The Zerbe Multiplane with five wings and two props, built in 1910 (source)

A Flurry of Activity

Yesterday, John Lilly posted a funny and insightful tweet:

It pointed towards the large number of people trying to build conversational UIs and chat bots. John is a partner at Greylock, so I think he has an early lens on these types of things than the general public, but it does seem to be accelerating.

Given that I am one of those people (yes, I am experimenting in the chat space and you can check out my latest hair-brained idea at chikai.co), it made me reflect on why I’m working on it and the current context of what is going on. As I thought about it, it reminded me of a talk that I attended by Burt Rutan when he visited Google.

Burt Rutan standing on top of SpaceShipOne

For those of you who are not familiar with Burt Rutan, he is the man who built SpaceShipOne, which completed the first manned private spaceflight and won the Ansari X Prize. When he came to talk, I ended up sitting right next to him and had a chance to talk to him. It was a somewhat surreal experience for me and was like that scene from the movie “Star Trek: First Contact” where the crew traveled back in time to meet with the inventor of the warp drive. Burt Rutan sort of even looks like Zefram Cochrane.

Zefram Cochrane is met by an enthusiastic Lieutenant Reginald Barclay (source)

When he gave his talk, the part that really stuck with me is when he talked about the beginning of the aviation industry. Burt Rutan said that after 1908, when the Wright brothers signed a contract to build planes for a French company, there was a flurry of activity for four years. He said that thirty thousand designs were tried out during that time and by the end of that period there were 39 countries with hundreds of planes and thousands of pilots. It was an amazing time for innovation in aviation and the craziest part was the risk people took. When an airplane design failed, it’s not like tech startups today where your company would be shutdown and people would be out of a job, but people *died*. Burt said as much as it seems like aviation is a process of intelligent design from today’s perspective, back then it was natural selection. If a design failed, it’s pretty obvious that you wouldn’t try that design again because someone probably died in the process of testing it out. But even with that risk of death, *thirty thousand* designs were tried out. We talk about risk with startups today, this was a totally different level.

When there is such a green field of opportunity available with a potential to create something like a flying machine, many smart people will flock to that opportunity and start throwing anything and everything at the wall to figure it out, especially since so much of it is totally unknown. It’s interesting to hear Burt Rutan say that it was not intelligent design in the early days, but natural selection. I imagine that is true when any major opportunity comes a long. It was definitely true with the initial dot com boom. There were so many companies that were started and funded during that period of time. Nobody knew what would work or how to build internet companies, so they tried every idea and method they could think of.

Fenwick & West | Silicon Valley Venture Survey — Fourth Quarter 2014 (source)

You can see the spike of activity in the number of venture backed companies during the 2000 timeframe. It has not reached that level again, even in the recent frothy funding climate. I am pretty sure this was a time of natural selection and not intelligent design.

Now this brings me back to the recent chat bot and conversational UI craze that is happening. Is this another one of those times of great opportunity? There is definitely a healthy debate going on about whether it is or not, but I thought I’d research it a bit and see if there actually was a recent increase in activity or if it just felt that way.

Let’s look at “chat bots” in Google Trends:

Everything seemed to be pretty steady until just recently, where it spiked upwards. So it seems like maybe there is something to John Lilly’s tweet.

Next, let’s look at the list of companies in Chris Messina’s #ConvComm collection on ProductHunt. I scraped the webpage (sorry Ryan!) and extracted the creation date of all 200+ companies in the list and plotted a graph of them binned by month.

You can see the flurry of activity started early last year, then died down in the fall, but it has picked up by almost two fold at the beginning of 2016. So I’d say with those two data points, I’m pretty sure that there is an increase in chat bot and conversational UI companies being created.

Is this like the start of 1999, where there was a explosion of internet companies? There seem to be a lot of similarities with the dot com boom. Aside from the numbers, I do think the diversity of what is being explored is very wide from inane stuff to very serious stuff. I get the sense that the casual observer probably thinks this is stupid and trivial. It is very easy to build a simple chat bot as John Borthwick demonstrated in his post yesterday, just like web pages were pretty trivial to create at the start of the first dot com boom. And it’s not necessarily obvious where this will go or what the potential will be, just like back then.

From an investor perspective, how do you figure out whether to invest in this area and what companies to pick? I don’t think I would have been able to make the call in the summer of 1999 to put in $25M into Google, which is no small amount of money even in today’s dollars, just after the knee of the curve hit and there was an explosion of companies that were invested in during the dot com boom. The NASDAQ crashed just 9 months later, so it wasn’t that far from the peak. It’s a very difficult call to make, but I personally would bet that there will be at least one big company that will come out of this whole flurry of activity in the chat space.

From a founder perspective, is it too late to join the race? It didn’t seem to be the case for Google with multiple search engines that existed when they got their Series A or even seed round. At some point there was a clear winner in web search, but I don’t think that is the current case with chat bots and conversational UIs. Nobody has really hit it out of the park and is the clear obvious winner. My take is that people still have not found the perfect use case that will take this to the next level. I think it will come from left field and it will not be the obvious answer people would expect. Will an incumbent be able to crush any startup that tries? Will Facebook M take the cake? Not necessarily. To continue with the Google example, Microsoft tried desperately to unseat Google in web search and failed multiple times. My guess is that it will take a DNA that is significantly different from what exists in today’s incumbents to become the clear winner.

But all of this is just conjecture. We will have to wait and see how it all ends up. I’m personally bullish on this area and find it incredibly fascinating, so I’ll end with this quote from Teddy Roosevelt that a friend recently mentioned to someone who had just shutdown their company.

It is not the critic who counts; not the man who points out how the strong man stumbles, or where the doer of deeds could have done them better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood; who strives valiantly; who errs, who comes short again and again, because there is no effort without error and shortcoming; but who does actually strive to do the deeds; who knows great enthusiasms, the great devotions; who spends himself in a worthy cause; who at the best knows in the end the triumph of high achievement, and who at the worst, if he fails, at least fails while daring greatly, so that his place shall never be with those cold and timid souls who neither know victory nor defeat.

I plan to be one of those people in the arena trying to build things and figure it all out. It is very likely that I will fail and I’ve already had a couple failed attempts in creating something in this space, but I’m definitely in the arena with all the lions and tigers who might bite my head off.