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Illustration: Brendan Lynch/Axios

In a hearing Wednesday, the Senate's judiciary committee will attempt to examine the impact of large and dominant companies on "American innovation" — that is, startups — and their ability to acquire smaller ones.

Why it matters: Whether Big Tech is preventing startups from realizing their full potential remains a key debate within the tech industry.

  • The industry benefits from a thriving competitive market where new companies have a shot a creating fresh products, yet struggles to fully reject big companies' dominance as they are the ultimate expression of winning at the capitalism competition.

Flashback: Sen. Amy Klobuchar (D-Minn.), who chairs the committee, recently introduced the "Platform Competition and Opportunity Act of 2021" along with Sen. Tom Cotton (R-Ark.) as an attempt to curb Big Tech's efforts to remain dominant by acquiring smaller companies.

  • The bill aims to make M&A much harder for companies with a market cap of $600 billion or more that have at least 50 million U.S.-based monthly active users or at least 100,000 U.S.-based monthly active business users. (It applies to Amazon, Apple, Facebook, Google and Microsoft, while exempting others like Walmart, at least for now.)

Between the lines: As we've written about before, much of startupland is horrified at the idea that being acquired by a larger company could no longer be a viable option for upstarts that don’t make it all the way to an IPO.

  • "If I'm a founder or I'm an investor, and I'm thinking about starting a company in a core market of an incumbent ... what if Plan B (M&A) is not an option? That changes things," Trinity Ventures' Patricia Nakache said last year during a DOJ event in Silicon Valley.
  • The argument is: Big Tech gobbling up startups isn’t a deterrent to entrepreneurship — it s an enabler.

Yes, but: Not everyone agrees, even within the tech industry, and some investors and entrepreneurs do want to see Big Tech's M&A activities limited.

  • Their argument is that large companies are so big that many startups can never take them on successfully with newer products.
  • They're also so rich that they can make acquisition offers that startups can't refuse — even if it means they'll have to shut down their businesses.

The bottom line: It's unlikely that startupland will ever see eye-to-eye with Klobuchar on this issue — M&A is too integral to what keeps the ecosystem running.

Go deeper

Austin's big year for VC funding

Expand chart
Data: PitchBook & NVCA; Chart: Baidi Wang/Axios

Despite the pandemic and labor shortages, Austin's venture capital industry in 2021 continued to boom.

The big picture: Startup funding flowed in Austin last year, delivering 387 deals valued at a record-setting $4.9 billion — or 211% growth compared to the previous year — per data from PitchBook.

  • The investments range from seed money to later stage rounds, a sign Austin serves to benefit brand-new startups as well as growing companies.
Hope King, author of Closer
1 hour ago - Economy & Business

Peloton pumps its brakes

Data: FactSet; Chart: Axios Visuals

Peloton’s popularity is falling as swiftly as it shot up.

Why it matters: Not all pandemic habits stick around. Peloton's trajectory over the past two years exemplifies how challenging it's been for companies to gauge shifts in consumer demand — particularly in sectors heavily altered by the pandemic.

First look: Senators propose bill to ban corporate PACs

Sens. Jon Ossoff and Mark Kelly. Photos: Chip Somodevilla (left), Courtney Pedroza/Getty Images

Sens. Mark Kelly (D-Ariz.) and Jon Ossoff (D-Ga.) will soon propose a bill prohibiting for-profit corporations from establishing and managing political action committees, according to a copy of the legislation obtained by Axios.

Why it matters: The introduction of "The Ban Corporate PACs Act" comes amid heightened scrutiny on Capitol Hill regarding money in politics, including efforts to bar companies from influencing political campaigns and federal elections. It would likely face a court challenge and First Amendment concerns.