Entrepreneurial activity in the tech startup scene is slowing down, and we can blame the lack of a big-enough sandbox for developers to play in.
According to data from PitchBook, the number of first VC financing rounds in the US has been in a steady decline year-over-year since 2014, in spite of rising overall startup funding over the last couple of years (the latter phenomenon being skewed quite heavily by SoftBank’s huge investments). The slowdown in first financings, in any case, points to an indisputable fact. There is less entrepreneurial innovation in the technology sector, or at least there are fewer startups that VCs deem worthy of significant backing.
What gives? One of the gaping holes in the tech world is the lack of a mega development platform.
This would have to be a platform larger in scope than the design of any single, ordinary company. It would be a widespread movement that upgrades consumer interactions with hardware at scale, the likes of which we haven’t seen since the iPhone took off in 2008. But when it does, and when lots of tech entrepreneurs find ways to profitably build apps that consumers want on top of it, the startup ecosystem will spring back to life.
We’ve seen this happen before. The introduction of smartphones, along with the mega mobile development platforms iOS and Android, changed the world as we know it.
Mobile phone owners worldwide were given a plethora of new ways to utilize their devices, consume content, and interact with each other. Some of the more recent worlds of tech innovation are wearables and AR/VR, though they’ve been limited in use cases and value to consumers thus far.
In order to understand the impact of movements like these, it’s helpful to remember what a development platform actually does: it links consumers with software made by third-party producers. In the case of closed development platforms like Salesforce, apps leverage the data provided by the core service. But an open development platform comes with an operating system in which developers can create any number of useful native apps.
But why aren’t developers still innovating around existing giant platforms at the same speed? The existing ecosystem is maturing, and the low hanging fruit has mostly been captured.
For example, let’s look at smartphones, which seem to provide endless amounts of data for developers to create new apps around. Smartphones have numerous sensors that collect user data, from GPS to biometric sensors. That’s not to mention the attempts companies have been making to track user behavior patterns, or the troves of user-generated data arising from texts and messages sent via social apps.
But as time progresses, there are fewer and fewer novel ways for developers to leverage that data and provide value to users. Today, most of the major consumer-facing platform opportunities have been captured by big platform conglomerates like Facebook, Google and Uber. Competing directly with these modern monopolies isn’t easy, so it’s no surprise that we’ve seen a decline in early stage funding and new tech startups.
The “next big thing” would have a couple of things going for it: an operating system with a streamlined user interface, and significant scale. It would also come with a vast range of potential applications and use cases.
One set of opportunities lies within the realm of augmented and virtual reality (AR/VR). Combined, the industry is expected to balloon to $95 billion in revenue by 2025. The potential for VR extends beyond storied gaming headsets like the Sony Playstation VR and Oculus Rift to the realms of education, sports, medicine, and tourism. AR, on the other hand, has immediate promise in public safety, retail, and architectural modeling, to name a few areas.
The part of the industry that appears to be picking up the most steam, however, is mobile AR. The tech monopolies Google and Apple are already battling it out with the ARCore and ARKit software development kits (SDKs), and mobile AR tech foresees a potential installed base of more than 3 billion by 2021.
Also on the horizon is the connected car. Google has made the dominant play in this space with Android Automotive OS. Of course, the Google brand brings a ton of supply-side heft to the fore, and now the tech giant is letting app makers into the inner workings of connected vehicles. Android Automotive could give developers ultimate “keyless access” to command and control APIs in the vehicle, including unlocking the car and remote start and navigation. It’s plain how all of this can integrate neatly with Waymo, Alphabet’s self-driving vehicle venture.
Finally, there are drones, which have come a long way from their original usage in military contexts. Aside from their current upmarket popularity in recreational and artistic pursuits, there is the increasingly widespread use of drones in package delivery, construction, retail, and many other B2C and B2B arenas.
Within any one of these mega development platforms opportunities, producers can possibly tap into a goldmine of implicit demand. Give it an operating system, a streamlined interaction model for consumers, and an “app store” that developers can reliably profit from, and we’ll see the next wave of startups emerge.
The magic happens when culture is in lockstep with innovation. Many ambitious members of Generation Z — who, had they been born just a decade earlier, might aspire to form tech startups — are setting their sights on becoming influencers via social media outlets like Instagram, Snapchat, and TikTok. Being a producer on content platforms like those involves less risk and much more potential upside than tech entrepreneurship.
However, the wellspring of young tech talent still runs deep enough for upcoming movements in tech to be fully realized. It’s hard to anticipate something as impactful as the Internet or smartphones. But a mega platform that entices developers to jump in en masse could still arrive soon, and bring with it the next big wave of new platform businesses and tech startups.
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Winner Take All
Winner Take All