After the Gold Rush(techcrunch.com) |
After the Gold Rush(techcrunch.com) |
Startup gold-rush is anything but over. Tell me this: if not into startups, where will the money go to find possible returns? Negative interest rates, oil price can't find the bottom and stocks aren't really going anywhere either. So where will this money go?
I had the same thought - TC is pretty much an eye-roll-and-move-on for me at this point.
However...
> Tell me this: if not into startups, where will the money go to find possible returns? Negative interest rates, oil price can't find the bottom and stocks aren't really going anywhere either. So where will this money go?
I think that the point here isn't that entrepreneurship is suddenly dead, but rather that
> [the big players] have co-opted the same technologies startups used to attack them” and so “until there is another fundamental technology disruption, the window of opportunity for startups is limited to more traditional markets with less competitive players.”
The various *AAS models may be coming to the end of their usefulness as a disruptive media, but there's plenty of "fundamental technology disruption" ahead: mesh networking, crypto-blockchains, embedded, VR, and on and on.
The article provides no clear metric for success, just impressions based on brand success. Things are not so rosy for its darlings as it implies. A price to earnings ratio of 70+ is quite a risk, no matter how sure it seems that such a company becomes a permanent monopoly. I feel that the low (now negative!) interest rates offered by central banks are fueling a huge bubble in the valuation of these companies.
Has the US experimented monetary deflation since the half of last year?
People use gchat, Facebook, Instagram, snapchat, whatsapp, and iMessage simultaneously, for distinct purposes. And all of their friends do too.
As long as the app present value, kids these days have no problems switching back and forth between apps, meaning they can get hundreds of millions or billions of users too.
For me, 10 years ago I had to use a desktop to achieve much of anything. These days I have the power of my desktop except it weighs 2.65 pounds, wireless transfer speeds up to 1300 Mbit/s, has a 13.3in 3200x1800 touch screen, 256GB drive I can read and write much faster than my 3ware RAID0 setup I had back then. Its the size of an actual notebook and runs all day long without getting plugged into anything. Not to mention it only cost me $750 bucks compared to at least twice that for my old desktops.
For me, it feels like things have improved fairly significantly.
For instance, my parents are happy as clams using a G4 Macbook and a second-hand HP Pavilion laptop
Look at the YC classes. They are very different from 2005. You can't get rich making a site like reddit today. YC is going international, with X for Y country businesses.
I was talking to a friend with a startup in Indonesia. In Asia its like 1998.
I think we are just at the end of the easy social/mobile revolution in the West and on the cusp of the next robotics/AI/IoT revolution.
And the same process that created cheap and easy tools for software, the same process that dropped the cost of starting a SaaS business 10x will happen for robotics/ai/IoT.
Its already relatively cheap and easy to prototype and fabricate things like low power bluetooth wearables.
Computers have just gotten tiny, low power, wireless and cheap enough to be disposable. These devices are about to be everywhere.
This is not the end of the tech startup gold rush. It's time to learn AI and hardware prototyping.
I can't speak such a broad generalization, but I noticed a learning curve/ trajectory of how people perceive opportunity online and the ideas they get excited about. It seems to depend when someone truly dove into internet and used it for everyday needs.
I only have anecdotal evidence to this, but I really think that most follow are following the same trajectory/learning curve about opportunity online and people are currently in place across that curve. We still have fewer than half the world online, and billions who are using the internet today the way we used it in 1994.
This is my theory for why old school domainers stopped buying domain names for a premium in 2007, and yet there are still people today paying a ridiculous amount of money for domain names, and thousands more investing in them like it's still a gold rush. That gravy train seemed to dry up in the last decade, yet somehow new people enter the market and fall in love. I bet there are still penny auctions making money and daily deal sites emerging, despite those trends passing years and years ago.
Those on the cutting edge need to remember that they don't reflect the bulk of the world, there is lagging opportunity for at least a decade in every space that seems to be owned.
SF/SV/NYC/LON are very desirable areas and it takes a long time to build out that infrastructure. It is a supply/demand mismatch. Domains were these nebulous things no one understood but if you bought one, it was worth way more than you paid for it. However, JET.com and Genius.com were quite expensive because they are pretty desirable domains, nerdy.com just went for 25K. Supply has gone up so the localpetstores.co.com domains aren'rt really worth anything.
On balance, technology companies-- companies that are leveraging technology well and constantly improve as part of their business, will continue to do well. However, if you define technology as, with a computer then that sector is as descriptive as American or European. Companies in leveraging technology well:
Alphabet
Apple
FB (oculus)
Amazon
Intel
Companies often referred to as "technology companies"
IBM
GE
If you look at the highlevel descriptors, both baskets are fairly comparable, and that is the trap!.
Amazon has a globally unified distribution for digital media, technology applications, physical things, and a marketplace.
Alphabet.
Facebook has 1Billion users and owns much of the messaging. It is how people organize social search. They also are able to marry the phone messaging and image/moments, with the online community of the computer and soon bridge the devide to gaming and a truly addictive world of VR.
Intel is the world leader in building the thing every one of those companies runs on.
etc.
The mismatch between value and perceived value is becoming more evident. So it is, to quote our guy Charlie D, both the best of times and rthe worst of times, some have much infront of them and some have nothing, and the pundits will insist that it is a superlative of this or that, when in reality it is sameness: think hard, be more correct and capitalize on your view of the future.
edit: just to clarify, I plan on using the domain lest anyone think I am a squatter. Although, I do have a tendency to get sidetracked/change gears so I was using that as an analogy above.
This sounds like pure denial. You don't want to face a painful truth, so you create a rationalization. But your sentence could be applied to dozens of other maturing industries, and your sentence would be wrong in every case:
In the 1880s: "There are thousands of oil reserves that no one has discovered yet, therefore the field remains wide open to innovators who want to take a risk on a new field."
And yet, after 1880s, the industry consolidated into a single behemoth. Even as late as the early 21st century, wildcatters could still make some money off a hard to reach patch, if prices were high enough. That didn't change the fact that all the big profits were held by a few near monopoly powers.
In the 1880s: "Much of the country can not yet be reached by train, so this industry is wide open to innovators who want to build new lines."
And yet the train industry consolidated after 1880.
1920s: "In automobiles, there are still vast innovations to be made to make brakes reliable, and someone needs to invent an automatic starter, since hand crakes are now dangerous, given the growing size of the engines. And an automatic transmission would be an amazing breakthrough, if anyone can figure out how to do it. The space is wide open for innovators who can solve any of the many problems that remain in the auto industry."
But the auto industry consolidated from that point forward.
In the 1980s: "The CPU is a new idea and the path forward for processors is still wide open to innovation."
And yet, Motorola was founded in 1928, Digital Equipment Corporation in 1957, Intel in 1968 and AMD was founded in 1969. The dominant powers for computer processors started a long time ago, the field consolidated when much was still unknown about the ideal strategy for processors.
There are industries that clearly have not yet emerged as stable entities with a clear path forward. Genetic engineering is an obvious one. But the software industry is clearly much more consolidated than it was in the past.
The microprocessor preceded the gold rush we're eulogizing here.
They all spawned brand new ecosystems that created entirely new opportunities for entrepreneurs to create wealth. The train even unified some nation states that didn't exist.
http://www.inference.vc/deep-learning-is-easy/ https://news.ycombinator.com/item?id=11006067
So OK, we've got tools for the IOT(mbed/arduino, etc). The key question is - how do you protect your product from being rapidly copied by big competitors(or worse, china),when they are using those same tools ?
In web development, we did it by getting tons of users really really fast and using that as a tool. But hardware markets are much slower.
That leaves us having unique, well protect IP(if you want a unicorn). And maybe this can be created by a startups, but a totally different type of startup: Maybe based on long university research. Maybe based of on a group of exceptional multi-disciplinary people with unique skills working together - and not a bunch of kids with an idea.
Seems very ironic, if you remember that time in Asia. (https://en.wikipedia.org/wiki/1997_Asian_financial_crisis)
Why not? Reddit is old...
I'm not sure it's possible to grow as large as Google, Apple or Facebook and remain agile. The product and organization gains too much inertia on its own. Even if you have a brilliant idea for improving the product there are hundreds of people you need to convince, months worth of meetings and reams of design docs required.
The big companies may be innovating on the edges, but their established products are all ripe for disruption.
Of course, if you look too disruptive they'll probably just buy you with their mountain of cash.
Most of the current wave of tech's origins are in the Web 2.0 'read/write' web that came after the dot com pump and dump funding fiasco...twitter et al grew out of the ashes of the last vc and wall street debacle. we are a similar inflection point IMO, where honest innovation will be more important than megabuck funding fests...
There's no middle ground in most of the news I read. Imo, the markets are tightening up forcing companies at all stages to cut their budgets and/or generate revenue.
Tighter markets and harder conditions does not equate to the stagnation of tech. They are not the same. In fact, constraints lead to greater innovation.
The golden days like in the 90-s everything is PC, you can run whatever you want on PC are still somewhere ahead of us with mobile and IoT.
There's still plenty of money, talent, and success out there for new, good ideas. It being hard to fund the same old thing again and again is more of a feature than a bug.
And the argument about the last few YC classes - it takes years to see who the stars are. I remember seeing one of the founders of Stripe speak when they were in YC. It wasn't clear they were going anywhere. What they were doing was cool, but there wasn't exactly lots of hype about it. Their success only looks obvious in hindsight.
Culture companies are the future. When you can get anything anywhere, the brand matters far more than the product. Anyone can make a burger or a pizza, so why are McDonalds and Pizza Hut crushing it across the globe, especially in China?
We're already seeing this with news. Traditional media companies are struggling to adapt while media outlets with personality like Vice (and Slate, and Quartz) are doing better than ever.
When all the gold is mined, when all the tech is made, the only thing that's left is to sell yourself.
Though, all tech has not been made yet - I suspect tech is taking a short time-out right now before the next big disruptions are enabled by:
* VR (cinema, anyone? could even make some 3d printing obsolete)
* order-of-magnitude faster mobile internet
* cheap(er) robotics
* abundant energy supply thanks to fusion or <insert yet unknown source>; also, perhaps break-through battery tech?
* self-driving cars (obvious, but I think that in itself will enable a lot of disruptions, like cheap grocery delivery)
* cheap(er) drones (= flying cars eventually?)
That being said, such shifts do not often treat incumbents well. Microsoft dominated the PC market in the 90s and early 00s, but their smartphone/tablet is barely a footnote in the market.
But this is far from true with the huge entrenched healthcare tech companies. Many of them haven't even begun to employ the newer software technologies. I'm down the street from the largest medical center in the world and numerous doctors and nurses encourage me all the time with their complaints about the major tech players in the industry. SV has barely scratched the surface of what could be improved and I look forward to seeing many more entrepreneurs join us in this $3 trillion industry.
If you're going to talk about financial/economic phenomena please at least conduct a modicum of quantitative research and give us some concrete data to discuss, not just opinions in a void.
"In 2011, Y Combinator’s poster-child alumni were — already — AirBNB, Dropbox, and Stripe. Can you think of any Y Combinator companies from the last five years as well-positioned today as those Big Three were then? Maybe Instacart, if their unit economics work. That’s it."
"A social network for X, like Facebook"
"A social news site for X, like Digg"
"A way to massively improve your e-mail experience, like GMail"
In other words, people always chase the massive startup that got popular about 3 years previously. This article is pretty much on-time if it's holding up AirBNB, DropBox, and Stripe - those are the massive startups that got popular about 3-4 years ago.
But in 2007, these were most decidedly not the hot industries to go into. Hotels were a done deal: Hilton, Marriott, Holiday Inn, and others chains owned it, and who would think a tiny team could take them on? Filesharing was an incredibly crowded market with 20-30 players, and in any case, if it got popular Google was going to crush them with Google Drive. PayPal owned payments; everybody knew it was a regulated industry with strong network effects, so why bother to compete?
And "gold rush" is a good term--"land grab" might be better. The fact that the "disruptive" companies are all now skirting or outright flouting the law shows that the easy land is taken.
If it's highly profitable, it's either illegal or difficult. Easy and profitable means that, even if you're first, the horde is inbound.
Those of us with real products that can't simply be done with 4 20-year-olds and a dog in Ukraine? We're chugging along, thanks.
Yeah, raising money is getting really annoying, but, if we can't, we'll bootstrap. Funny that, bootstrapping is an option when people pay you money.
And, do remember, the people who made all the money in the gold rush weren't the miners, it was the people who sold shovels and alcohol.
Ssssh, don't give away the secret. ;)
Actually, startups designed to sell to other startups will fail too when the whole thing collapses like a stack of cards...
Enter Mandrill, which recently found its conversion funnel so ineffective that they suddenly shut the entire system down.
I was curious so I googled. Wikipedia: There were 300,000 gold-seekers and "On average, half the gold-seekers made a modest profit, after taking all expenses into account."
So probably better odds than the people doing startups. One person who made a lot of money was Levi Strauss who stated selling denim to the miners.
I don't think that is true. Less than 50% of humans have regular access to the Internet. Do you really think that more than half the people on the planet do not want to get online?
[1] http://www.nytimes.com/2008/04/09/technology/09silicon.html
[2] http://www.nytimes.com/2016/02/22/technology/caution-rebuffe...
In the end, the entire macroeconomic background is different.
"And they assert that they are not feeling anything like the pain that followed the collapse of the dot-com bubble, which led to big job losses, an exodus of talent, a plunging commercial real estate market and a significant drop in investment in start-up companies."
You can't type on a keyboard and make an automobile factory that can compete with the big car companies, but in software, you pretty much can. It's a pretty chaotic market for this reason even if there are big dogs.
Stop working on your social network. Stop trying to simultaneously pick the lowest hanging fruit while going after the biggest pile of cash.
Go after problems that matter, rather than gizmos that might get a lot of users, or "eyeballs".
The gold rush is never over for extraordinary companies.
Facebook will either have to work out a business model that makes it profitable to frequently buy WhatsApps/Instagrams and then Snapchats/Telegrams/etc or they will end too.
The answer for Facebook and me, is nothing. If Google disappeared tomorrow, I would be hurting for many services I probably take for granted. I suspect if Facebook disappeared tomorrow, most people's lives would not materially change for the worse. Perhaps they would even change for the better.
I disagree. I am reminded of the comparison of the prisoner and the warden, where the warden [behemoth] has his whole life to think about whereas the prisoner [startup] is only thinking of escape [way to get a leg up on the behemoth]. The difference is that many people see the behemoth with no obvious weaknesses and give up; but if they had the same weaknesses they exploited, that would be too easy wouldn't it?
Oh, come on. Where there are BigCos, there is inherent bureaucracy slowing them down. Creating a startup gives founder engineers the opportunity to massively create wealth in a way that BigCo simply does not incentivize.
I have worked for a bank before coming to Google. The biggest difference, even in the core business, is that people speak up to management and call bullshit out.
Memegen, for all its flaws, wouldn't survive one week in the open in a bank, and the perpetrators would be fired.
And what is the Memegen (and its flaws) you refer to? I google it and find a bunch of meme generators.
Or just copy you.
Even if they are 10-20% worse, they have a bigger, cheaper distribution channel than you which they can stuff their product into.
Google Videos vs YouTube. Orkut vs Facebook vs Google+. Facebook status messages vs Twitter. Google Offers vs Groupon. Google Flights vs Kayak or Hipmunk. iMessage vs Whatsapp. Google Local vs Yelp.
There're plenty of examples where the big company came out with a competitor (often getting to market first, eg Google Video or Orkut), stuffed it through the distribution channel, but lost to a startup that nailed the user experience. Having a big channel doesn't matter if your conversion rate sucks.
Woe! :P
It looks like a cycle. Come up with new product with a small team, add more employees, add more managers, add more cruft, slow down.
Then a startup comes along, moving faster, innovating faster, disrupting until it grows and starts to add more employees, add more managers, add more cruft, slow down.
And Then a startup comes along ......
Big companies buy 'disrupters' when they fear their market share is at risk. But most of the time their market share is not at risk, and they should just wait for X startup to crumble.
> Move into new fields that have not (yet) gone through this transition. Tech giants may have adapted (somewhat) to the startup threat, but there are other fields — healthcare, for instance — still trying to adjust to last decade’s technology. These will remain fertile ground for some time yet.
However, we know that this is not an easy field for many reasons (regulations, importance, no mistakes allowed, …). There is a reason why this field seems that stale.
This is something that wasn't the case for software, so I guess this is also why this goldrush was so much different than anything else we've seen before.
My father is a physician. So we've had lots of conversations about this problem. I also here all of his complaints about software. Especially EMR (Electronic Medical Record) systems.
The current SV business model is "hoover up personal information people don't completely realize they're providing you, then use it to sell them marginally-more-effective ads." That works for "social" websites and taxi companies that aren't taxi companies, but I doubt it will fly for health care.
You can see Facebook and Google scrabbling over themselves to get a share of the emerging markets. Google is trying to pair down Search so they can get it onto those 2G connections. Facebook is trying to give away bandwidth. They both know there is going to be a lot of money in those markets soon, but no one knows exactly how that economy is going to evolve.
Yep. I can see why they don't wait for them to crumble though. What if they don't? That's a big risk to take.
When a potentially disruptive product gets bought, it virtually always means death of the product. You get fed a line about how it's going to keep going, and then a few months down the line, it has all been integrated into some existing big company product.
What's sad to think about is that sure, a lot of these companies would have failed, but how many would have succeeded? We'll never know. I don't blame founders: it's pretty hard to say no to a mountain of cash when your future is so uncertain. But deep down, I still wish more would take the gamble.
It's about the app store, not the iPhone.
It's about the phone contract, not the phone hardware.
It's about the K-cups, not the Kurig.
It's about the cable subscription (and the ads), not the set top box.
Case in point: the Nest Dropcam uses backend services to do image detection and alerting, two things which require skills hardware manufacturers often don't have.
Find a way to get enough devices installed in the right places by the right people, or better yet take to seas.
Sell your sensor network data, which is analyzed with some type of machine intelligence to make it more valuable.
The ocean is a rich place to find such data.
Low power computing + motors + wires + rapidly prototyped printed, or machined or laser cut parts + low cost sensors + web backends + newly accessible ai libraries = infinite diversity in infinite combinations.
We won't run out of startups like that until we're living on a fully networked intelligent planet.
"Each technology lowered the cost of starting and running businesses"
No, not in those industries. When an industry consolidates, the cost of the starting a new business in that industry skyrockets. Eventually it becomes impossible to start a new company in that industry. That clearly happened for trains and automobiles, microprocessors, and certainly now for Internet companies.
This is a pat re-statement of a tired cliche:
"They all spawned brand new ecosystems that created entirely new opportunities for entrepreneurs to create wealth."
There will probably be economic growth in the future. I mentioned one obvious industry that is still forming: genetic engineering. That doesn't change the fact that the gold rush has come to an end for Internet startups.
Here you are changing the subject:
"The train even unified some nation states that didn't exist."
I come back to my original diagnosis: Your comment sounds like pure denial. You don't want to face a painful truth, so you create a rationalization.
I didn't say cost was lowered in the "train" industry. Cost was lowered in the milk industry. Because after the train people didn't have to keep cows in urban areas to have fresh milk.
Your diagnosis is wrong. I've spent the last year focused on internet connected hardware, immersing myself in all the amazingly powerful new tools that just got cheap and open source.
The things I've made, the possibilities, the wonder of designing something on a screen and having it manifest itself in the world, so you can hold it and it comes alive right in front of you. The next evolution of internet techology is going to be so much better than CRUD apps ever were.
Adopt a broader view of internet startups friend and you will see the internet is just the communication/coordination channel for our cybernetic future.
I can see the arguments for that but on the other hand the internet unicorns are popping up like never before. Maybe they are overhyped but Slack etc are doing ok. I'm not sure things are dramatically different in 2016 compared to 2013 when they launched for example.
That has been my experience so far as well.
I was also in banking and financial services before, and I found people tip toe around management a lot more.
And MemeGen is an internal thing, and I won't say anything beyond that. (I understand what the poster is saying, but I don't think it's necessary to understand his/her pointl
Especially around bonus time.
Memegen is internal, but has been leaked and written about. See https://www.google.com/search?q=Google+memegen
They can screw up great products too. I miss my old YouTube. I currently have videos up that I can't access.
It seems like tech companies are prone to an--I don't know the correct word/term, so I'll just say it. They remind me of a hiker on a mountian. At first, the company seems great. We all join. We all use their products. Then it's downhill. I honestly don't know what Yahoo even does now. I am embarrassed to use my yahoo email--for what reasons, I just don't want to hear some yahoo say, "Ah--you still use Yahoo. That brings back memories."
I don't use Yelp anymore. Why? I just don't want to be one of those people; Those whiny, picky people. See, it was once a good site. Now I cringe when ever I see their commercials. In my mind, they are going down the hill.
If I owned a big company, I would just prepare for the eventual day if goes down that sine wave.
I still think there are big opportunities in tech. I would open up my garage to the right people. I would hire Hackers. Guys with nothing to lose. I would keep a close eye on the legalities of what these "convicts" do though. I've never felt guys who take big chances, without a backup, are given enough business opportunities.
Nothing to do with user experience.
But even assuming that it was all because of pirated content, that's a good example of an advantage that startups have over entrenched incumbents. If you're a 6-month-old startup and you get sued for a hundred billion dollars (and lose), you just go bankrupt and try again. If you're a 10-year-old company and you get sued for a hundred billion dollars, you lose a hundred billion dollars. The risk/reward tradeoffs are dramatically different.
In my experience, it is very difficult to make money with scientific software in general, so I'm certainly not expecting a "goldrush" here.
Based on the sale price from last week, it's worth about $200 right now.
* there is friction in the market
* information is distributed asymmetrically
* improvements can be made quickly with technology
* value is different for each actor, synergy could provide a more compelling case for an action
* people still make money of arbitrage
* people will pay not to wait, e.g. registration and ownership of an asset in a foreign country has a 1-2 month lag.
etc.
This is a perfect example of the trajectory I was referring to. Back in 2006 I believed I could register a name from a registrar and turn around and sell it for $1000. I even knew the economics of domaining. All the monetization strategies, sales tactics, valuation models, and based my belief on comparable sales, etc... (in other words, there was real value independent of two buyers competing for it.)
Yet, now I believe it is tantamount to a scam. Intrinsically, there is no value in a domain name that you can register today. The value is a complete fiction. Sure, there are tons of suckers today buying names they shouldn't, taken in by the shining lights, but this is my point. The domain names that have intrinsic value are long gone and have been for over a decade. (i.e 2 & 3 character, dictionary words, short pronounceable & brandable, names, places, etc...)
The only value in domain names today is if two people both desperately want the name. Too often it is the ego of someone who falls in love with a name they thought of for their brand and can't untangle their ego from reality and end up buying a name that they didn't need.
In a few years, their knowledge will catch up with mine today and they will perceive the opportunity the way I do. The same way in a few years I will have the experience to view things in a new light. I have to remind myself that someone exposed to domaining in the last 5 years doesn't have the benefit of learning what I learned over the last decade.
> domains for an analogy are like real estate.
I used to share this belief, but now I believe it is built on a fundamental misunderstanding.
Fundamentally, the only thing that would give a name value like real estate is if its easier to spell or remember. I.e. more accessible than another name. There really is no intrinsic difference between genius.com or smartbloke.com or owlsmarts.com All are short, easy to spell, easy to remember, easy to tell over to friends, and conjure up the same general idea. Yet, domain sellers will have you believe that genius.com is worth 10x-100x the value of the others. This is a pure fabrication.
Real estate and location have very real dynamics like accessibility, visibility, local demographics, parking, passing traffic, etc...
In the old days, a domain name with type in traffic would trade for 4-6 years revenue from parked traffic. That was comparable to real estate.
My point is simply that I can't understand how someone buys a great generic domain name for 5-6 figures like nerdy.com, when they can accomplish 95% of the same thing with any two dictionary words like, " nerdybird.com or nerdyduckling.com , etc...
Currently, subtle differences make a big impact on metrics(growth, value, price) & the market is beginning to price these in. If you have seen the big short, it is a great movie, but the opening line is something like:
It ain't what you don't know that gets you into trouble. It's what you know for sure that just ain't so.
So try to check myself when I think about something like this, although it is obviously difficult. In this current framing, certainly one or both of us, is wrong and it is sort of a matter of timing.
I think we are in 1993 and you think(I don't want to put words in your mouth) are in 98'. Either way, if you were in 93 or 98 and knew what to look for you could have made a lot of money, and you yourself may have because you were fundamentally correct when others weren't.
So on balance, I think you are totally correct and I do not disagree with you. However, my estimation is that many people are making the mistake of grouping unrelated things together and drawin g a conclusion, when I think that in fact, the opposite could be true currently.