A Pitch to J.D. Make “VCs in Residence” your antitrust legacy
This is a modest proposal: The Trump-Vance Administration could hire venture capitalists (VCs-in-Residence) in antitrust agencies to predict the trajectory of emerging technology. The Republican senator from Ohio said
, “We threw away the chains in the early republic – we didn’t intend to replace them with chains of private monopoly.” J.D., not John Sherman, stood on the Senate Floor in 1890 and introduced antitrust legislation that bears his name. Vance in February 2024 at a conference hosted by Silicon Valley startup incubator Y Combinator.For seven hours, entrepreneurs, technologists, and politicians presented
“glimpses into alternative scenarios enabled by different regulatory landscapes.” Tim Wu gave opening remarks; Lina Khan delivered a keynote. Speaking between them, Vance described his time as a VC in 2015, seeing ad tech startups that showed “rapid growth” but were “fundamentally uninvestible” because the market was “already dominated by such powerful incumbents.” Vance appreciated what Khan recognized: Economists miss “something very fundamental” when focusing narrowly on price, ignoring “a broader understanding of how we think about competition.”
The Lawyer-Economist Gap
Despite attempts to label future competition as “nascent” or “potential,” these terms confuse even seasoned antitrust attorneys. Paul Denis, the author of the 1992 Merger Guidelines admitted to mixing up these terms. Debbie Feinstein, former Director of the FTC Bureau of Competition said
that she “never understood how one could ever bring a perceived competition case,” preferring to use the term “future competitiveness.” She conceded that the labels we choose are not the issue. Some technologies–blockchain and synthetic biology–have arrived but remain early in development, while others–quantum computing and nanotechnology–are still years from practical deployment. Market shares will fluctuate as AI advances disrupt competitive positions. Lawyers and economists cannot update the labels for future competition. The DOJ and Stanford will co-host a workshop in February 2020 on Venture Capital and Antitrust. Stanford Law’s Doug Melamed noted
that economists excel with established markets (e.g., T-Mobile/Sprint) but offer “less value in answering the Facebook/Instagram question,” which demands intervention “under conditions of substantial uncertainty.” When defendants claim that “disruptive innovation is just around the corner,” Trump’s AAG for Antitrust, Makan Delrahim, urged enforcers to think “a bit like venture capitalists.”The VC industry has propelled American innovation, providing early capital for Apple, Google, and Facebook. It has fueled major advances in semiconductors, mainframe computing, personal computing, biotechnology, internet/e-commerce (2000s and 2010s), mobile/cloud (2000s and 2010s), and more. VCs help bring new products to the market by providing capital at risk that banks and private equity cannot or will not. In 2019, VC-backed firms accounted for half of all U.S. publicly traded companies, but accounted for 90% of R&D expenditure. VCs have shaped the modern economy by fostering technological advances over decades. The limited fund sizes, however, mean that they prefer
unclaimed market over those controlled by entrenched competitors.
When judges are asked to predict the future, they oversimplify. In Illumina-Grail the nascent tech was multi-cancer detection early detection (MCED). Illumina was the “monopoly supplier”
of a key ingredient, and its purchase by Grail — “the first mover in MCED testing”— raised fears that Illumina could foreclose Grail rivals. The court worried this deal would “chill“ investment in “numerous firms” developing MCED tests. While the court attempted a VC mindset, it oversimplified, making a binary distinction
between “highly experimental” liquid biopsies and MCED testing that “all of the players” expected would “one day generate tens of billions of dollars.”In August 2024, a court found Google had monopolized the search market, noting, “venture capitalists…have stayed away from funding new search ventures.” When Google urged the court to consider how nascent AI might erode barriers to entry, the court replied, “AI may someday fundamentally alter search, but not anytime soon”–oversimplifying AI as a distant, binary event.
Proposing “VCs-in-Residence”Over the past decade, the FTC and DOJ have recognized that lawyers and economists alone are insufficient for modern enforcement. In 2011, the FTC under Obama appointed its first Chief Technology Officer, a position that was filled eight times in total, including one time under Trump. In 2019, Trump’s FTC launched the Technology Enforcement Division, whose technologists even right-leaning commissioners praised[] for filling “research gaps outside economists’ typical areas.” In February 2023, Biden’s FTC established a dedicated Office of Technology.Parallel shifts at the DOJ reinforced this trend. In 2022, Antitrust Division hired “technology economists” to be Chief Economist. The Antitrust Division, realizing that it could not fill the entire need with one person, launched a strategic realignment. It hired a Ph.D. Data Scientist
to be its first Chief Technologist. They also rebranded the Economic Analysis Group (EAG) as the “Expert Analysis Group” and secured a $45,000,000 Technology Modernization Fund investment. By April 2025, there will be more than $35 million available for spending. This could fund a pilot program of “VC-in Residence” as agencies retool. The Trump FTC challenged the deal in 2020. It was tried last week. UK regulators noted Instagram had “generated no revenue” and cited “one third party” seeing no “significant marketing opportunities.” Meanwhile, Mark Zuckerberg emailed a colleague that businesses like Instagram “are nascent, but the networks are established
the brands are already meaningful.” A VC-in-Residence might have understood that a 13-employee photo app with filters could, in Zuckerberg’s words, “be very disruptive” to Facebook’s social network.
VCs-in-Residence can also develop agency guidance. The 2010 Horizontal Merger Guidelines acknowledged
firms that “play a disruptive role in the market,” but offered little clarity regarding weighting intangibles (e.g. Instagram’s brand). The 2023 Merger Guidelines refer to “nascent threat” and “ecosystem” competition, but they do not distinguish between good and bad acquisitions. VCs routinely scrutinize intangibles–vision, talent, product potential, and ability to access data–that economists and lawyers struggle to quantify. An Alternative to Heavy-Handed RegulationIf the Biden Administration was too heavy-handed, VCs-in-Residence carefully weigh trade-offs. Regulation, for example, can reshape startup incentives. Without viable exit strategies the incentives for founders and investors to invest their time (and money) in the ecosystem will diminish. Proposed rules that prohibit incumbents from purchasing nascent rivals could stifle
investments precisely where they are needed. Meanwhile, Michael Kratsios, director of the White House Office of Science and Technology Policy, has said, “There needs to be a place for Big Tech to …allow space for little tech to be able to grow and flourish.”Would VCs-in-Residence create conflicts of interest? Conflicts of interest are already commonplace. 75% of FTC officials in the past 20 years came from or went to companies that appeared before the agency. 60% had technology-related conflict. Since many venture investors support startups and not incumbents, VCs in Residence could act as a counterweight against the existing capture by Big Tech. The risk of capture can be reduced by implementing strict disclosure and recusal policies, hiring retired VCs or limiting the role of these individuals to advisory functions. An open, multi-phase application (e.g., Presidential Innovation Fellows) or alternating the profile of appointees (between Silicon Valley and emerging geographies) would make selection more transparent.Still, can’t enforcers just pick up the phone
to call experts for free? While some questions are free, the majority of expertise is not. A dialogue is more valuable than a phone call. While agencies have expertise in the fields they regularly scrutinize (e.g. hospitals and pharmaceuticals), nascent competitors lack frequent transactions. VCs miss the big trends – Airbnb has been rejected repeatedly – but they also develop patterns that provide an early warning system for new business models. VCs invested less in these regions when the DOJ closed 4 of its 7 antitrust field offices. Startups in concentrated industries were the hardest hit. An enforcer once quipped, “I personally find it to be scary…to consider having actual technologists at the FTC.” Scarier is not being equipped to manage the coming wave.[and]
The Next CenturyIn 2015, the FTC celebrated its 100-year anniversary by commissioning artwork that featured a “winged flywheel”–symbolizing “progress” and commitment to protecting consumers “in a world of evolving technology.” Nearly a decade later, the FTC sued Amazon for “fuel a flywheel of anticompetitive harm,”
and Live Nation-Ticketmaster for a flywheel that “suffocate
competition.”
Had the FTC consulted J.D. They may have chosen a different symbol if they had consulted J.D. By pairing VCs with technologists and economists, they can foster cross-pollination. This leaves behind lawyers and investors who are future-savvy. Never before have VCs lived so close to Washington, DC. VCs-in-Residence are a practical way to put this expertise to use._______________________The author declares no conflicts of interest.
