the focus now is using what he’s learned from Carvana to find “100x” opportunities.

In addition to Opendoor, Jackson has been promoting IREN, a provider of power for bitcoin mining and AI workloads, and Cipher Mining, which is in a similar space. He’s seen his following on Elon Musk‘s social media site X, which he said was stuck for years between 32,000 and 34,000, swell to almost 50,000. And after a lengthy lull, investors are reaching out to him to try and put money into his fund, he said.

Jackson has a lot riding on Opendoor, a company that saw revenue and number of homes sold slip in the first quarter from a year earlier, and racked up almost $370 million in losses over the past four quarters.

In early June, Opendoor announced plans for a reverse split — ranging from 1 for 10 to 1 for 50 — to “give us optionality in preserving our listing on Nasdaq.” With the stock now well over $1, such a move appears less necessary, as shareholders prepare to vote on the proposal on July 28.

“I think it’s a terrible idea,” said Jackson. “Those things usually further cement a company’s move into oblivion rather than hail some big revival.”

Opendoor didn’t respond to a request for comment.

Banking on growth

Analysts are projecting a more than 5% drop in revenue this year, followed by 20% growth in 2026 and 12% expansion in 2017, according to LSEG. Losses are expected to narrow over that stretch.

Jackson said his analysis factors in projections of $11.5 billion in revenue for 2029, which would be well over double the company’s expected sales for this year. He looked at the multiples of companies like Zillow and Carvana, which he said trade for 4 to 7 times forward revenue. Opendoor’s forward price-to-sales ratio is currently well below 1.

With Zillow and Redfin having exited the instant-buying home market, Opendoor faces little competition in allowing homeowners to sell their property online for cash, rather than going through an extended bidding, sales and closing process.

Jackson is banking on revenue growth and increased market share to lead to a profitable business that will push investors to value the company with a multiple somewhere between Zillow and Carvana. At $82, Opendoor would be worth about $60 billion, which is roughly 5 times projected 2029 revenue.

Jackson said his model assumes that “like Carvana, Opendoor can prove that it can permanently turn the tide and get to sustained profitability” so that the “market multiple would get reassessed.”

In the meantime, he’ll keep posting on X.

On Friday, Jackson wrote a thread consisting of 11 posts, recounting the challenge of having “99.5% of my AUM” disappear overnight after his primary investor pulled out in 2022.

“Translation: he fired me for losing him too much money,” Jackson wrote. He said he almost shut down the fund, and was even encouraged to do so by his wife and accountant.

Now, Jackson is using his recent momentum on social media to try and attract investor money, while still reminding prospects that he could lose it.

“All I have is my reputation,” he wrote, “and, unless I keep picking good stocks, it will be gone.”

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Technology

Astronomer board investigating CEO Andy Byron after viral Coldplay kiss cam video

Published

1 hour ago

July 18, 2025

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Astronomer board investigating CEO Andy Byron after viral Coldplay kiss cam video

PERTH, AUSTRALIA – NOVEMBER 18: Chris Martin of Coldplay performs on stage at Optus Stadium on November 18, 2023 in Perth, Australia. (Photo by Paul Kane/Getty Images)

Paul Kane | Getty Images Entertainment | Getty Images

Astronomer, a provider of open-source technologies that was hardly known until this week, said on Friday that it’s launched an investigation after CEO Andy Byron was shown on video at a Coldplay concert in an intimate embrace with the company’s head of human relations.

“The Board of Directors has initiated a formal investigation into this matter and we will have additional details to share very shortly,” the company said in a post on X.

“Our leaders are expected to set the standard in both conduct and accountability,” the company said.

The post comes a day after videos went viral on social media that showed Byron on a big screen at the concert in Boston. Byron, who is married, had his arms around Kristin Cabot, the company’s chief people officer.

Seconds after showing up on the big screen, the pair ducked and hid their faces.

Ether and trading stocks take the crypto spotlight as Congress passes historic stablecoin bill

Published

6 hours ago

July 18, 2025

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Ether and trading stocks take the crypto spotlight as Congress passes historic stablecoin bill

Jonathan Raa | Nurphoto | Getty Images

Ether and other crypto related stocks climbed to end the week as the GENIUS Act heads to President Donald Trump’s desk to be signed into law. Bitcoin and its proxies took a breather.

The price of ether was last higher by 3.6% at $3,558.68, according to Coin Metrics, trading at highs not seen since January.

On Thursday, ETFs tracking the price of ether saw daily inflows top those of bitcoin ETFs for the first time ever. The funds logged $602 million in net inflows, led by BlackRock’s iShares Ethereum Trust (ETHA). Bitcoin ETFs on the same day saw inflows of $522 million. A day earlier, the ETH funds saw a single-day record inflow of $726.7 million.

Stocks tied to crypto trading gained as well. Coinbase rose 4%, hitting an all-time intraday high surpassing its initial pop on its IPO date in 2021, and pacing for its fifth positive week in a row. Robinhood also added 4%. Ether treasury stock Bitmine Immersion continued its rally, jumping 12% Friday.

Meanwhile, the price of bitcoin slipped 1%. Bitcoin treasury giant Strategy, formerly MicroStrategy, fell 4% and Mara Holdings, the mining company and bitcoin proxy, hovered under the flat line.

Ether has advanced 19% this week, bringing its two week gain to about 43.6% — its strongest two-week period since August 2021. Bitcoin is down less than 1% for the week.

“No coin seems to have more [momentum] than Ethereum of late,” Wolfe Research’s Read Harvey said in a note this week. “We began suggesting it was time to start gaining exposure in May, as ETH began to show some life relative to BTC. Fast forward to today, and we’re not just seeing life, but a potential trend reversal.”

Now trading near five-month highs relative to bitcoin, the leadership pendulum in crypto may be shifting, he added.

On Thursday, the House passed a bundle of crypto bills, sending one, the stablecoin legislation known as the GENIUS Act, to President Trump’s desk. It is expected to be sign into law Friday afternoon and become the first ever piece of major crypto legislation in the U.S.

“This is the biggest deal in crypto so far this year, up there with the change in the SEC – it’s the first crypto-focused law in the history of the United States, home to the largest financial market in the world. Just the symbolism alone is worth getting excited about,” said Noelle Acheson, economist and author of the Crypto is Macro Now newsletter.

Being law rather than an agency ruling “means that future Administrations will not be able to easily overturn its provisions. Should any try, by then stablecoins will be so deeply embedded in the global financial landscape, it would be futile,” she added.

House lawmakers also passed a second, much broader crypto market structure bill, the CLARITY Act, that will now go to the Senate.

House passes crypto market structure bill

On Thursday, BlackRock also filed with the SEC to include staking to its ETHA ether ETF, which also boosted sentiment for crypto’s second largest coin.

—With reporting by CNBC’s Nick Wells and Adrian van Hauwermeiren