
Ask HN: What could be done to stop funded startups undercutting businesses? - CM30
Because here at Hacker News, I&#x27;ve seen quite a few people complaining that venture backed startups distort the market, since they don&#x27;t have to be profitable to keep going and could hence undercut other (bootstrapped) businesses.<p>But what&#x27;s the &#x27;solution&#x27; to this? Because to a certain degree, this happens at all levels and in all industries. It&#x27;s basically what killed the media industry, since the best funded traditional outlets are mostly kept alive by billionaires pumping in money for &#x27;charitable&#x27; reasons, and the internet has created a market of hobbyists doing the same work for free on the side.<p>And it&#x27;s true in many other fields too.<p>So what&#x27;s the solution? How can regulators stop saying, a venture capitalist putting millions into an unprofitable business to drive competitors out of business?
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chrisbennet
I don't doubt that venture backed startups distort the market but I also can't
recall anyone on H.N. complaining about it. At the end of the day, regulations
aren't supposed to protect incumbents business models, they are supposed to
protect the _consumer_.

As for the newspaper business, I think Craigslist is the culprit there.
Traditionally, newspapers sold ads to pay for their journalists, etc.
Craigslist destroyed that model. (And Craig did it on shoestring budget.)

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hidenotslide
In the US predatory pricing only applies to companies who use their market
power to earn above-competitive profits. So the earlier actions could only be
dealt with by the FTC after they drove competitors out of the market and
raised prices.

But another distortion is the regulatory arbitrage angle. Ride sharing
companies that don't comply with taxi regulations, Airbnbs that don't have to
follow hotel or zoning laws, etc.

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matt_the_bass
Sometimes such regulations are for health or safety. I agree with those. Other
times they are simply barriers to entry established by the current players. I
don't agree with those.

I do think companies like ride-sharing and home sharing should have
regulations that are health and safety related.

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hidenotslide
So are you against municipalities having the right to determine their own laws
and regulations then? Just because you don't like the law doesn't mean you can
ignore it.

My point is not whether or not the regulations should exist, in many cases
they probably should not. I was just pointing out that having companies
willing to operate in legal gray areas could have a distorting effect on the
existing market.

The original question was what regulators could do, and an answer is to
enforcing existing laws where applicable.

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matt_the_bass
I'm for municipalities having the right to create laws and regulations that
are in the best interest of their overall population. I'm not in favor of
municipalities making laws that favor rich special interest groups that only
serve a small subset of the population.

I'm in favor of protecting small companies from practices of large companies
that are unsustainable (like subsidizing rider costs to win market share) in
which small companies can't compete. I'm not in favor of protecting small
companies just because they are sustainable.

And I agree with you about enforcing all rules including ones I don't agree
with. But I'd like to get rid of those that I don't think are for the
protection of the community at large. I guess I should have said that I agree
with some of those regulations and not others (rather than saying one should
or shouldn't ahear to them). Thank you for pointing that out.

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claudiulodro
Don't compete primarily on cost. It is much more difficult for venture
capitalists to provide better service or or a better product than it is for
them to provide a cheaper one.

