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It's hard out there for tech startups--and big tech could be to blame.

Over the past two weeks, Microsoft, Apple, Amazon, and Alphabet have reported record annual revenue for 2019. They're all hovering around $1 trillion valuations. Facebook, despite mountains of negative press over the past year and beyond, also reported strong earnings and is more than halfway to that $1 trillion mark. 

For everyone else, the outlook isn't quite as rosy. On Monday, The New York Times wrote about the widening gap between big tech and the rest of the industry. The story noted that a growing number of startups--including some of the most heralded fast-growth startups of the past few years--are cutting jobs as tech giants are muscling aside or buying out rivals and using their resources to outbid any startup for top-tier engineering talent.

"The strong are getting stronger, and the weak are getting weaker. It's a market of haves and have-nots," Daniel Ives, managing director of equity research at Wedbush Securities, told the Times. "In 20 years covering tech, it's unlike anything I've ever seen."

Amazon in particular is an interesting example of how dynamics can change when a big company just keeps getting bigger. Also on Monday, Bloomberg published a behind-the-scenes look at how Amazon started the frenzied bidding war for the location of its HQ2 with a jaw-dropping mix of hubris and jealousy. The report revealed that Amazon's negotiating strategy for U.S. cities was internally summarized as "F--- you. We're Amazon."

So what's a startup tech company to do in this climate? While there's no easy answer, it doesn't mean you take your ball and go home. Maybe you need a Goliath-avoidance strategy. Or maybe you stake your claim to a lucrative niche that's simply too specific for those large companies to pursue. Or you take advantage of the "techlash" that's spreading across major college campuses by offering top young talent more than just money.

Whatever you do, it's going to require creativity, scrappiness, and ingenuity. Good thing the best founders usually have those traits.

Published on: Feb 5, 2020