Do you dream of launching a startup and having it become a multi-billion-dollar "unicorn" like Snap or Uber? If you do, there are few better people to listen to than Bryan Schreier, partner at the legendary Silicon Valley VC firm Sequoia Capital. In nine years at Sequoia (after stints at Morgan Stanley and Google) Schreier has bet on some big winners, including Dropbox, TuneIn, and Trulia.

Between sessions at the Insight Summit sponsored by Qualtrics earlier this month, Schreier shared his predictions for where the next big startups are coming from.

1. Companies combining sophisticated technology with hands-on operations.

"On the consumer side, it's very clear we are now in the age where the next $50 billion market cap company will be what we call a 'hybrid' that uses both technology and operations from a human perspective." As examples, he cites Uber, Airbnb, and Thumbtack, a Sequoia-backed startup that connects consumers with service people such as nannies, gardeners, and carpenters.

"I think after Snap, the next three or four huge consumer IPOs will be these kinds of hybrid companies," Schreier says. "Technology has matured to a certain extent. Mobile platforms are 10 years old now." Companies like Facebook and Snap on the social media side, and Google and Microsoft on the platform side have already captured large segments of the marketplace, he says. "A lot of that white space is gone."

But maturing technology has created a different set of opportunities. "The new large markets that haven't been tapped into yet tend to be offline markets that are now coming online, sometimes because there's finally mobile connectivity or sometimes for other reasons. Uber is an obvious example where you want to disrupt the taxi industry once all the drivers have mobile phones and the phones have GPS."

The potential for such hybrids is much larger than for pure technology companies, he says. "In core tech, we get excited about $5 billion market. Uber's market is a $60 to $70 billion market. Airbnb's market is a $100 to $200 billion market. Thumbtack's market is $500 billion. But you need a very large human workforce that works with the technology."

2. B2B system of record companies.

A system of record company offers what the tech industry sometimes calls a "single source of truth"--all data pertinent to a specific function gathered and accessible in one interface. Salesforce.com, Workday (an HR and ERP company), and ServiceNow (cloud-based IT help desk software) are all good examples, Schreier says. So is Qualtrics, which manages customer experience data, he adds. (Schreier is a Qualtrics board member.)

There are also opportunities for system of record companies that can help their business customers tame Big Data, he says. "There's this plethora of data available to companies and most don't have tools to deal with it. They've got all this data coming at them, and they're wondering, 'What does it mean to me?' So you've got companies working on that."

Schreier believes data science and AI are the future, with AI finally becoming accurate enough that people will begin routinely interacting with it in our homes and cars. In fact, he says, "We think the company that will win the self-driving war is the one that has the most data." Unfortunately, he doubts that there's much opportunity there for startups or small companies. "It's hard to compete against the Googles and Microsofts that already have so much data."

3. Augmented reality companies.

Schreier is bullish on both virtual reality and augmented reality. (In virtual reality, you fully enter a virtual world, usually while wearing goggles such as Google Cardboard or Oculus. In augmented reality, digital images, text, or sounds are superimposed on the real world, as in Pokemon Go for instance.)

Although the press has had a love-hate relationship with VR, he says it's a technology that's just about to arrive. "The real breakthrough in VR is when you have controllers in your hand and can interact with the environment," he says. "Something clicks in your head." Because the latest VR goggles allow users to do just that, he predicts, "That market is going to emerge quickly." But startup opportunities may be limited, at least on the hardware side, with companies like Samsung and HTC grabbing most of the market for devices. "Oculus is an anomaly," he says.

On the other hand, AR offers a lot of opportunity, and not just for Pokemon Go-like games. AR can help professionals work on car (or jet) engines, tell construction workers what's concealed within walls, and give people in warehouses a better view of their inventory, among many other uses. "There will be a number of interesting vertical software markets to go after," he says.

Will Schreier's predictions for where the next big IPOs will come from turn out to be true? Only time will tell. But if you've got a startup idea in any of these fields, now's the time to start putting together your pitch. And once you do, maybe you should start with Sequoia.

Published on: Mar 29, 2017
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