Maturing markets = higher stakes, closing doors

Interesting piece by Jessica Lessin in The Information today: The End of Tech Startups:

Big tech companies are getting better at fending off competition from startups by adopting many of the tools and distribution platforms used by the upstarts. That will force startups to become more inventive or to go outside of tech.

I think this premise is exactly correct. Though it’s easier to start a company than ever before, it’s harder to compete. There are several reasons, as Jessica outlines. But one way I think about it is, in every maturing market, over time, value moves up the stack.

The auto industry used to be filled with startups (as did cable, radio, telecommunications…). Then it got incredibly hard and expensive to enter the game.

A certain class of tech companies used to be about technology, mostly. Then they were about technology + design. Now they need to be about tech + design + marketing/distribution. Exclusive deals, sales teams, lawyers, lobbyists, and other competitive advantages are getting built on top of technology as the rewards increase.

There will continue to be successful startups that are mostly focused on the tech part — but it has to be deep tech, not just clever tech.

Not to say there won’t be the occasional breakouts with clever ideas that find cracks in the market. And because nothing lasts forever, eventually, the current bigco’s will also become lumbering and susceptible to being out-executed by the rare startup.

But in the meanwhile, I fear we are in an increasingly big-company-tilted world.