The Tension Between Venture Capitalists and Regulatory Oversight
In a striking display of discontent, prominent venture capitalists are calling on Kamala Harris, should she ascend to the presidency, to dismiss a key regulator known for her vigorous scrutiny of Big Tech companies. While I firmly oppose their stance, I believe their criticisms highlight a more profound issue within the venture capital sphere and, by extension, our technology sector—an essential pillar of our economy and societal progress.
Venture capital, although a relatively small facet of the broader financial landscape, has historically played a pivotal role in the evolution of the modern computing age. Over the last 75 years, venture capitalists have consistently supported nascent companies, empowering them to challenge and ultimately displace established industry giants. Iconic companies such as Fairchild Semiconductor, Intel, Apple, and Google all thrived thanks to early investments from venture capital.
However, the landscape has dramatically transformed. The influence wielded by major technology incumbents has reached unprecedented levels, creating a symbiotic relationship where contemporary venture capitalists increasingly align themselves with these monopolistic firms. This shift has resulted in a concerted effort to oppose governmental regulators who are striving to foster competition within the market.
The rise of these tech monopolies can be traced back to significant policy shifts that allowed large corporations to expand unchecked. Historically, antitrust legislation, which originated in the late 19th century, was designed to maintain competitive markets by scrutinizing and curbing market consolidation. A notable example is the 1911 Supreme Court ruling against Standard Oil, which controlled nearly 90 percent of the U.S. oil market. The court determined that Standard Oil had employed predatory pricing and monopolistic practices to suppress competition, ultimately mandating the company’s breakup.
This vigilant approach began to wane in the 1970s and 1980s, as a new wave of legal scholars, influenced by free-market ideologies, argued for a self-regulating market model. The focus of antitrust enforcement shifted away from preserving competition to prioritizing consumer benefits, such as lower prices and increased product availability. Thus, if a large corporation chose to undercut a smaller competitor, it was deemed a positive outcome for consumers rather than an act of predation.
As the internet matured in the early 2000s, there was widespread optimism that it would catalyze a new era of entrepreneurship by dramatically reducing the costs associated with accessing national and global markets. Unfortunately, this hope has not materialized as expected. Instead, a small number of colossal corporations now dominate critical technology sectors. Despite a surge in entrepreneurial activity during the pandemic, the overall rates of new business formation remain significantly below the levels witnessed in 2006.
