Product is king. Gone are the days of little budgets. Venture capitalists want to invest in good teams creating game-changing technologies to serve needs for good companies. But being the next Apple and getting in the top 100 in technology isn’t enough anymore. The most prosperous and successful entrepreneurs have company culture and a powerful software position that can make up for a pesky product fit.
Great product is in rarer and rarer supply. Hypergrowth becomes more and more rare. It’s Silicon Valley’s specialty. Chris Dixon identifies how hardy the founder’s success will be when I interviewed him on GigaOm today.
This means the industry and the market will be shaped by the ones who have solid product and franchise loyalties and hard options but great options to go fast. Uber will make almost sure a “proven” product can break into the Uber empire. If you don’t have a solid product and can’t crack the code in a competitive marketplace, it may be time to run into the sunset.
But alas, there’s going to be blood in the streets.
Hardtech and Moonshots
The country is not near the verge of self-driving cars. But it’s getting closer, and it’s going to kill some green projects. The closest we’ve been in history is the American Clean Energy and Security Act, a 2007 bill that would have started the effort to accelerate automotive innovation. Though it fell short in the House, it became part of future energy bills, and the math helped rescue the struggling auto industry.
But this time around, the auto industry is reinventing itself to put autonomous driving technology in vehicles. That means the fate of green energy will be tied to the cars themselves. That means difficult battles between electric cars and hybrids.
Only companies that have core product appeal, strong sustainable franchises, loyal customers, and lots of internal capital can see an escape from the fast-moving race to meet the needs of an increasingly mobile and connected planet. Hardtech, however, will be particularly hard for VCs to take a gamble on. Instead of software, it will be hard to pick out of hardware, energy, healthcare, and agriculture. Several of these are “moonshots,” which require huge investments, years of time, a lot of brainpower, and no easy way to make money. Moonshots don’t have institutional pressure to get paid back in time. Moonshots will be hard to fund.
“Hard” can even be a negative in some markets. Healthcare is hard right now because the healthcare industry faces plenty of heat in Washington over spending in favor of superficial profit.
Some bright eyes will be needed for “new era moonshots.” Historically “new era moonshots” have been championed by late period “old era” entrepreneurs. Their companies were often expensive to build and their founders didn’t know how to run them. Their abilities and strategies depended on the most recent generation of technological advancement. Their most recent company born with a private commitment by VCs. They’ve been able to focus on company culture and attract great talent. In time they could morph into great public companies. But nobody has said they’re going to do that for enterprises created by modern software startups. The one field that’s been left out of the good planning is AI. It’s hard enough for many startups to stay at scale if they only have a core culture and customers. There’s no way to get to the top of the tech stack with roots in desktop running on IBM hardware.
It’s Going To Be Tough
Hard tech and moonshots may have a tough time raising money from VCs, but I don’t expect it to stop them. Rather, it’s all going to come down to loyalty to them in the battle for product market fit. Humans are complex creatures and even great companies struggle to carry their product across phases in a continuous 24/7 launch. Convincing people to commit will be hard, but it will become harder as more folks say they’re stuck in Google’s dark world of life hacks.
Still, we may not need to spend untold billions on a mammoth AI system. There are plenty of nimble startups competing for talent. They’ll rise to a different standard. They’ll have the promise to change both the world and themselves, on the ground and in orbit.