oculus-faceFor most of us, there’s no good news in Facebook’s $2 billion purchase of Oculus. Mark Zuckerberg can crow all he wants about buying up tomorrow’s platforms, Oculus executives and investors can preen – entirely justifiably – over their glorious financial exit, but the rest of us are left watching the same horror show on repeat. Tech giants opening up their checkbook and buying the competition, willing to gut entire markets before they’ve even got started.

Eighteen months ago Oculus Rift was raising $2.4 million on Kickstarter. Three months ago it raised a juicy $75 million Series B round. But the company didn’t even get to launch a consumer product before Facebook swept in and bought them for $2bn.

Until today, Oculus Rift was the leader in a space that at some stage – not today, or tomorrow – could have been revolutionary. But now it’s the property of Facebook, a company with no track record of developing hardware, let alone virtual reality hardware, and a spotty-at-best success rate trying to innovate outside their core area of social media. Oculus Rift’s innovations, which could have been built on, slowly expanding out the market and breaking down the doors of what it could do, are now as good as siloed.

This is all great for investors, of course. A few weeks ago I had a conversation with one of the earliest stage hardware venture capitalists in Silicon Valley talking about Google’s spending spree, whether springing for Nest, or taking out eight of the most prominent robotics companies, buying Schaft, Industrial Perception, Redwood Robotics, Meka Robotics, Holomini, Bot & Dolly, Boston Dynamics and DeepMind Technologies, all in the space of a few months in 2013. The returns from this have been magnificent, he acknowledged, but there was a stifling impact of it all, with yet to be seen costs.

The reality is, you can’t eliminate that much new intellectual property and park it inside a company with a market cap of $390 billion and expect everyone to stay hungry. Mad, determined geniuses end up well fed and well paid inside a much more comfortable ecosystem with much less to prove. That sense of independent, seat-of-the-pants innovation: small teams of inventors creating tomorrow’s world-changing technologies is strangled in the womb.

The fact that it’s Facebook doing the buying here is even more troubling. There’s no reason to feel good about Google trying to absorb an entire ecosystem of robotics companies, but at least Google has established itself as a maker of physical things: be they self-driving cars or Google Glass. Facebook’s splashiest innovation, its ‘Home’ software for Android phones died silently. Where this goes, seems farfetched. Does Google fancy itself as a car manufacturer? Does Facebook have similar hardware aspirations, shaping and manufacturing Oculus Rift into something that can go head to head with Google Glass? The fear of course is that, no, Facebook has no such ambitions. They just want to own Oculus because they can. Or to prevent Google buying it, or something else equally unromantic.

But whatever the reason for the purchase, the result is clear: virtual reality just became a monopoly before it even became a market, its development now serving whatever agenda Facebook has for Oculus. And Oculus won’t be the last: An entire generation of hardware innovation is up for grabs right now, and neither Facebook or Google seem about to close their wallets.

To paraphrase the motto of (Pando investor) Founders Fund: we finally found people who could deliver on the promise of flying cars, but they’re all being taken out by the same two characters.

There are two potential silver-linings here. The first is that entrepreneurs get absorbed into Facebook and Google, experience some financial success and gain some life lessons and then spin out in a few years to something new. The problem with that though is it hardly ever goes as planned. First success isn’t an indicator of second success. Even in a best case scenario, a real hardware industry lead by independent companies has still been set back by at least five to ten years.

The second silver-lining is more promising: That exits like Oculus Rift’s or Nest’s show off to early stage investors that large returns are possible in hardware. There is a glut of early stage money in the system and most of it is terrified of hardware. There’s a reason Kickstarter and Indiegogo have seeded more hardware ideas than VCs. Hardware is still brutal and cruel, but at least now we’re seeing that it can be lucrative.
If more money goes into the system, odds are higher that someone will get funded who is visionary, arrogant, or naive enough not to sell.

[illustration by Brad Jonas for Pando]