As most of us are well aware, Amazon is a phenomenally successful firm. But, has the giant gone too far in the way that it treats the small startups in which it invests? In this post, we look at one particular issue that has been bubbling up. It involves claims that the company aggressively uses information from those firms to develop its own products. And to cut the other companies out of the market.
In an Uneven Playing Field, Has Amazon Gone Too Far?
Recently, the Wall Street Journal did a major article on Amazon’s business practices with startups. As Dana Mattioli and Cara Lombardottioli report:
“Amazon.com’s venture-capital fund invested in DefinedCrowd Corp. Thus, it gained access to the technology startup’s finances and other confidential information. Nearly four years later, in April, Amazon’s cloud-computing unit launched an artificial-intelligence product that does almost exactly what DefinedCrowd does, said DefinedCrowd founder and Chief Executive Daniela Braga. The new offering from Amazon Web Services, called A2I, competes directly ‘with one of our bread-and-butter foundational products’ that collects and labels data, said Ms. Braga. After seeing the A2I announcement, Ms. Braga limited the Amazon.com fund’s access to her company’s data. And diluted its stake by 90% by raising more capital.”
“Ms. Braga is one of more than two dozen entrepreneurs, investors, and deal advisers interviewed by the Wall Street Journal who said Amazon appeared to use the investment and deal-making process to help develop competing products. In some cases, the decision to launch a competing product devastated the business in which it invested. In other cases, it met with startups about potential takeovers. Sought to understand how their technology works. Then declined to invest. And later introduced similar Amazon-branded products, according to some of the entrepreneurs and investors.”
“An Amazon spokesman said the company doesn’t use confidential information that companies share with it to build competing products.”
For a podcast summarizing the observations by Mattioli and Lombardottioli, press the play button.