Is the golden age of startups over?

These days, it seems increasingly difficult for dynamic newcomers to topple the behemoths of our internet economy

Fail to launch.
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The tech sector is always buzzing with anticipation of the next hot startup and the next blockbuster IPO. These nimble, creative dynamos can appear out of nowhere with the power to create new demand for things we never knew we desperately needed. And experience has shown big companies that they need to stay alert to keep from getting knocked off the top of the heap by these newcomers.

"For every lumbering Goliath," says Farhad Manjoo at The New York Times, it has long seemed that there were "one or two smarter, faster Davids just now starting up in some fabled garage, getting ready to slay the giants when they least expect it." Think IBM, or Hewlett-Packard.

But things are changing. "The technology industry is now a playground for giants," Manjoo says. And the giants are named Amazon, Apple, Google, Facebook, and Microsoft. "Where 10 or 20 years ago we looked to startups as a font of future wonders, today the energy and momentum have shifted almost completely to the big guys. In addition to the many platforms they own already, one or more of the Five are on their way to owning artificial intelligence, voice assistants, virtual and augmented reality, robotics, home automation, and every other cool and crazy thing that will rule tomorrow."

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Startups can still generate buzz and get funding, but their hope of breaking out and becoming giants themselves is dimming. Fewer than 1 percent ever become $1 billion companies, Manjoo notes, and now more than ever they're likely to get gobbled up by an existing behemoth before they ever come close. "The best start-ups keep being scooped up by the big guys (see Instagram and WhatsApp, owned by Facebook)," Manjoo says. "Those that escape face merciless, sometimes unfair competition (their innovations copied, their projects litigated against). And even when the startups succeed, the Five still win."

And tech giants aren't the only ones getting in on the action. "Walmart has bought a handful of startups lately," says Katie Roof at TechCrunch, "and the company says this acquisition spree will continue."

The world's largest brick-and-mortar retailer bought fast-growing e-commerce startup Jet.com for more than $3 billion last year. Since then, it has snapped up ShoeBuy, Moosejaw, Bonobos, Parcel, Hayneedle, and ModCloth, and the company is looking to buy still more technology and retail brands, Jet.com founder and now CEO of Walmart eCommerce U.S. Marc Lore said recently.

Industry leaders are boxing out startups in other sectors, too. Big banks, for example, are spending more and more to develop their own robo-advisers, causing venture-capital financing of wealth-tech startups to drop by 49 percent to $272 million in the second quarter, say Julie Verhage and Hannah Levitt at Bloomberg. Betterment, the biggest independent robo-adviser, snagged the biggest wealth-tech investment last quarter, taking in $70 million based on a valuation of $800 million, according to CB Insights, but at the same time Wall Street giants, including Morgan Stanley, JPMorgan Chase, and Goldman Sachs, all talked up their own digital enhancements of their wealth businesses.

So, is the golden age of the startup over? Maybe. But maybe not. It's still possible to make "Google look like a dinosaur," says Balaji Viswanathan, CEO of Invento Robotics, on Quora (via The Huffington Post). How? Viswantahan has a few tips. First, "Go for speed," find markets where moving fast is the key to success, because "large companies are too slow to move." Also, go for niches that the Big Five see as small potatoes, or "gray areas" that may or not be legal — big companies will stay away because they have too much to lose. "Startups often plead innocence, or in the worst case die. Still worth it."

Bottom line, he says: "It is statistically unlikely for anyone to [beat] Google in any product category. But, where is glory if you are not doing statistically unlikely things?"

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Harold Maass, The Week US

Harold Maass is a contributing editor at The Week. He has been writing for The Week since the 2001 debut of the U.S. print edition and served as editor of TheWeek.com when it launched in 2008. Harold started his career as a newspaper reporter in South Florida and Haiti. He has previously worked for a variety of news outlets, including The Miami Herald, ABC News and Fox News, and for several years wrote a daily roundup of financial news for The Week and Yahoo Finance.