Facebook establishing a venture arm to invest in startups

Noob question but if you've already bootstrapped your startup, aren't you ahead of the competition and likely to get the funding, instead of the funding going to your competitor.

Just trying to understand the context here: your competitors apply/get-approved before you do, or is it that you don't want to take the funding? (or something else going on).

Facebook is the modern day internet gangster cartel, they are not even trying to hide it any more. This is an obvious trap that is easy to avoid.

Sadly, I doubt there is any company that can take them on.

Am working at a bootstrapped startup. Actually profitable. In a very competitive space. No VCs to answer to, no irresponsible burning of cash on marketing and bloating of engineering team. No AWS. No expensive SF office or lunches paid by VC money. Hiring is dictated by our revenue and profit growth, and no we don't spend VC money on absurdly overpriced engineers.

Because we're run super lean, we've been able to hire more and spend more on marketing during these tough times while businesses are downsizing or putting a halt on hiring/marketing dollars.

If the space you're getting into requires lots of capital, fundraising is unavoidable, but if you're thinking of even bootstrapping a company, it better be one that won't require a lot of capital (SaaS), and you need to run it lean.

It's pretty interesting that FAANG doing venture capital is basically like legal insider trading.

They clearly have data on web traffic, consumer usage, advertising spend, etc. that other VC firms and investors generally don't have access to.

They can use this to understand entire markets, see who the incumbents are, estimate revenue/users, see who's up-and-coming, etc. Obviously within some margin of error.

I wonder if this is how Facebook identified that Instagram was on the path to success, and knew $1B was a great deal. Meanwhile everyone at the time thought they were crazy for spending that much.

Since startups aren't publicly traded, I don't think insider trading laws apply to trading their securities. FAANG is legally allowed to use their access to information to make better investing decisions than other companies are able to. (IANAL)

It seems like they have a high chance of getting a great ROI. Once you're a big tech company, this is just another way of monetizing the vast troves of data you have.

I would guess it's more about the money than you think.

Public companies have a fiduciary duty to maximize profits and investor returns.

They're simply using the data that's available to them to make great investment decisions to make more money.

It seems like a conflict of interest to invest in a company and then turn around and compete with them. If the end plan is to take their ideas once they start becoming successful, you don't need to give them money in the first place. (Case study: Snapchat)