Regulation is increasingly written by and for the Goliaths, to the detriment of the Davids. But startups can still compete fairly in Texas.

When Washington fixates on Big Tech — companies like Apple, Google, Meta and others — it neglects Little Tech.

Little Tech — the younger companies building specialized solutions using emerging technologies like AI, robotics and more — is the engine of American innovation. It’s experimenting bravely and solving problems too complex or too early for the incumbents to tackle.

Yet when it comes to shaping tech policy, Little Tech is rarely invited to sit at the table. Last year, I joined Y Combinator President and CEO Garry Tan and founders from across the country in Washington, D.C., where Garry warned of the existential fight entrepreneurs face. He underscored how high the stakes are — not just for America’s startups, but for America’s prosperity.

He’s right. Regulation is increasingly written by and for the Goliaths, to the detriment of the Davids. App store terms, algorithm rules, AI governance frameworks and data mandates tend to reflect the priorities of the mega-caps. It’s regulatory capture at its purest: Incumbents get a protective moat, while upstarts are shut out of the castle altogether.

But there’s one place where startups still have the freedom to compete: Texas.

Texas is one of the last safe havens for innovators. While states like California burden entrepreneurs with excessive taxes, regulations and pick-the-winner policies, Texas remains open, flexible and growth-oriented. It’s a dynamic business climate that pulled me to Texas from Washington, D.C., years ago — underpinned by an entrepreneurial culture, a dense ecosystem of tech founders and funders, a pipeline of innovation and talent flowing through the University of Texas at Austin, a frictionless process to start a business and a lack of state income or capital gains taxes. Moreover, it’s why founders reach out to me regularly about building companies here.

Texas continues to punch above its weight, with startups modernizing the grid, advancing diagnostics and reinventing manufacturing. The pandemic boom may have subsided, but the depth of founder interest hasn’t. Startups still see Texas as a place to test ideas and solve real problems. Here, our optimism is palpable — and our future is as bright as the Texas sun.

Recognizing the importance of flexibility for Little Tech, the Texas Legislature passed a bill this past session that, effective January 1, 2026, creates a 36-month regulatory “sandbox” allowing promising companies to test and refine new AI inventions under relaxed regulatory requirements and without risk of enforcement under those waived rules. Examples like this underscore Texas’ willingness to foster an equal playing field for Little Tech to grow and incubate emerging technologies.

After two decades operating across both Little and Big Tech, I’ve seen what happens when regulations are shaped only by the giants: Big Tech grows bigger while startups get eaten alive. If the future of innovation depends on a handful of powerful gatekeepers, we lose the dynamism that built America’s tech leadership in the first place.

We face a choice: Do we want a society where every new idea must pass through the bureaucratic bottlenecks of a handful of massive companies? Or do we want one where new entrants can fight in the free market and rise on the strength of their ideas?

Here’s why Texas matters: The Lone Star State is, on its own, the equivalent of the world’s eighth-largest economy based on GDP But even as a single state, the policies we develop here often create the template for reforms in other states and even at the federal level. Take Texas’ AI sandbox: There’s now legislation in Congress to establish a national AI sandbox to ensure that the U.S. leads the global AI race. What happens in Austin can help or hinder America’s competitiveness in the world.

Texas remains committed, both structurally and culturally, to our freedom to build. And it’s preserving something even more important than a business climate: It’s protecting the conditions that allow startups to grow and have a fair shot at competing with Big Tech.

If we want to promote innovation, we must make room at the table for the builders, not just the billionaires. Texas knows the difference. Washington should remember it too.

Don’t mess with Little Tech. Let it compete, and watch what it can do for us all.

Steve Johnston (@StevenEJohnston) is a startup investor, serial entrepreneur and strategic advisor based in Austin.