Amazon is Introducing Private Investors To High-Risk Startups in a New Pilot Program (cnbc.com)

Amazon is testing a new way to bolster its relationship with startups and possibly bring in more capital to the ecosystem. From a report: The fledgling effort, known as the Amazon Web Services Pro-Rata Program, is designed to link private investors with companies that use AWS, as well as venture funds whose portfolios are filled with potential cloud customers. Amazon is not investing money through the program.

The Pro-Rata program is being run by Brad Holden, a former partner at TomorrowVentures (founded by ex-Google CEO Eric Schmidt), and Jason Hunt, who are both part of AWS's business development team focused on angel and seed relationships, according to an email they sent to investors in January. "The Pro-Rata Program is a new pilot intended to connect family offices and venture capitalists for specific investment opportunities from the AWS ecosystem," according to the email, which was viewed by CNBC. "Pro rata" refers to the rights investors have to put money in subsequent rounds. Mike Isaac, a reporter at The New York Times, writes, "If Amazon is using its direct knowledge of startups' health based on the fact that Amazon literally owns and operates the servers, how is this at all ethical? If that's not the case, Amazon should make that crystal clear (even though i'd have a hard time believing it). It's like Facebook's years of insights into [various] apps' data with the Onavo team, only instead of ripping companies off (which FB did), they invested in them."

Comments

Ethical?

[Shaitan]

It is insider trading. Plain and simple.

Re:Ethical?

[Shaitan]

If they were the owners it wouldn't be a factor at all. But they are a third party. Technically? It might currently not be insider trading. But SEC is like the IRS, all it takes is for them to decide it smells bad and they can apply discretion. Following the letter of the rules to do something shady doesn't pass unless they decide to let it pass.

IANAL. But in this case they are systematically trading on insider information to gain an advantage over other potential investors in companies that are in a pre-public fundraising stage. That doesn't smell bad, it smells like the bog of eternal stench.

How do you determine health from server activity?

[SuperKendall]

If Amazon is using its direct knowledge of startups' health based on the fact that Amazon literally owns and operates the servers, how is this at all ethical?

That assumes you CAN determine a startup's health from server activity.

Maybe there's not a lot going on, but they have one huge trial customer and a really low burn rate.

Maybe there is a lot going on server-wise, but the burn rate is high and the large amount of traffic is really killing the company sooner rather than later as they are not moving towards profitability quick enough.

How honestly would you consistently determine a companies health from server activity? You have no emails, you have no Slack communications, hell you may not even have the whole server picture, what if they are also using color hosted servers or a mixture of Amazon for storage and other servers for compute?

So I'm not sure how this is really unethical.

Re:How do you determine health from server activit

[SuperKendall]

they have unfiltered access to all of the commands you send to AWS in cleartext. sending data into ML? they can read it. storing data on S3 unencrypted? they can read it.

Yes... but so what?

First of all, if Amazon were ever to be found to be scanning containers that would be the end of AWS, so honestly I doubt they are dong this even if they technically COULD.

Secondly as I said, even if they do risk the company by scanning text uploaded to containers for every tiny startup, what honestly would they really learn? Are you storing your email there? What are you storing there that would really be that huge a help to determining viability?

And like I said, you don't even know what other servers a company is using, so low activity is not a good indicator for viability even if you know the general company type.

I'm just not convinced that even looking at the things you described gives you enough of a picture to make the "insider trading" claim that is being put forward.

Oh, just great

[Drunkulus]

Can't wait to see the next round of changing-the-world taxi and meal kit ripoffs. Can we throw in a couple blockchain startups too?
(What? Too soon?)

Re:How do you determine health from server activit

[kriston]

AWS specifically forbids itself from examining or otherwise gaining access to customers' resources.

How can I get in on this?

[ayesnymous]

I am a private investor.