The Senate Subcommittee on Competition Policy, Antitrust, and Consumer Rights is holding a hearing today on U.S. innovation, competition and consolidation. As the subcommittee considers recently-introduced anti-tech legislation, here are important things to keep in mind:

– The companies targeted by proposed anti-tech legislation are the same companies driving U.S. leadership in innovation.

– America’s innovation and startup ecosystem is stronger than ever.

– Mergers and acquisitions reward entrepreneurs for the risks they take launching innovative startups and play an important role in spurring new business formation.

The companies targeted by proposed anti-tech legislation are the same companies driving U.S. leadership in innovation.

The U.S. is by far the leader in R&D spending in software, hardware, and internet sectors, finds data from Dealroom.co.

America’s innovation leadership is due in part to the extensive investments and risks taken by its leading firms, shows data from FDI Intelligence. 12 of the top 20 publicly listed companies ranked by annual research and development expenses in calendar year 2020 were U.S. firms, including Alphabet, Amazon, and Microsoft.

The “tech-ecommerce ecosystem” is now the top job creator in the U.S. economy, finds the Progressive Policy Institute. “Average pay in the tech-ecommerce ecosystem is also 44% higher than average pay in the private sector, and 21% higher than average pay in manufacturing nationally.”

These companies not only spend more on R&D in dollar terms—they spend more on R&D as a percentage of revenue than leading companies in other industries, shows the Innovation Frontier Project.

These companies are consistently named as the most innovative in the world. BCG’s Most Innovative Companies 2021 report, for example, lists Alphabet, Amazon, and Microsoft as among the top 10 most innovative companies in the world.

Leading tech companies play an important role in conducting research around innovative next-generation technologies such as artificial intelligence and quantum computing. In 2020, for example, researchers affiliated with Google published more papers accepted at the leading AI conferences than any other institution — including Stanford and MIT combined. 

America’s innovation and startup ecosystem is stronger than ever.

With $65 billion invested, November was the single biggest month for VC funding ever, reports Morning Brew. “November [2021], like the 10 months of 2021 that preceded it, was another blistering month for venture funding. In total, companies raised $65 billion last month, per Crunchbase—the highest single-month total ever. For context: Global venture funding is already at $580 billion on the year—compare that to the total of $335 billion across all of 2020.”

2020 was a record year for the U.S. venture capital industry, according to the National Venture Capital Association (NVCA). “In 2020, U.S. venture-backed startups represented about 2.5 million employees. The 10,862 high-growth startups that raised capital last year to build and grow their companies hailed from all 50 states and the District of Columbia, 233 Metropolitan Statistical Areas (MSAs), and 414 Congressional Districts.”

Startups have access to more financial support than ever before, shows PitchBook data.

The U.S. is home to nearly half of the world’s “unicorn” firms, proving that the next generation of innovators value the tech climate in the U.S. Jan Rybnicek, Senior Fellow at the Global Antitrust Institute. “This data shows that entrepreneurs seek to innovate and grow their businesses in the United States more so than in any other country further, further supporting the notion that the United States has fostered a superior climate for innovation than has Europe—one in which innovators and entrepreneurs can attain the funding they need to grow and have ample opportunity [to] vigorously compete against old and new rivals.”

Mergers and acquisitions reward entrepreneurs for the risks they take launching innovative startups and play an important role in spurring new business formation.

Mergers and acquisitions create a virtuous cycle in the startup ecosystem, seeding ventures with capital, talent, and new ideas.

Acquisitions are a beneficial and necessary part of the startup ecosystem. Investors are able to take profit at this exit and use the proceeds to fund new investment in new startups. This is borne out by the data, finds Engine. “There is a strong positive correlation between investment and acquisitions. “Acquisitions are a more common method for startups to exit, and this makes the growth in the number and overall value of acquisition steadier. The growth in the number and value of acquisitions—156 percent and 170 percent respectively over 2008 to 2018—indicates a healthy ecosystem where entrepreneurs are rewarded and investors and entrepreneurs are able to fund new ventures with their profits, incentivizing and supporting additional innovation.”

Many tech founders look to acquisition as their ultimate goal, as it can allow their ideas and products to reach users more efficiently, highlights Jim Pethokoukis of the American Enterprise Institute. “For founders, future acquisition is often ‘the goal.’ Then the entrepreneur can go on to start another firm or become an investor in other aspirational startups working on risky new ideas. Same goes for the investors in the acquired firm. What’s more, these purchases are often ‘acquisition–by–hire’ situations where the prize is talent rather than the Next Big Thing. And when an upstart firm has a valuable idea, acquisition can be the fastest way for it to get to users.”

Innovators are rewarded for the risk they take when their businesses are acquired, writes entrepreneur Bettina Hein. “Acquisition, therefore, is the most likely avenue for successful entrepreneurs and their employees to realize the value of their creation. In a typical year, more than 10 times as many startups are acquired as go public. According to a recent report by Silicon Valley Bank, nearly 60% of startups expect to be acquired. Acquisitions also enable startup investors to reclaim their capital, realize any gains, and recycle their money into the next generation of startups.”

When companies acquire businesses that provide complementary assets, innovation is more rapidly introduced to the market, says D. Daniel Sokol, Professor of University of Florida Levin College of Law. “So when you benefit from an innovation, not just a novel product or service, but the complementary asset basically allows for speeding up and successfully introducing innovation to the market, which allows for better commercialization. We’ve seen this across a lot of traditional industries — the traditional typesetter industry, biotechnology, even solar industry.”