CareCredit - Women's Health April 2024

EU Pressure on Big Tech Sparks Startup Concern

Amazon’s recent cancellation of its iRobot deal reportedly has European startups worried.

In a recent Financial Times (FT) opinion piece, Javier Espinoza writes that entrepreneurs are concerned that if regulatory pressure keeps one of the world’s largest companies from buying the Roomba maker, it might mean other Big Tech companies will stop buying smaller ones.

As PYMNTS reported, Amazon called off its $1.7 billion purchase of iRobot in January, saying that the deal “has no path to regulatory approval” in the European Union.

“We’re disappointed that Amazon’s acquisition of iRobot could not proceed,” David Zapolsky, Amazon SVP and general counsel, said at the time, calling the cancellation the result of “undue and disproportionate regulatory hurdles.”

With the deal dead, iRobot went into restructuring mode, cutting 31% of its staff. CEO and Chairman Colin Angle also announced he would step down.

“It’s a bad sign if the EU intervenes so heavily,” Stefan Moritz, secretary-general of lobbying group European Entrepreneurs, told the FT in reference to the iRobot purchase.

“In the long run nobody will want to be an entrepreneur, many companies will shut down or be bought if they have any remaining valuable assets.”

Olivier Guersent, director-general of the EU’s competition unit, said the regulator’s concerns about iRobot stemmed from the fear that Amazon would favor Roomba sales on its platform over rival products.

“We think we had a very good case for this,” Guersent said at an antitrust conference in Brussels. “A lot of evidence. And we actually think that this is why Amazon decided to drop the case rather than take a negative decision or challenge it in court.”

The report noted that startups in Europe have long looked to Big Tech to maximize their growth, citing the example of Microsoft buying Skype for $8.5 billion and Apple’s $400 million purchase of music-recognition app Shazam.

This is happening in the wake of a year that saw a significant drop in tech startup funding in Europe. A report late last year from British venture capital firm Atomico projected funds raised by Europe’s tech startups would reach around $45 billion for the year, compared to the $82 billion those companies reaped in 2022.

“The decline is not surprising given the dual effect of many later-stage companies delaying fundraising, as well as materially slower deployment pacing by investors, which have both served to drive the large decline in the prevalence of outsized, late-stage investment rounds — the biggest factor in the lower amounts of capital invested,” the report said.