Venture capital plays a critical role in the Internet economy by helping to nurture and grow young startup companies from the ground up through capital investment and strategic guidance. Global leaders of the Internet economy, including the likes of eBay, Tumblr, Skype, Zipcar and Kayak, can all trace their roots back to venture capital funding.
In 2013, the venture community invested nearly $30 billion in more than 3,000 companies, with $19 billion directed towards companies that rely on the Internet to deliver products and services in sectors as diverse as data management, transportation, social media, software analytics, education technology, retail, healthcare and cybersecurity.
In order for venture capital investment to continue to flow into the Internet economy, entrepreneurs must maintain their ability to develop products and services and reach global markets through equitable access to the Internet. Regulatory changes that would create a two-tiered system where companies could pay for priority access to the internet would hinder young companies and force them to compete with resource-rich incumbents. Anything short of fair and equitable access to users and customers through the Internet could jeopardize startup companies, dry up venture investment and threaten one of the most important components of the Internet economy.
Much of the discussion surrounding net neutrality has centered on which specific measures the Federal Communications Commission (FCC) should or should not take to protect a fair and open Internet. While NVCA is not advocating for one specific regulatory solution or another, we want to make clear that whichever path the FCC chooses to take it should not come at the expense of entrepreneurs.
The U.S. government should ensure that entrepreneurs do not face arbitrary roadblocks that limit their potential to build products and services on the Internet. Therefore, it is our strong belief that Internet Service Providers (ISPs) should not be allowed to discriminate through paid prioritization. If the FCC were to allow this, it would create a competitive advantage for well-established companies while disadvantaging entrepreneurs who build disruptive and transformative new companies.
The concept of paid prioritization could turn the entire concept of a fair and open Internet on its head at the expense of the startup ecosystem. These companies often struggle to have enough capital to build new products and services, let alone the financial resources to pay for priority access to the Internet. If they can’t afford to compete against those with deep pockets and established businesses, we as a nation will surely suffer from the lost opportunity of innovation. In the same of facilitating America’s startup ecosystem, we believe that permission-less innovation should be encouraged and allowed to flourish without interruption.