At some point in the 1990s, entrepreneurs realized that entire businesses could be built online. Servers could be hosted on Amazon Web Services. Websites could be built with open-source software. Distribution costs could be tracked on Google AdWords. In other words, the costs of entrepreneurship dwindled to zero.
Fledgling companies were buoyed by a pervasive assumption among VCs - that in this initial land grab, we are looking for the company that will "win" the Internet. Today's business models, they said, will be built by rapidly accumulating users, building network effects, and creating active online communities.
To the fore came Facebook, Apple, Google, and Amazon. Soon after, Twitter, Foursquare, Groupon and others followed -- all trying to build "platforms" and "marketplaces". Driven to win, companies battled for active users and S-curve growth. They became marketers and designers. They created the interactive web. They made breakthroughs in HCI research. They ushered in an era of seamless user experience and elite customer service.
Everything was open source. The web became fiercely competitive.
In 2014, the dust is starting to settle. From our vantage point now, it looks like we were only partially right. In January 2014, The Economist published a special report about startups, with the benefit of hindsight. In this context, they came away with two consequential statements:
- Startups will be built on top of a few platforms.
"The world of startups today offers a preview of how large swathes of the economy will be organised tomorrow. The prevailing model will be platforms with small, innovative firms operating on top of them. This pattern is already emerging in such sectors as banking, telecommunications, electricity and even government. As Archimedes, the leading scientist of classical antiquity, once said: 'Give me a place to stand on, and I will move the Earth.'"
- Startups will begin to comprise the new middle class.
"'Entrepreneurs are the new labour,' [Mr Rao] claimed ... he sees a connection between today's entrepreneurs and the artisan steelmakers of the late 19th century. As the market matured, he explains, the Victorian steelworkers' knowledge became commoditised, making them the nucleus of the new working class. Something similar is now happening to founders, Mr Rao claims."
The Economist, chiefly an observer and explainer, does not dabble in predictions or opinion. Allow me to be so bold and riff off their conclusions:
Online experience is fundamentally fragmented. We managed broad areas of our life across different platforms, all of which have incentives to keep fencing us off from each other. As collateral damage, we seem to have become inured to poor experience in important areas the Internet should help us improve.
Many tech companies aren't startups. We wrongfully equate startups with the tech industry. Startups are high-growth companies with large market potential. Tech reflects society's adaptation towards software automation tools, and spans culture, management, and technology.