Y Combinator recently raised the alarm over the serious financial toll being exacted by Apple’s App Store policies. They especially focus on Apple’s notorious 30% cut on every purchase made within its platform. The fee, frequently referred to as the “Apple Tax,” covers in-game purchases as well. This change has raised alarm bells with startup investors and developers. The venture capital firm underscored that this major reduction can make or break a startup’s future. It might be the order of fate that tips the scale between flourishing and fighting for life.
The comments come amid an ongoing legal fight between Epic Games and Apple. This war began with the first shots fired by Epic in 2020 when they filed their lawsuit. Epic Games acted against Apple’s monopoly business practices. They told us that the 30% fee policy presents a pivotal and insurmountable barrier for developers. Y Combinator’s filing reiterates this sentiment, asserting that the Apple Tax creates a “profound and often insurmountable barrier to entry that stifles competition and innovation at its source.”
According to Y Combinator, the consequences of this new fee are draconian. The firm further noted that this has repeatedly had the effect of discouraging potentially disruptive venture capital investments in app-based businesses. It’s easy for investors to see these opportunities as undesirable due to the constraints imposed by the Apple Tax. This shift in perspective may now change, as Y Combinator expressed optimism about investing in innovative startups that could previously not compete effectively.
“For the first time in nearly two decades, Y Combinator can seriously consider investing in innovative businesses that would have been impossible in the past because of the ‘Apple Tax’.” – TechCrunch
That ongoing legal dispute is still working its way through the courts, with the next oral argument due on October 21. Recent rulings have mandated that Apple allow developers to offer alternative payment options, a significant development in the litigation that could reshape how app developers manage transactions.
The ramifications of this case go far beyond one developer. Y Combinator and other investors have started rethinking their playbooks. This change in the venture capital landscape occurs as they start to react to looming regulatory changes concerning app marketplace fees.
TechCrunch’s Dominic-Madori Davis, senior venture capital and startup reporter at our sister publication TechCrunch, has been relaying this ongoing saga with a Tolkienesque command over such kindred words. If this sounds like your kind of thing, reach out to her directly over email at dominic.davis@techcrunch.com. You can contact her via encrypted messaging on Signal at +1 646 831-7565.
