Has all the low hanging fruit been plucked?

unicornsIf you believe The New York Times article The Next Wave of ‘Unicorn’ Start-Ups – Uber and Airbnb were part of an early generation of tech start-ups that quickly reached $1 billion in value. The up-and-coming generation is looking very different.

The author Erin Griffith, seem to think so:

… the easy opportunities for disrupting old-line industries are drying up. Now, many of the up-and-coming start-ups that may become the next unicorns have names like Benchling and Blend. And they largely focus on software for specific industries like farms, banks and life sciences companies.

But that’s not just her opinion; it is based on an analysis for The New York Times by
CB Insights, a firm that tracks venture capital and start-ups. CB Insights used a variety of data — including financial health and the strength and size of the market a company serves — to identify 50 start-ups that may be on a path to achieving a $1 billion valuation (though there is no guarantee they will get there).

For you entrepreneurs that are looking for the next industry to disrupt, here’s the CB Insights’ list of 50 startups that may become the next billion-dollar valuation unicorns. You might want to stop reading here and figure out which one to emulate!

For those of you with a bit more patience, here’s a bit more on the subject of unicorns. The number of companies with $1 billion market caps – unicorns – has gone from 131 in 2015 to 315 today!

So where are the next wave of unicorns coming from?

… a new class of software start-ups as different industries adopt more technology. Mr. Green, the venture capitalist, said it’s become clear that software aimed at niche sectors offers larger opportunities than previously expected.

“Health care, automotive, retail, consumer packaged goods, advanced manufacturing companies — they’re all trying to figure out how technology helps reduce costs or how technology is going to help them build their next business model,” said Mr. Sanwal of CB Insights.

This jibes with my experience as a mentor. I  haven’t seen any startups attempting to compete with AirBnB, Uber, or Pinterest. But I have seen startups targeting farming, for instance. Aside from finding new industries to disrupt, like farming, there’s also the “picks and shovels” startups, those companies providing services to today’s unicorns.

The rise of companies like Uber and Airbnb has created its own mini-economy of start-ups.

One of those is Checkr, which was founded in 2014 by Daniel Yanisse and Jonathan Perichon, who worked as software engineers at Deliv, a delivery start-up. Both had become frustrated at the slow-moving background checks for the delivery drivers they wanted to hire for Deliv, so they created their own business to expedite the process.

Now Checkr works with Uber, Lyft and Instacart. It has also added other types of customers like the insurance company Allstate.

The term “picks and shovels” refers to the California gold rush, where smart merchants sold picks, shovels, and dungarees to miners, rather than attempting to mine for gold themselves.

The megatrend that the article skips over is the rise of AI – the new electricity, and the blockchain/crypto revolution. I’ve been waiting since 1985 for the rise of AI! That’s when I joined Addison-Wesley Publishing Company, as General Manager of their Educational Software Division. My colleague, Bill Gruener, had built the best computer science list in the publishing world. I was reading books on AI, in particular what were called expert systems, by computer scientists like Patrick Winston. In fact, it was reading those AI books, that took about a year to go through the python of the A-W copy editing, proof reading, typesetting, printing, and distribution to reach readers that gave me an idea for a startup: Why not enable computer scientists like Winston to publish their books on computer science online, so they wouldn’t be out of date by the time A-W brought them to market? Unfortunately in those days the Internet was not available for commercial use – it was restricted to academics (and the military). Our only options for online publishing were CompuServe, AOL, and Prodigy. After studying them all and seeing if there was an alternative we decided that my idea was just too far ahead of its time – which has been the problem with many of my startup ideas!

But I’m far from convinced that all the low hanging fruit has been plucked. I believe applying AI and/or blockchain technology can totally disrupt large extant businesses like banking. So while I would encourage any would-be founder to study the CB Insights list for ideas, I would also encourage those with computer science educations to also study how some of that low-hanging fruit could still be pluck by standing on the AI or blockchain ladders.

Author: Mentorphile

Mentor, coach, and advisor to entrepreneurs, small businesses, and non-profit organizations. General manager with significant experience in both for-profit and non-profit organizations. Focus on media and information. On founding team of four venture-backed companies. Currently Chairman of Popsleuth, Inc., maker of the Endorfyn app for keeping fans updated on new stuff from their favorite artists.

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