Is the Golden Age of Startups Over?

 

The early part of the 2000s will be remembered for at least two economic events, one terrible, the other pretty great: the Global Financial Crisis and the Age of the Unicorns. We are almost a decade past the first one. And the second one? Well, we may be at its end, at least according to TechCrunch columnist Jon Evans:

The web boom of ~1997-2006 brought us Amazon, Facebook, Google, Salesforce, Airbnb, etc., because the internet was the new new thing, and a handful of kids in garages and dorm rooms could build a web site, raise a few million dollars, and scale to serve the whole world. The smartphone boom of ~2007-2016 brought us Uber, Lyft, Snap, WhatsApp, Instagram, Twitter, etc., because the same was true of smartphone apps.

Because we’ve all lived through back-to-back massive worldwide hardware revolutions — the growth of the internet, and the adoption of smartphones — we erroneously assume another one is around the corner, and once again, a few kids in a garage can write a little software to take advantage of it.

But there is no such revolution en route. The web has been occupied and colonized by big business; everyone already has a smartphone, and big companies dominate the App Store; and, most of all, today’s new technologies are complicated, expensive, and favor organizations that have huge amounts of scale and capital already.

It is no coincidence that seed funding is down in 2017. It is no coincidence that Alphabet, Amazon, Apple, Facebook, and Microsoft have grown from “five big tech companies” to “the five most valuable public companies in the world.” The future belongs to them, and, to a lesser extent, their second-tier ilk.

Now to be clear, Evans isn’t declaring the end of Silicon Valley or the end of cool new tech or the end of innovation. It’s just that the next-wave tech that he identifies — AI, drones, AR/VR, cryptocurrencies, autonomous vehicles, the “Internet of Things” — are more capital intensive than starting a social network. He also thinks it’s more likely that firms are purchased by Big Tech rather than grow into major competitors. But there will still be plenty of new companies: “…software and services built atop newly emerging hardware are likely an exception to the larger rule here; startups in those niches have far better odds than most others.”

Of course I don’t think the best way to judge America’s startup culture is if it is able to produce another four megacompanies over the next decade or so. Rather, are there lots of new firms innovating around what should be some pretty major disruptive change, particularly with AI and autonomous cars? And that said,  perhaps what’s most needed now from a macroecon perspective “is that business needs to learn how to harness these new technologies.”

Published in Culture, Economics, Technology
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There are 8 comments.

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  1. I Walton Member
    I Walton
    @IWalton

    We don’t know what the next big thing will be.  If we did it would already be big.  Startups and innovative new companies will always be risky and the more we regulate the economy and hover over newness the less there will be.  But newness has to be very new indeed or it will fall under old regulations.   Try to think about any problem or hindrance or stumbling block, or rot ineptitude and dysfunction where the government is not the problem.   Where we can’t see it almost certainly we don’t fully understand all the variables impending on the issue.

    • #1
  2. Vectorman Inactive
    Vectorman
    @Vectorman

    anonymous (View Comment):
    The way to preserve this culture is easy: don’t regulate or tax it out of existence.

    • #2
  3. MarciN Member
    MarciN
    @MarciN

    I’m looking at the Alphabet, Inc., subsidiaries, and I can’t help thinking that Google is the new financier for innovation. Google as the business incubator is, in itself, the next new thing. Google thinks like Edison and GE but on a global basis.

    Pretty soon it will have its own Nasdaq. :) Perhaps it does already. :)

    • #3
  4. Danny Alexander Member
    Danny Alexander
    @DannyAlexander

    #2 anonymous

    I love and agree with your comment, and I always respect what Peter Thiel has to say.

    With respect to the latter’s observation about regulating atoms but not bits, however, I have to say I wonder.

    A lot of my work is in enterprise software supporting the Property & Casualty and Life & Annuity Insurance industries, and the hackneyed characterization of both is these are industries that run on promises (including the promise that said industries are the experts in pricing risk, etc.) — so it’s all bits, all the way down, and these bits are all pretty intensively regulated.

    (Hence the struggles so many insurers have with innovating, and the controversies percolating in the industry as to whether InsurTech/FinTech startups might be cruising for a regulatory bruising.)

    I’m probably splitting hairs too much here, so forgive me if that’s how you see it; I certainly agree that Thiel is wholly correct insofar as “pure” IT hardware and software developments and innovation, occurring away from their industry-specific applications, are thus far mercifully spared from the dead hand of regulation.

    Actually, reading through the prepared texts of Dan Geer’s various recent conference speeches is an excellent starting-place for pondering whether the risk of the regulatory hydra raising its various heads might be upon us as various technologies (the ones cited in the OP, etc.) mature and proliferate…

    • #4
  5. Viator Inactive
    Viator
    @Viator

    Those five may be the IBMs of today. Somewhere in a garage the next big thing is hatching. $3 trillion repatriated, if the GOP can ever get it’s act together, will help fund many new ventures.

    • #5
  6. ctlaw Coolidge
    ctlaw
    @ctlaw

    anonymous (View Comment):
    But, so far, somebody with an idea for an innovative application which doesn’t fall into one of these heavily regulated categories is perfectly free to code it up and see if anybody is interested.

    Perhaps only to a point. Once you draw attention, a software company will get hit by regulators, whether information police or tax collectors.

    Also, you have chronicled your SEC regulatory issues involved in going from zero to a public company. I can only assume that SEC issues have not gotten better and that a 2017 startup would also have additional burdens such as Obamacare.

    • #6
  7. David Foster Member
    David Foster
    @DavidFoster

    “most of all, today’s new technologies are complicated, expensive, and favor organizations that have huge amounts of scale and capital already”

    Sound pretty much like what John Kenneth Galbraith wrote circa 1967.

    • #7
  8. David Foster Member
    David Foster
    @DavidFoster

    “It’s just that the next-wave tech that he identifies — AI, drones, AR/VR, cryptocurrencies, autonomous vehicles, the “Internet of Things” — are more capital intensive than starting a social network.”

    Focusing on “Internet of Things”, I don’t think it’s correct that startups in this area are always extremely capital-intensive.  Here’s one example of an interesting startup in this area, focused on automation for rental properties:

    http://goparakeet.com/

    Do you really think that (say) IBM or Microsoft or AT&T would have an unsurpassable advantage in this application?

    • #8
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