Amazon met with startups about investing, then launched competing products(wsj.com)
wsj.com
Amazon met with startups about investing, then launched competing products
https://www.wsj.com/articles/amazon-tech-startup-echo-bezos-alexa-investment-fund-11595520249
351 comments
There's no way to really know how true this is but it certainly feels true if you're on the startup side - however most startups just aren't being realistic with themselves, and thinking they are special.
For example, my previous company brought our 6DOF MonoSLAM SDK, 3D model processor and OpenGL viewer to Amazon from 2014-2017 pitching the "AR View" functionality that they eventually put in 2017 [1].
Was that a result of us coming and pitching it? Probably not because that use case and stack wasn't a novel concept even back to 2010. So the concept and stack was certainly there for them to do on their own.
What we DID provide to Amazon however was a significant data point (based on our user velocity/interaction metrics and the rate of increase of 3D model generation from retailers) about whether the market was ready for that feature - and so they said ok it's probably time to do this. It just so happened that the cost of implementing it crashed to basically "trivial" in 2017 with the introduction of ARKit and so it was a no-brainer for them to roll out for a few years.
What's the takeaway? These big companies aren't dumb, your idea isn't that novel and they probably have the team and technology to do it better than you for cheaper.
[1] https://www.theverge.com/2017/11/1/16590160/amazon-furniture...
For example, my previous company brought our 6DOF MonoSLAM SDK, 3D model processor and OpenGL viewer to Amazon from 2014-2017 pitching the "AR View" functionality that they eventually put in 2017 [1].
Was that a result of us coming and pitching it? Probably not because that use case and stack wasn't a novel concept even back to 2010. So the concept and stack was certainly there for them to do on their own.
What we DID provide to Amazon however was a significant data point (based on our user velocity/interaction metrics and the rate of increase of 3D model generation from retailers) about whether the market was ready for that feature - and so they said ok it's probably time to do this. It just so happened that the cost of implementing it crashed to basically "trivial" in 2017 with the introduction of ARKit and so it was a no-brainer for them to roll out for a few years.
What's the takeaway? These big companies aren't dumb, your idea isn't that novel and they probably have the team and technology to do it better than you for cheaper.
[1] https://www.theverge.com/2017/11/1/16590160/amazon-furniture...
Amazon announced a copycat of us pretty quickly after we went through YC. I suspect it’s not some sinister top-down thing (unless they are actually reading all YC company descriptions). Most likely, the copycats are ambitious, unoriginal PMs pitching some budget.
We facilitate subscriptions using a smart scale, and it works way better than a Dash button (Bottomless.com, YC W19). I’m actually surprised they haven’t launched yet and are taking so long.
It’s pretty wild, the hardware on their launch page is exactly like ours, only they're so slow that it’s a copy of two versions ago and hasn’t even hit the market.
We facilitate subscriptions using a smart scale, and it works way better than a Dash button (Bottomless.com, YC W19). I’m actually surprised they haven’t launched yet and are taking so long.
It’s pretty wild, the hardware on their launch page is exactly like ours, only they're so slow that it’s a copy of two versions ago and hasn’t even hit the market.
I was a senior manager on the very first product the article talks about. I was closely involved in designing the service and presenting it to Amazon senior leadership. WSJ quotes the CEO of a startup called DefinedCrowd as accusing us of stealing their ideas from a meeting 4 years earlier.
What a bunch of conceit. I don't remember our team discussing DefinedCrowd even once. We focused on the many other more interesting players that are doing the same thing, and researching them by trying out their service etc. like anyone normally would.
I'm sure someone talked with DefinedCrowd 4 years before that. Amazon, like all other tech companies, routinely has NDA conversations with startups that never go anywhere.
I can't speak to the rest of the article, but the very first example is totally false. WSJ is looking for an angle, and this startup is probably looking for a way to blame Amazon for their own execution problems.
What a bunch of conceit. I don't remember our team discussing DefinedCrowd even once. We focused on the many other more interesting players that are doing the same thing, and researching them by trying out their service etc. like anyone normally would.
I'm sure someone talked with DefinedCrowd 4 years before that. Amazon, like all other tech companies, routinely has NDA conversations with startups that never go anywhere.
I can't speak to the rest of the article, but the very first example is totally false. WSJ is looking for an angle, and this startup is probably looking for a way to blame Amazon for their own execution problems.
Isn't this just what you would expect a company of this size to do?
"We want to launch a product in category X"
"Ok, should we roll it ourselves, or buy something?"
"Well, let's interview a few companies, see if there's any we like, and if not, we'll make it ourselves"
"We want to launch a product in category X"
"Ok, should we roll it ourselves, or buy something?"
"Well, let's interview a few companies, see if there's any we like, and if not, we'll make it ourselves"
I worked on the Echo Show team. The product had been in development for over a year when we invested in Nucleus. I remember thinking it was very strange that Amazon was investing in that company when we were building such a similar product internally.
"In 2016, a group of investors led by the Alexa Fund bought a stake in Nucleus, a small company that made a home-video communication device that integrated with the Alexa voice assistant.
Nucleus’s founders and the venture-capital funds investing alongside the Alexa Fund had reservations about collaborating with an Amazon-backed firm, according to some of the co-investors. "
"After striking the deal, the Alexa Fund got access to Nucleus’s financials, strategic plans and other proprietary information, these people said. Eight months later, Amazon announced its Echo Show device, an Alexa-enabled video-chat device that did many of the same things as Nucleus’s product.
Nucleus’s founders and other investors were furious. One of the founders held a conference call with some investors to seek advice. He said there was no way his small company could compete against Amazon in the consumer space, according to people on the phone call, and began brainstorming ways to pivot his company’s product.
An Amazon spokeswoman said that the Alexa Fund told Nucleus about its plans for an Echo with a screen before taking a stake in the company. Several people on the Nucleus side of the deal disputed that.
Before Amazon introduced its product, the Nucleus device was sold at major retailers such as Home Depot, Lowe’s and Best Buy. Once the Echo began selling, those sales declined sharply and retailers stopped placing orders, said two people involved in the deal.
Nucleus threatened to sue Amazon, which settled with Nucleus for $5 million without admitting wrongdoing, according to people familiar with the settlement. Both sides agreed not to discuss the matter.
Nucleus reoriented its product to the health-care market, where it has struggled to gain traction, some of those people said."
Wow, Gavin Belson must be furious.
Nucleus’s founders and the venture-capital funds investing alongside the Alexa Fund had reservations about collaborating with an Amazon-backed firm, according to some of the co-investors. "
"After striking the deal, the Alexa Fund got access to Nucleus’s financials, strategic plans and other proprietary information, these people said. Eight months later, Amazon announced its Echo Show device, an Alexa-enabled video-chat device that did many of the same things as Nucleus’s product.
Nucleus’s founders and other investors were furious. One of the founders held a conference call with some investors to seek advice. He said there was no way his small company could compete against Amazon in the consumer space, according to people on the phone call, and began brainstorming ways to pivot his company’s product.
An Amazon spokeswoman said that the Alexa Fund told Nucleus about its plans for an Echo with a screen before taking a stake in the company. Several people on the Nucleus side of the deal disputed that.
Before Amazon introduced its product, the Nucleus device was sold at major retailers such as Home Depot, Lowe’s and Best Buy. Once the Echo began selling, those sales declined sharply and retailers stopped placing orders, said two people involved in the deal.
Nucleus threatened to sue Amazon, which settled with Nucleus for $5 million without admitting wrongdoing, according to people familiar with the settlement. Both sides agreed not to discuss the matter.
Nucleus reoriented its product to the health-care market, where it has struggled to gain traction, some of those people said."
Wow, Gavin Belson must be furious.
If I’m reading commentary correctly, Amazon would invest in other companies using its Alexa fund in order to gain access to their data and then actively operate in a way that undermines the success of the company. Sounds like they’re essentially enjoying most of the benefits of purchasing a company but for a fraction of the price. Rather than spend their own capital to do the hard legwork of building and validating a product idea, they’re effectively spending others’ and then swooping in for the bait and switch kill.
If I were a founder or board member I’d be super skeptical about ever taking money from Amazon in light of this news.
If this isn’t illegal it at least seems wildly unethical. If it’s neither of those and considered an acceptable tactic, then perhaps companies are generally undervaluing themselves otherwise it wouldn't be financially feasible?
If I were a founder or board member I’d be super skeptical about ever taking money from Amazon in light of this news.
If this isn’t illegal it at least seems wildly unethical. If it’s neither of those and considered an acceptable tactic, then perhaps companies are generally undervaluing themselves otherwise it wouldn't be financially feasible?
This is a bit complicated. I’m not in Amazon but work for a (very large) org. Often we will have some product in mind and approach/maybe even partner with a vendor while at the same time having an internal effort. Occasionally we go with an internally developed solution, sometimes we go with vendor solution. I am sure some vendors feel bad that suddenly they are forced out by a “similar” internal product. However, in every case I’ve been involved it wasn’t sinister. There was a business need and the company actively invested into multiple parallel solutions, eventually an internal solution won after we used a vendor solution for some years(but sometimes it is the vendor that wins!).
Not from Amazon but this happened to me when I had an app in the top 10 of the AppStore. This a-hole from Silicon Valley flew over to London, asked me loads of stuff, saying he wanted to buy it, offering large amounts of cash and then just launched his own version and some copies of other things I’d made. I’m still not sure if it was his plan all along or not - He did try and recruit me to his company at one point but when I refused, his parting words were “if someone offers you a seat on a spaceship, don’t ask which seat”. Really glad I didn’t take that seat.
Am I the only one who thinks this is to be expected?
Stealing good ideas is literally amazon biggest strategy in retail. They monitor best selling products, then launch their own brand and crash the competition.
Why anyone expected them to change strategy with business ideas? This strategy served them well.
Stealing good ideas is literally amazon biggest strategy in retail. They monitor best selling products, then launch their own brand and crash the competition.
Why anyone expected them to change strategy with business ideas? This strategy served them well.
So this didnt come across in the title - but the first company they use as an example is one Amazon actually did invest in? And that was four years before the "competing" product (which is literally just providing data for AI training as far as I can tell)? I'm not sure what I'm missing, but that reads like if coke invested in an energy drink brand and four years later launched another energy drink brand. It's basically a commodity and it's 4 years after the fact- what's so controversial here?
Amazon met with an unnamed startup I worked for to do this, luckily our investors warned us before the meeting.
While I cannot comment on a startup's or Amazon's perspective on this matter, I had interactions with Amazon employees that was in fact deceptive.
Short story: Amazon representative tried to trick influencer into sending their traffic without compensation.
Long story:
At the time, I commercially represented an influencer (largest in a mainstream niche with an active targeted fanbase) who had been approached by Amazon to sell access to our online course on Amazon (as in: let customers buy a coupon code for our content platform). The paperwork we received to sign did not reflect the terms we had negotiated. It included some kind of fees etc. that had never been mentioned, basically shifting percentage in favour of Amazon using fine-print. This felt dishonest.
We decided to do it anyway due to their promises of considerable sales for our program including projections. Then the representative showed us a listing of a direct competitor and told us the number of sales this competitor was able to generate. While it's nice to be on the receiving end of such information, it's unethical. Who knows how truthful the numbers were anyway.
But then the week of deals started and nothing happened. No sales.
This could have had many causes but instead of revisiting the offer or the listing or just say "bad luck", the representative kept insisting that the influencer send their traffic to Amazon which is usually a business transaction but that wasn't part of the deal. They kept insisting anyway, even a second representative.
I'm not keen on doing business with Amazon after that encounter.
Short story: Amazon representative tried to trick influencer into sending their traffic without compensation.
Long story:
At the time, I commercially represented an influencer (largest in a mainstream niche with an active targeted fanbase) who had been approached by Amazon to sell access to our online course on Amazon (as in: let customers buy a coupon code for our content platform). The paperwork we received to sign did not reflect the terms we had negotiated. It included some kind of fees etc. that had never been mentioned, basically shifting percentage in favour of Amazon using fine-print. This felt dishonest.
We decided to do it anyway due to their promises of considerable sales for our program including projections. Then the representative showed us a listing of a direct competitor and told us the number of sales this competitor was able to generate. While it's nice to be on the receiving end of such information, it's unethical. Who knows how truthful the numbers were anyway.
But then the week of deals started and nothing happened. No sales.
This could have had many causes but instead of revisiting the offer or the listing or just say "bad luck", the representative kept insisting that the influencer send their traffic to Amazon which is usually a business transaction but that wasn't part of the deal. They kept insisting anyway, even a second representative.
I'm not keen on doing business with Amazon after that encounter.
There’s a big difference between stealing actual IP and executing on someone else’s idea (even if the idea was “stolen”).
The sour grapes here seem to be coming from those who thought they “owned” having an idea but failed to fully execute on it. The winner is the one who actually does it.
The sour grapes here seem to be coming from those who thought they “owned” having an idea but failed to fully execute on it. The winner is the one who actually does it.
The meeting probably went like this. “I want (crazy %) for (low ball $) or we start one ourselves.
As a startup, if a company is serious in investing or buying they will make an offer.
It's a common mistake to be lured into talks that drag out for weeks and months.
If they are serious it will start with an offer.
It's a common mistake to be lured into talks that drag out for weeks and months.
If they are serious it will start with an offer.
This is like 1/2 the RFP world.
RFP, then build in-house.
I mean, I'm betting Facebook's "Small Business Grant" program is going to harvest that data and put it to use too.
As a startup, if your only defensibility is that you had a head start in product development, that's not much of a moat.
RFP, then build in-house.
I mean, I'm betting Facebook's "Small Business Grant" program is going to harvest that data and put it to use too.
As a startup, if your only defensibility is that you had a head start in product development, that's not much of a moat.
History repeats itself. This is straight out of Microsoft's playbook from back in the day.
Silicon Valley is clearly not a comedy: https://youtu.be/JlwwVuSUUfc
Standard advice to to not keep your startup secret but to talk about openly to as many people as possible. Eg, quotes about how only 1/1000 startups die to competition, and the rest self destruct or fail to get traction.
Is that still the case?
Is that still the case?
Why are people surprised by this? There was a period of time in the VC world (~2001) where this was di-rigeur. You were caught between a rock and a hard place, as pitching literally meant potentially enabling a competitor.
Google has done this and worse. Some of you may remember this one.
https://news.ycombinator.com/item?id=18566929
https://news.ycombinator.com/item?id=18566929
Wasn’t this whole behavior spoofed in Silicon Valley?
Almost every established VC is a potential competitor as much as a potential backer, because they already have backed ventures in/near your market, you won't get approached by one without expertise in your market. Any of their other backed ventures might be mulling over a new strategic goal and doing indirect research on you via their sponsors. Before you say NDA, it's practically unenforceable, you can't stop a VC chatting about what they've seen in confidence to a trusted friend, the bar to prosecute breach is far too high.
You can't stop someone seeing what you offer, and it's hard to prevent competitors from seeing how successful you are, especially giving the lack of privacy in consumer space. In this article, we don't know if Amazon used any IP, we are told they just copied the offering, which anyone is free to try.
I bet the problem with DefinedCrowd is not so much they revealed too much, rather they revealed too little. How so? The VC dance is really about demonstrating to the uncertain backer-competitor that you are so good, it's not worth competing. That's a main point to inviting outside parties in. I imagine these guys were just so weak, they made competition more appealing that partnership.
You can't stop someone seeing what you offer, and it's hard to prevent competitors from seeing how successful you are, especially giving the lack of privacy in consumer space. In this article, we don't know if Amazon used any IP, we are told they just copied the offering, which anyone is free to try.
I bet the problem with DefinedCrowd is not so much they revealed too much, rather they revealed too little. How so? The VC dance is really about demonstrating to the uncertain backer-competitor that you are so good, it's not worth competing. That's a main point to inviting outside parties in. I imagine these guys were just so weak, they made competition more appealing that partnership.
It's weird how questions of "is what we're doing, wrong?" can be so easily and inevitably obliterated by the profit motive.
It's entirely possible they launched competing products because they know something everyone else doesn't. Did anyone bother to investigate why they didn't acquire these companies?
I've worked at several startups and you'll be surprised at why some corporations don't purchase a startup.
Some of them have awful cultures of psychological abuse, you walk in the door and you know something isn't right because the founder(s) have a cult-like environment that includes abusing his/her employees to the point where they are all afraid to say anything.
Some startups have founders and employees that are lying about everything and when you actually dig into their source code and infrastructure they aren't doing anything they say they are doing.
Some of them have the worst infrastructure imaginable and/or they have such poor software engineering practices that they will never be able to scale to meet the kind of demand a company like amazon has.
Just because they have a good idea and a company doesn't mean they have an implementation that is worth investing in.
I've worked at several startups and you'll be surprised at why some corporations don't purchase a startup.
Some of them have awful cultures of psychological abuse, you walk in the door and you know something isn't right because the founder(s) have a cult-like environment that includes abusing his/her employees to the point where they are all afraid to say anything.
Some startups have founders and employees that are lying about everything and when you actually dig into their source code and infrastructure they aren't doing anything they say they are doing.
Some of them have the worst infrastructure imaginable and/or they have such poor software engineering practices that they will never be able to scale to meet the kind of demand a company like amazon has.
Just because they have a good idea and a company doesn't mean they have an implementation that is worth investing in.
VCs will often meet with startups to get market analysis done for them.
Maybe it's not the primary motivation of a meeting but information has to be presented to make the case for the business, so it gets recorded and used anyway. It can be used to look for alternative investment targets.
Pitches have inherent risks to them, that have to be taken into consideration.
Also I get that Amazon has much more resources but if they there able to copy it after one meeting... Was your project really that valuable? And would not be copied then you launched?
Also I get that Amazon has much more resources but if they there able to copy it after one meeting... Was your project really that valuable? And would not be copied then you launched?
Maybe...but in the past, AWS proactively looked at traction of products hosted on its platform, built competing products, and then scraped & targeted customer list of those hosted products. In fact, I was on a team in AWS that did exactly that. Why wouldn't their investing arm do the same?