It seems like you want to have your cake and eat it. You want to criticize these guys for out-competing small businesses, but you also want to claim they aren't really doing good business, that they are just wasting their investor's money.
Not OP, but small businesses have to use operating margins to make payroll and pay for capital goods. 'Startups', through what essentially boils down to predatory pricing, can burn through investor cash to acquire customers leaving the entire market at a loss.
NYMag actually does a decent job explaining it a bit:
http://nymag.com/daily/intelligencer/2014/04/problem-with-pr...
It's market manipulation (but not the type that rises to the level of impermissible market manipulation).
It certainly seems like Amazon is beginning to exercise their strength as a monopsony to gain unfair advantages and extend their business into new areas without actually competing on merits.
As an emporium of everything, Amazon already has a distinct advantage. Even if prices are higher on Amazon than other e-commerce sites, it makes sense for me to use Amazon because I can get 2, 3, 4 products shipped at once. That can be a big saving.
Additionally, Amazon subsidised widespread free shipping on low-ticket items for many years, in the UK they have only recently gotten rid of it[1].
That free shipping policy, while great for consumers in the short term, did starve out a lot of their competition.
And of course, the larger Amazon gets, the better shipping rates they can negotiate. My orders are now delivered to me by a "Amazon Logistics". It seems they've finally achieved full vertical integration.
If the business fails, then it has disrupted existing businesses for no gain. But if it becomes extremely profitable, then presumably it has made some cost savings in order to be able to do so, and so deserves these profits.
If the average business is profitable, then the investment is justified, both for the investors, and from the point of view of society as a whole.
The same way venture funded startups destroy bootstrapped, profitable startups: by massively outspending them.
Venture backed companies can get away with it for as long as investors will support them, regardless of how profitable their business may or may not be.
Even if they're not ultimately viable and fail, the pressure can be enough to crush the viable but not venture-funded businesses in the interim.
As such, they can 'disrupt' stable markets that are largely profitable and efficient, and that basically do not need disruption, by throwing tons of cash at them. Most of the time these ventures are not profitable (though they still disrupt the market - negatively!), but the occasional hit makes up for that and makes the strategy net profitable for the VC, even as 90% of what he invests in flames out.
If the VC is profitable, then the average venture is profitable, and therefore, on average, they have a positive impact on the markets they are involved in.
EDIT: in case it wasn't clear, every use of "average" by me refers to the mean, not median. So 10% vs 90% doesn't matter as long as the 10% is high enough.
But it's still a loss for society because now we don't have those 9 small businesses or their 9 "disruptive" replacements.