Photo: Patrick Gensel/Flickr
In the wake of the Facebook IPO, something funny has happened to the world of startups. Suddenly, startups feel very boring.
VCs and entrepreneurs say they feel it too.
“I do feel a bit like that, but then again that could also just be the startups I’m happening to see,” one investor said.
“The noisiest space (social consumer) looks a bit less interesting,” said another.
What’s changed? Why are startups for the first time in a long time…boring?
We’ve just come out of a very exciting time in tech
Four of the biggest, most-hyped tech companies—LinkedIn, Groupon, Zynga, and Facebook—have gone public.
Instagram got acquired for $1 billion. Yammer did even better.
Everything we were looking forward to is over and there’s not much that’s exciting on the horizon.
If feels like the day after Christmas.
Suddenly, startups aren’t the exciting companies to watch
Yammer CEO David Sacks was on to something when he wrote about the coming end of Silicon Valley.
“Human creativity has not changed,” he wrote. “But the question is, how many of those opportunities will be captured by startups versus incumbents? Silicon Valley may not be running out of ideas, but we might be running out of big new companies.”
For the first time in a long time, the exciting stuff is coming from the biggest companies in the industry instead of the smallest ones. Google’s self-driving cars. Apple’s iPad. Amazon exploring same-day delivery.
These are big, world-changing ideas.
A few startups are worth their hype. Square is doing something amazing in making a transaction feel personal again. Pinterest’s user growth is astounding. And Twitter, if you can still call it a startup, is becoming more and more important. But those are exceptions.
Startups that were supposed to be big, exciting tech companies are letdowns
A few startups had us nearly convinced they’d be the next big things, but they’ve been letdowns. After a splashy launch Airtime lost all its users. Brewster, an app that promised to change mobile contacts, did too. When was the last time anyone used Viddy or Draw Something?
Add to the pall how Facebook, Zynga and Groupon, are struggling in the public markets.
What happens to those big companies affects the entire tech ecosystem. Paul Graham cautioned startups about a Facebook fallout.
“The bad performance of the Facebook IPO will hurt the funding market for earlier stage startups,” he said.
He was right; startups are stuck in limbo. No one wants to invest or believe in “the next Facebook” while the current Facebook struggles.
The space is too crowded
Starting a company used to be more difficult. Only people with boatloads of money could afford to launch one. Only engineering geniuses could make one. And only marketing gurus knew how to scale one.
Thanks to improved technology, social media, and new sources of financing, anyone can start a company, even if it isn’t novel or necessary. Founders can scale consumer products relatively quickly too. Angel investor Chris Dixon called 10 million users the new one million.
“Thousands of early-stage consumer web/mobile companies were started and funded in last 24 months,” he wrote. “If you are thinking of starting a non-transactional consumer startup, be aware that you are entering what is perhaps the most competitive sector in tech in the last decade.”
A startup era is ending
Consumer startups, products we all use and can easily understand, have led the tech world for the past few years.
“The interesting innovation now is happening in [business-to-business] and infrastructure, which doesn’t seem as intellectually interesting but can have a large impact,” an investor told us. “[Business-to-consumer] might just be tapped out for the moment after a good 5+ year run.”
Suddenly the most interesting startups are in less-sexy sectors: hardware, enterprise software, infrastructure—even biotech.
Those startups may be better, more predictable bets for investors. But they require a different mindset from entrepreneurs and the rest of us.
Oh, and remember how mobile was going to be the next big thing in consumer? One word for that: Instagram.
The consumer startup era is ending.