What lies ahead for future startups?
This post isn’t about me guessing what the next trend in the startup world will be. Nope. If I knew anything about that, even the slightest, I wouldn’t be sitting here and just write about it…I’d go out there and make it happen.
So, this is just me thinking that it’s about time to ask such a question.
These past few years we’ve seen how the likes of Uber and AirBnB altered the otherwise low-tech industries into booming tech-based services.
Such a “simple” and smart innovation has helped both startups to rise into the cult status as unicorns, namely private companies with a minimum valuation of $1 billion.
Such disruption also took the market by storm. It inspired others to do the same in virtually every niche and vertical, from transport to accommodation, from travel to trash management.
The disruption gave rise to the so-called sharing economy: a nearly Utopian land where everyone shares virtually everything. Such concept of sharing was an instant hit that soon became a trend. So trendy it became the unwritten norm: You’re not startup enough if you don’t incorporate the sharing principal into your service.
But we have to admit that we’re eager to see something else hence my question above.
The Ghosts of Startup Past
In another spectrum however, the craze both startups instigated also became what some predictors said as the second dotcom phenomena. That without the bubble.
Let’s backtrack our timeline a little bit. In the late 90s/early 00s, investors gobbled up every share of any dotcom companies entering the stock markets. In those days, you could sell shares with price twice as high as a conventional company just by putting .com suffix in your traded company name.
It’s roughly the same with what we’ve seen these past few years when VCs endowed founders with their money for no other reason than being a startup, isn’t it?
With zero profits, untested revenue/business models and high burn rates, it was only a matter of time before the dotcom market crashed and burned. And it did. The dotcom bubble burst as soon as investors learned that the return of those dotcom companies (or lack thereof) wasn’t worth their investments. Among the victims, Amazon and eBay survived the onslaught and kept growing to where they are now.
However, only fools make the same mistake twice. Fast forward to today, to avoid similar fate of their predecessors, when it comes to capital vis-à-vis startup, the players are much wiser and wittier.
Unlike in the past, startup founders don’t rush themselves into making public offering. They stay private as long as they can. It took no less than 8 years for Zuckerberg to hold the IPO for Facebook, for example. The investors, meanwhile, use different channel instead of just planting their money through the stock market as they did in the past. They do it through venture capital now. It’s a win-win solution for everyone involved. Entrepreneurs get the money without all the setbacks. It’s not a debt that they have to pay later even when they did not succeed and, unlike shares, there’s no risk of market volatility that can expose them to capital loss. The investors, in return for their investment, will receive a percentage in the companies’ equity in the future.
It’s the same game, nonetheless, only with a different, stricter and safer set of rules and game play.
Zero profits, untested revenue/business models and high burn rates are as detrimental to startups today as they were to the dotcoms. They still pose real challenges as much as they were one and half decades ago. There are too many flop stories involving startups that failed to achieve satisfactory level of success and had to have the rug pulled out from under them. Despite the amount of funding they received and flashy status they gained as the next this or that, those startups ended up shut down for good.
What Comes Next: The Future of Startup
I’m not sure whether Hegel’s theory that history always repeats itself can be applied accurately to the history of internet, considering its very short time span, but it’s needless to say that the future startups will be in perfect alignment with the future of the web. And vice versa.
Social media is the next evolution of the world wide web. Web 2.0. Honestly, it’s the fanciest name people ever give to a test pack for maturity level. What? Haven’t you ever reflected upon what you said when you anonymously or not so anonymously, trolled someone’s status or opinions? I have. Trust me, if anything, social media has awakened the troll in all of us.
But it’s not just for trolling. People do share important stuffs via social media too (surprise!). Sharing is caring…and upon this basis the startup revolution began. This brings us back to the ripples caused by the unicorns mentioned above: sharing-economy.
Like anything else, every trend shares the same destiny. Even in the startup world. Sooner or later, no matter how big, no matter how far reaching the sparks of inspiration it creates, it would end, with a bang or in a puff, giving way to the next one. The core concept of the sharing economy itself is under scrutiny. Some criticized its motive: creating opportunity by exploiting the results of the economical crisis. Others questioned the ethics behind the amount and the sources of funding that support those platforms: who’s actually profiting? The individuals, the moms and pops who rent out their spare rooms, or the corporate, as in any other capitalistic environment? To the critics, sharing economy isn’t as noble as it seems.
The problem is, numerous startups bet not on the future, but on what sells today.
The problem is, numerous startups bet not on the future, but on what sells today. This is not progress. It’s repetition. And it’s getting old. The market is saturated analysts said, and yet we’re still bombarded with the Uber-for-this-and-Uber-for-that kinds of startups. Some accelerators/venture builders even keep on churning mega e-commerce sites, across niches and across countries without any clue on how to improve their services or users’ experience.
Isn’t it time to start to address the real challenge? Y Combinator created a really cool list of criteria that a startup can do to answer future challenges.
Speaking about the future, I don’t know why nobody talks about Web 3.0 anymore. Or are they? Instead, we have what is known as IoT, Internet of Things. Whatever that means. And it’s stealing the show from Web 3.0, if there will ever be one.
From where I stand, I can’t imagine a world where every piece of equipment can receive and transmit data and by that leave an access point that someone with the right skill and wrong intent can exploit.
Try this. If the idea of having a fridge so smart it has its own CPU/IP doesn’t scare you…I don’t know what can. People can hack into it, make it inaccessible for you (the owner), freeze or de-freeze everything inside, send some misleading infos to vendors that soon will send you things you don’t need but still have to pay for…. And that’s just the fridge.
Jason Vorhees: The bane for all those snogging teenagers
Y2K, anyone? As a real threat, it was a dud. But the fear it caused was as real as the fear of those teenagers caught snogging by Jason Vorhees. Remember, Y2K happened when not as many PCs were around. And from that number, by today’s standard, only a handful were connected to the internet. What about gadgets? Are you kidding me? What gadgets?
Now, imagine the scale of the uber-mega-FUBAR that’s going to happen if something similar hit in the IoT age. Everything we own, from our smartphone to our watch and everything with/out power cord in our house will be connected to a server somewhere in the cloud. As such, they’re prone to even the smallest binary deviation. Digital doomsday? Maybe. One thing is clear though, the Y2K happened 20 years too soon.
Never mind that. It’s just me being too paranoid. But still, I don’t think there’s a merit in connecting my fridge to the internet…or my house or my shirt (just to let me know it’s time to change).
Ok. Enough ranting.
In order to top this post off, I’ll list some things that I think we can expect from future startups. They can be the real game changers. It’s highly personal. No deep research behind it. So, just for the fun of it, here we go:
Better/More search engines
Let’s face it, Google sucks sometimes… It’s frustrating to find that the info you’re looking for is buried deep in its SERP, especially when you already use the quote-unquote in your query. That if you managed to find it. Sometimes you’re just not that lucky.
Not just that. For something with a heroic status, namely something million people use to save their day, their “Don’t be evil” thing doesn’t work anymore. Google has become so big it can’t afford not being evil sometimes. Maybe that’s why they created Alphabet?
The smartphones we have today are only as smart as the users are. We need one that really is smarter than we are, with price tag twice as cheap as the smartest today will be really cool. As we can see, mobile-first technology is pushing itself to become mobile-only. Smarter smartphone can close that mobile gap and speed up the desktop version’s journey to oblivion. I’d bet my money on those Shenzhen-based smartphone brands.
More startup with social purpose
What would happen if you have so much money that you can literally donate 99% of it and live off only on the remaining 1% and even this would be more than enough to finance your family living expenses, including children and some following generations? If that happens then you’re Warren Buffet. Tech giants, at some point are billionaires (technically). Slack can operate just fine even without all the investments it raked over these past 2 years. So, what is that money for actually?
Better gig economy platforms
Gig economy is beyond popular these days. It’s everywhere, slowly altering everyone’s traditional view on working. However, although the fees from gig jobs can be highly lucrative, they lack the safety nest a regular job offers, like benefits, perks etc. Not to mention the fierce competition to win a gig with others. It calls for improvements in many aspects. Making those improvements can be the ticket in for any startup in the future.
Cheap alternative to Bloomberg Terminal
Financial technology (fintech) is going to be even bigger in the years to come. Money is a niche in itself. Microloans. Bitcoin or stock-related startups sprang up purely from market demand. However, as technology improved, the looks, the feel and UI of Bloomberg Terminal virtually remains the same since the 80s. Unbelievable! For the sake of many, some alternatives with the same potency are needed ASAP, considering that one unit of this sprawling, multi-monitored console has an insanely pricey lease. Lease? Yes. This is the remnant of the late 80s’ practice where companies leased computers instead of owning them. Crazy right? And it costs like $24000 a year!
Virtual and Augmented Reality
A picture says a thousand word they said and a picture of Zuckerberg walking, grinning satisfyingly while all other persons in the room are plugged to VR/AR devices says some other thousands. No wonder, the internet freaked out over this picture.
To me, this is just a clue on how artificial realities platforms will play a major role in the future. It can be a huge success, but it can be another story of over-expensive flops (Facebook bought Occulus Rift for a staggering $2 Billions)…especially because VR isn’t entirely new. The 90s’ version of it wasn’t that successful.
“Mobile is the platform of today, and now we’re also getting ready for the platforms of tomorrow,” Mark Zuckerberg on VR
Let’s see how Zuck will transcend VR from its relatively comfort zone in the gaming world.
I have to admit, hardware world has never been that exciting. With cheaper and smaller components available (for sensing, tracking and computing purposes), IoT literally has one foot in the door. Wearables, drones, next generation 3-D printers (and things they can make), robotics tech and so on and so forth will make the hardware scene a fierce battle zone for many startups to come. Personally, I want to see a nano drone, or the black lego-like thingy you can control with your mind in Big Hero 6.
It amazes me that, after all these years, the fluctuation of oil price still drives economy like it has been doing it for decades. Talking about disruption–the most overused word in startup world– a clean (non-fossil), safe (no-nuke) and efficient source of energy will be the mother of all disruption on Earth. Are there any research on this field yet? Gravitational waves have been found. So did the Higgs boson particle. So where’s the alternative energy? We need it for like yesterday!
Or, should I say, The Untouchable? Personally, I’m an old school guy. But this guy is too old school in practice someone needs to disrupt them ASAP. Some lobbying with the government are needed though, because its a heavily regulated industry.
Thanks to too many startup flop stories, VCs are now tightening their control over their funds. The flop didn’t deter the VCs from making any investment at all, mind you. However, future startups will have to rely on something else than generous fundings. The challenge is getting tougher too. It’s not easy to find something that isn’t available yet or (if it already is) is way better than any competition or has a rapid growth potential.
If anything, growth is what differentiates a good startup from the rest.
Speaking of growth, nothing invites growth more than the emerging markets. More startups will cater to the needs of frontier lands in Asia: China, India and SE Asia. I would not be surprised if the next unicorn will be born in Asia. In fact, I’m kinda expecting that. Asia has an enormous market size that, even with some competition, the slice can still generate big enough profit. Another incentive is that the living cost in Asia is much, much cheaper than let’s say the Bay Area. Meaning? We’re speaking of the possibility for the developers diaspora to full relocation of headquarters here.
In the meantime, there will be more and more startups comprising multinational team members who, despite working in the same company will seldom meet in flesh. This is necessary. Market in Asia, for example, need local knowledge to help navigate its sometimes uncharted terrains (laws and rules…and, not to mention, language barrier). A good example for that would be what happened to Uber. To this day, it still has trouble to operate in Jakarta due to technical glitch. It’s a loss that can be avoided if the PIC was more familiar with Indonesian bureaucracy.
As consequence of the disruption they probably cause, many startups will find the law unaccommodating to their existence or services. This can give rise to new battle zones in legality. The incumbent or the “disrupted” industries won’t just roll over and die. So this is to be expected.
It’s also worth to note that although IT has a global appeal and outreach, things we need, as humans, go far beyond that category. Looking beyond that particular tech world can be the answer for future startups. Food sustainability, medicine and even labor/workforce are among the things that have sustained human civilizations for millenniums, and remain relatively untouched by the startup craze. I have a hunch that in the near future, anything worthy of unicorn status will be a startup that produces something tangible…as opposed to something so abstract it can be stored in the clouds.