There might be better alternative business models if there were something even remotely resembling a level playing field. Unfortunately, that's not the case.
One of the biggest myths of western capitalism is the myth of the 'free market.' Free markets no longer exist. And many economists would argue that they never really did. All of the world's economic systems and marketplaces are regulated. Some may be regulated less formally, or to a greater or lesser degree, but all
of them are regulated.
In a regulated marketplace, the most established businesses with deepest pockets* have a significant advantage since much of the regulatory system is designed to protect their interests. In such an environment, innovation is often viewed as a threat rather than an opportunity, unless the innovation is minor - or is being brought to market by a big company.
So here's the problem in a nutshell: Any real advantage a small company might have can almost always be trumped by greater capital resources, litigation, or regulation.
Most successful small tech developers know (as do their investors) that no matter how breakthrough their product or service is, it will only be a matter of time before someone with deeper pockets:
- Buys out one or more of the developer's partners or investors.
- Files IP or patent infringement charges against the developer regardless of merit.
- Steals the developer's product/service outright and defies them to successfully sue to get it back -or-
- Attempts to get legislation passed to effectively outlaw the developer's product or service.
Small companies don't have the resources to fight against these tactics for any length of time. And the bigger kids on the block know it.
So from a purely business perspective, becoming a nuisance and then selling out to the highest bidder is probably the current most effective business model - if you look at it from the viewpoint of profitability, investor return, and capital preservation.
From a societal and technical perspective, we're all made poorer by this approach. But for the people putting in the time and money to develop a new product or service, this may be the only way they can reasonably expect to make something for their efforts.
And for an individual or small company, 10% of something
is a better return than 100% of nothing
*Note: having 'deep pockets' applies to individuals as well as businesses.
That's why it's so important to get your net worth up (just above $1 million in the USA) to the economic tipping point. Once you get there, you'll discover "the system" starts working for you in the form of more favorable interest rates, better investment opportunities (courtesy of 'qualified investor' rules), and access to various legitimate tax strategies.
The old adage "The best way to make serious money is to have serious money to begin with!" was never truer than it is in the USA. The USA may occasionally forgive failure - but it always rewards economic success.