Amazon Is Using the DENNIS System on Unsuspecting Young Startups
By: Daniel May
Tags: Entrepreneurship, Capitalism, Amazon, Economics, Startup

It’s starting to look like Amazon might not be the most ethical company in the world. A recent Wall Street Journal investigation found that Amazon often uses the investment and deal-making process with startups to steal confidential information and develop their own competing products.

Amazon is a gigantic company, and their bottomless pockets can be too attractive for entrepreneurs to ignore. An investment from Amazon could make or break young companies. Described as a “wolf in wolf’s clothing” by a partner at a venture capital firm, Amazon essentially uses the DENNIS system on unsuspecting young startups.

D — Demonstrate Value

Amazon first demonstrates value by showing the company what an investment could enable them to do. “Look at all of this money we’ve got,” basically.

E — Engage Physically

Amazon meets with company leadership and indulges their fantasies, making them believe they actually have a shot at some Bezos Bucks. At this stage, the relationship is still playful and flirtatious, but Amazon is clearly signaling a desire to take it to the next level.

N — Nurture Dependence

Not many other companies have the capital that Amazon does, so it’s easy for them to make startups believe that striking a deal with the devil is their only way to be successful. Before making it official, Amazon is able to acquire otherwise confidential information from the unsuspecting startups. Little do they know that Amazon has no intention of ever taking it to the next level.

N — Neglect Emotionally

After Amazon has acquired the information they need, they start to neglect emotionally. Amazon executives no longer return emails or respond to the naïve entrepreneurs. Startups are left wondering where they went wrong, and what they could do better next time (if there is a next time), but they don’t yet suspect anything malicious.

I — Inspire Hope

Just when all hope is lost, Amazon shows back up. Maybe there are some documents or secrets they missed, and they need to briefly re-engage the startup one final time. Either way, the startup is just glad to be on speaking terms again, and gladly provides Amazon with anything they need.

S — Separate Entirely

Once Amazon has everything they need to duplicate the startup’s product or service, they separate entirely. This is the ugly step where the startup becomes jaded and finally realizes what Amazon did to them. If they have any fight left in them they might try to sue, but who are we kidding? None of these small companies have the financial resources to take a giant like Amazon to court.

The lawyer representing one inventor who was DENNIS’d by Amazon said, “They find technology they think is extremely valuable and seduce people to engage with them, and then cut off all communication after initial sessions with an inventor or company. Years later, lo and behold, the technology is in an Amazon device.” This particular inventor demonstrated a patented microphone array for Amazon, but never struck a deal because Amazon executives ghosted him shortly after the meeting. He now says that his technology is being used in Amazon Echo devices, which would be patent infringement. Amazon disputes this claim, and the case is slated for trial in September.

Most cases never go to trial. Amazon sometimes settles out of court for an extremely small sum of money, akin to someone throwing a penny at a homeless person on the street, but many small companies don’t have the resources for any sort of fight with Amazon. While Amazon profits from their ideas, they slowly go broke, with no money to stand up for themselves or defend their work. You don’t see Amazon stealing information from Apple or Microsoft; they prefer to pick on startups that don’t have the resources to defend themselves.

The Wall Street Journal interviewed over two dozen entrepreneurs, investors, and deal advisors who said Amazon used this process to develop competing products. In some cases, Amazon actually does invest in or buy companies, like they did with Ring. More often, though, it appears that Amazon has found it is more cost effective to steal ideas without investing money.

This is what capitalism is. Without government regulation, money and power condenses in the hands of a few giant corporations. There is no trickling down; entrepreneurs, inventors, and startups are left for dead by Amazon and slowly go broke after their once-in-a-lifetime idea is made worthless. How much greater would our country be if those actually coming up with brilliant new ideas were fairly compensated for their work? Instead of adding to the wealth of Jeff Bezos, money would go to entrepreneurs that could put it to work creating something useful.