To put a bit more nuance (or perhaps just spin) on it, the problem is not VC itself. VC can play a vital role in supporting innovation. Unfortunately, what it does far more often is let a bunch of marketing/financial dorks with strong connections to the money pipeline enter a young market and obliterate all of the actual innovators. It's not only innovation that gets lost, but diversity as well.
Case in point: continuous data protection. If you were around ca. 2004 you might have heard of this. Like backup, only to any second in the past. Nowadays we might say git for your entire storage system. Anyway, I was a fairly early employee at one of the original companies in the space. It was our marketing VP who coined the term. We worked really hard to promote the idea, and often collaborated with our competitors in that (much like Asana in this story).
Of course, that initial spirit of shared mission eventually disappeared. At that point, VC-backed and BigCo competitors were all spinning up their own products, backed by many times the engineering and (even more importantly) marketing budgets. They didn't actually win head to head, because they didn't actually have any products, but they totally froze the market. Storage is a hard market for a startup in the best of times, and these weren't the best of times, so that company ended up in a fire sale to Veritas/Symantec. End of story. It's pretty unremarkable in itself, except that I could tell almost the same story about half of the other startups I worked at.
None of this is necessarily bad. Just "creative destruction" and all that. In the end good ideas do get implemented and benefit users and make someone a lot of money. Unfortunately, those people are rarely the ones who innovated. When it happens over and over and over throughout the industry, it starts to seem like VCs are setting up incentives to be a copier (at best) rather than an innovator, and I'm not sure that's healthy in the long term.
I think its just the nature of innovation. It takes 1/4 the effort to copy as to create new and this is true in marketing as well as engineering. Call it the second mover advantage, where someone else has already paid the cost of innovation, risk reduction and marketing (convincing people that they want x) and the second mover capitalizes on the new zeitgeist that they created but with lower overhead.
That is in fact exactly what I called it when I wrote about this on my blog. It's definitely a part of how things happen "naturally" but that's also why I think VCs should act to counter it instead of magnifying it.
Case in point: continuous data protection. If you were around ca. 2004 you might have heard of this. Like backup, only to any second in the past. Nowadays we might say git for your entire storage system. Anyway, I was a fairly early employee at one of the original companies in the space. It was our marketing VP who coined the term. We worked really hard to promote the idea, and often collaborated with our competitors in that (much like Asana in this story).
Of course, that initial spirit of shared mission eventually disappeared. At that point, VC-backed and BigCo competitors were all spinning up their own products, backed by many times the engineering and (even more importantly) marketing budgets. They didn't actually win head to head, because they didn't actually have any products, but they totally froze the market. Storage is a hard market for a startup in the best of times, and these weren't the best of times, so that company ended up in a fire sale to Veritas/Symantec. End of story. It's pretty unremarkable in itself, except that I could tell almost the same story about half of the other startups I worked at.
None of this is necessarily bad. Just "creative destruction" and all that. In the end good ideas do get implemented and benefit users and make someone a lot of money. Unfortunately, those people are rarely the ones who innovated. When it happens over and over and over throughout the industry, it starts to seem like VCs are setting up incentives to be a copier (at best) rather than an innovator, and I'm not sure that's healthy in the long term.