Not only is this argument wrong, the /opposite/ is true. Buyouts are actually the /engine/ of innovation. They're the fuel. The oil. You know this yourself. Just take a quick look at Silicon Valley - it's a hotbed of innovation. If you believed this argument, you'd expect to see a dirge of new businesses & a desert of new ideas. That's just not true. We have wearable tech. Quantified self. Bank challengers. News extr…
Except that enormous numbers of these startup ideas are all about undercutting existing businesses and creating a race to the bottom rather than adding value.
WhatsApp removed any profit from SMS. Its revenue is a rounding error to Facebook. Facebook will start running ads on the service, they don't have any choice. Now, even if you want an ad-free SMS service, that won't be an option.
Lyft is directly competing against taxis. They do this by laying the liability for what they do at the feet of "contractors" who now bear the burden (and generally just ignore it) So, the legitimate services that have to pay tax, liability insurance, training, and licensing are now at a disadvantage relative to the newcomers. If Lyft wanted to actually add value, they could set up a taxi fleet and provide the kind of quick, GPS response that people want. But, you see, that's real work and won't have anywhere near the margin for a quick VC exit.
There is innovation in the valley. It's just not in the "social" companies.