What will the 2010s be remembered for in the world of startups & Investing? originally appeared on Quora: the place to gain and share knowledge, empowering people to learn from others and better understand the world.
Two things stand out to me today upon first blush.
First, we're going through a cambrian explosion of software, and toward a broad democratization -- into verticals, smbs, developers, many new categories separate from the "traditional giants" of HR/ERP, CRM, productivity.
You can believe both that software valuations are inflated and that the opportunity for business software is much, much larger than previously understood, especially as software automates more and more real world, manual work (e.g. payroll, or perhaps driving), and connects and reorganizes business relationships (e.g. long distance trucking brokerage). Many other factors are driving this explosion that make me particularly optimistic -- the design of software for end users, the ability for software to be adopted and sold over the web, the ever-decreasing cost of building software, the ability for software to do more work for us with modern machine learning, and even the ability to integrate data across applications w/APIs.
The total value of the largest SaaS companies is now almost $1T in aggregate. The 2000's had the vanguard of the first few SaaS companies that mattered. The 2010's showed we're still early in a multi-decade expansion of software's impact on the world. Let's go!
Second, there's been a torrential flood of capital to the technology sector, and this has dramatically changed the venture capital industry, as well as changed how capital efficient, margin-rich companies need to be -- even to go public. I think we'll see both total collapse of some "fat startups" started in the 2010's, as well as some enduring platform companies who used their capital to build distribution, technology and operational capability that is fundamentally valuable.
Venture capital 50 years+ in as a profession, has just maybe begun to grown up somewhat. It is more competitive than even six years ago, and I think the firms who have differentiated positioning and invest in structural advantages (which in turn usually support either opportunity-creation or company-building) vs. try to play the same old game and assume the "glut of capital" is a cyclical problem are really going to be left behind.
The traditional structure of venture capital firms (rely on recruiting a few very bright people who turn out to be great investors and board members every couple years) isn't particularly robust, and any student of economics and business strategy has to understand that it shouldn't be possible for firms to make consistent outsize gains vs. the market and other asset classes without focus and clear structural advantage. So we think about that a lot. It's still fundamentally a people business, especially at the early stage where we focus, but the 2010s are the decade where firms made decisions on how their model would change for the better, or not.
Most of all, startup decades are remembered for the franchise companies that they birthed -- and 2019 isn't over yet!
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