Three thoughts:
1. Honestly it's not super hard to copy / re-create apps.
The more important things Big Tech companies buy in the acquisitions are:
- the user base / network effect
- the management team / employees
- the brand and halo effect the brand has built with its current user base
We see in G+ vs Facebook that copying the tech was the easy part. But users of FB did not have a strong enough reason to move to G+ even with G+ tightly integrated with the rest of the Google ecosystem.
So inasmuch as Big Tech are *forced* to create better products to get users to remain (or switch), I agree. Buying the users was a shortcut, and without acquisition, Big Tech companies have no choice but to just create better products if they want to fend off the startups.
2. This only affects US companies.
Big Tech from outside US can continue to acquire unhindered (i.e. China Big Tech). Will this be a handicap to US Big Tech or will this be a net positive in that more small players can grow on their own and Big Tech are forced to improve faster to fend off small competitors which they now couldn't buy?
3. Still no silver bullet for startups
G+ losing to (then startup) Facebook may be the exception not the norm. See the recently viral article of Amazon copying the startups it invests in. Startups still face an up-hill battle against big tech and they should operate with the assumption that Big Tech (or anyone!) can copy their apps at any moment. This means, they should focus on the non-tech elements:
1. Strategy. And to me Strategy = Focus. One thing Startups can beat Big Tech in is Focus. Strategy is about sharpening the spear. In ancient war, infantry with long pointy spears could always successfully fend off cavalry with their large horses. A balloon that drops on a bed of nails won't pop, but a balloon dropping on a single sharp nail will.
2. Brand. The only value of the brand is its user's loyalty to it. Not its beauty, its logo, its font - a brand has no value if no user is loyal to it. Loyalty is built through a series of positive experiences with your brand.
3. Founders / Team. They say investors invest in founders/teams and they're right. A Facebook created by Zuckerberg will always be better than the Facebook created by the Winklevoss twins. Apple under Steve Jobs (post-exile) will always beat Apple under John Sculley. Focus on getting better everyday.