Since 2015, first VC financings declined 25% to 40% annually for startups operating in sectors exposed to the core activities of Google, Facebook, and Amazon
Context & Ripple Effects
Hathaway's finding puts a number on what VCs informally call the kill zone: since 2015, first financings have fallen 25%–40% annually for startups whose core activity sits in the path of Google, Facebook, or Amazon. It lands two months after the Journal counted just 1,594 US startups receiving an initial VC round in the first nine months of 2018, down 40% from 2015 — even as the median seed round swelled to $2M, roughly four times its 2013 average.
The mechanism was already visible that summer, when NYT data showed ad tech VC investment collapsing as Google and Facebook solidified their grip on digital ads. Hathaway's contribution is showing this isn't one sector's story but a systematic discount applied to any idea too close to the platforms.
First-order effects
- Founders pitching anything adjacent to search, social, or commerce now hit a thinner first-check market: VCs screen out platform-exposed ideas at the deal stage, before product risk is ever priced.
- Capital concentrates in the survivors — with far fewer first financings and a $2M median seed, the same dollars back fewer startups, raising the bar for what counts as fundable.
Second-order effects
- Categories the platforms already own consolidate rather than renew: ad tech's funding collapse pushes the field toward roll-ups and acquisitions instead of new entrants.
- With VC-backed tech IPOs at their slowest pace since the financial crisis in 2015, the realistic exit for platform-adjacent startups becomes selling to Google, Facebook, or Amazon themselves — deepening the very dependence that scared off their original investors.
Third-order effects
- If the pattern holds, startup formation structurally migrates away from platform-core activities toward sectors where Google, Facebook, and Amazon aren't competitors, and venture returns hinge on calling those safe adjacencies correctly.
- Gatekeeping over what gets built near the platforms shifts from VCs to the platforms themselves: their acquisition appetite, not independent financing, increasingly decides which platform-adjacent startups exist.
The trend: Venture capital is routing around big tech's core businesses, leaving platform-dominated categories to consolidation and making the platforms themselves the de facto arbiters of which startups get financed nearby.