Whether you are an entrepreneur, investor or social analyst, staying on top of the latest trends that shape and define the venture landscape is of vital importance. So far 2015 has been an exciting year for ventures, but brace yourself for lots of more movement to come as indicators point to an imminent up-phase for tech ventures and innovation. With TechCrunch’s Disrupt NY 2015 just having taken place in May, it is a good time for an appraisal of currently hot venture trends. Here is a cutting edge presentation of 8 of the hottest venture trends right now with strategic analyses, overview of big ventures and a few examples of fresh startups in each category.
1. The Sharing Boom
You must have heard it a thousand times by now. Everyone wants to be the UBER of X. The idea is this: there is a vast amount of underused resources and capacities around which can be used much more efficiently if we share them on an on-demand basis instead of transferring ownership as a prerequisite for use. Consumer willingness to opt in is great. While the industrial age consumer had to own all the goods she desired (a house, a car, sports equipment, a vacation home, clothes, entertainment, whatever) the information age actor is happy to have access to the goods without necessarily owning them. This seems to be especially true for the millennial generation where a majority actually prefer a lifestyle with less possessions and more access. Combine this shift in consciousness with new technological possibilities and you have all the ingredients for the massive emergence of the sharing economy. What UBER (recently evaluated at $41 billion) and Lyft ($2.5 billion) are doing for transportation, AirBnB ($10 billion) is doing for vacation rentals, Wework ($5 billion) for shared work spaces, Instacart ($2 billion) for grocery shopping, and Etsy ($2.3 billion) for bespoke goods. No doubt, the sharing economy is clearly the hottest thing around and it’s on the rise.
But there are still largely untouched blue oceans on planet collaborative consumption. As of yet, no true sharing giant has emerged in health, education, energy or food. Opportunities abound for strong value visions and sound venture strategies. Particularly the food industry seems to be ripe for a big disruption, with ventures like Munchery or Sprig recently having raised significant rounds of venture financing and now gearing up to duke it out alongside SpoonRocket and others. Although these ventures are generating quite some buzz – especially as they are expanding into geographies outside of the Bay Area – most are in fact delivery-based, putting them into competition with online food delivery services like GrubHub and Eat24. Food upstarts shouldn’t be afraid of value propositions that put stronger emphasis on the advantages of the sharing economy which go beyond the delivery of goods and that include the creation of new relationships and social experiences. Some, such as Kitchensurfing, EatWith, and to some extent Kitchit, are closer to tapping into this potential, given that their concept is based on people actually sharing their eating experience with others instead of merely receiving a delivery.
As a flurry of new apps and services in collaborative consumption hits the market, the field remains one of the most interesting areas for entrepreneurial innovation. To name a few examples of exciting fresh value propositions, Vive is connecting underutilized hair salon capacities with style-conscious women to offer a flat rate for blowouts, the AirBnB-for-creatives venture Spacefy connects creatives like artists and performers with the kind of spaces they need for their creative pursuits, and Bookya delivers a platform to connect those very same musicians, artists and performers with gigs and events while allowing event promoters and party organizers to find suitable artists who are currently available locally (which is an important factor, given many artists live location-independent lives). Lastly, Dexterous wants to bring the personal trust and accountability factor that makes the sharing economy work into service personals that typically run in low accountability spaces like craigslist.
2. Digital Security & Privacy Innovation
As mobile payment solutions, SaaS and cloud-solutions, industry 4.0 applications, smart homes and autonomous cars increasingly enter the scene, the amount of critical data and associated security needs is on the rise. Simultaneously, successful attacks are becoming more costly, with high profile cases like Target (where data breach caused a $162 million damage) at the top of minds. A series of hot ventures is offering cybersecurity solutions to enterprises wishing to avoid comparable mishaps and to cut down losses due to fraud. Ahead of the bunch, and potentially heading for IPOs in the not-too-distant future, are ventures like Blockscore, which provides ID-verification based on comparing user information with data from various sources like marketing files, credit data, and so on, as well as customized questions that only the actual individual is likely to be able to answer. Trulioo provides a bank grade identification process which is moreover used to find out whether online traffic stems from real people or bots, thereby generating reliable metrics for advertizing and marketing purposes, and Sift Science uses machine learning algorithms to present security officers with highly sophisticated combinations of minute details in user behavior which point to potential fraud, while Lookout does something similar for mobile devices.
In terms of new approaches, Apple has introduced Touch ID for fingerprint mobile security while Motorola is toying with the idea of an edible security pill for verification purposes. However, as every verification method will have a weak spot somewhere, the future belongs to aggregated solutions. A venture like ShoCard seeks to make identification easier for customers by giving them an online identity card inscribed in bitcoin’s blockchain which provides unique security (as it is practically impossible to alter the blockchain) when combined with an array of other methods such as encryption, hashing, data-matching and mobile phone verification. Put together, ShoCard’s approach enables users to take control over their transactions and verify every transaction to their name. Targetting a different need, Cloudwear offers online security for cloud-based enterprise applications based on a system that lets you restrict access to precisely delineated geographical locations, whereby hackers from overseas or from across the block can be effectively shut out. Lastly, CoroNet continues the trend of world-leading security solutions out of Israel by offering the first effective defense against a new breed of hackers called commjackers who use now available tech to directly hijack cellular, wireless and other over-the-air signals to take control of devices. CoroNet does this through the real-time detection of anomalous patterns in complex behavioral parameters, effectively bringing military level intelligence to your business.
The defense connection points to a natural exit for innovative cybersecurity ventures, as recent acquisitions of security startups by defense contractors like Raytheon and Lockheed Martin demonstrate. So while security is attracting both major investments and innovative minds, user-focussed privacy still seems to be a little behind. On the one hand it’s clear that concerns for security and privacy are connected because the more readily available your data becomes online, the easier it becomes for cybercriminals to abuse that data. On the other hand, privacy is not as clear cut as security. Everyone wants security and there is no debate about it. But there are legal and philosophical debates being held regarding the desirability of privacy. Should there be privacy at all or should we be happy about heading into an age of all-out transparency? If there is going to be privacy, what form will it take and how will ventures provide the means to secure it? We have heard people like Edward Snowden or Mark Cuban give us their takes, and Mark Cuban has launched his self-destructing messaging platform Cyber Dust, but generally open questions still predominate the issue.
3. Social Network Innovation
“Facebook is dead!” – how many times have you heard the dictum voiced by journalists, trend-savvy friends and twitterati? And yet Facebook is alive and kicking and after strategic aqcuisitions of Whatsapp, Instagram and Oculus Rift (with many others certainly to follow) Mark Zuckerberg looks primed to continue Facebook’s reign as the social network. Yet the sense of boredom with the social networking giant is palpable. Everyone uses it but everyone knows that something has to change. With new possibilities that users have at their fingertips in form of latest smartphones, would-be disruptors have a lot to work with. Unsurprisingly, there is no dearth of new networks trying to make the leap to the top of the heap. Contender platforms seem to fall into one or more of the following trends: live, anonymous, location-based, specialized, and aggregating. In terms of live content Meerkat and Periscope are duking it out, with Meerkat still enjoying a first to market advantage while Twitter-owned Periscope has the advantage of being able to integrate with existing Twitter networks. As users, marketers and brands are figuring out how to effectively use live-streaming, services are going to evolve considerably which leaves much space for supplementary offers such as a recording function for live-streams created by NY-based digital agency Glow, as well as for alternative apps, such as Eclipsea which is based on the idea of location-based streams that expire after 24 hours.
Tying into concerns for privacy, anonymous social networks like Yik Yak or Whisper are recreating the opportunity to connect with others without having to reveal anything about oneself, just like in the early days of the internet. Yet upstarts in anonymous social will still have to better solve the question of monitoring and of rampant cyberbullying in absence of personal accountability. Some new social networks seek to take the possibilities of ubiquitous location sensors fully to social. For example Canadian startup Bumpn is based on the idea of being able to spontaneously find cool happenings, gatherings and ‘bump buddies’ around you while Meetly operates under the concept of quickly organizing micro-meetups around particular activities with nearby participants. Both ventures are fresh and will take a shot at the emerging space for location-based social networks, together a wide range of other startups such as Mapian which is launching soon. After adoption patterns emerge, the mid-term question will be if these services are going to remain stand-alone offers or if they will be integrated into existing networks.
Specialized social networks are emerging for specific tastes and communities – such as Sportswonk which lets you share and discuss your favorite sports events with fellow sports enthusiasts, or Motoroso which brings you everything you need to know about cars and lets you tap into a car-lover community as well as offering a smart integration into the automotive accessories ecosystem. Given the existence of such additional monetization channels, niche networks should be able to establish themselves well. Going into the opposite direction of aggregation instead of specialization, an intelligently designed app like Phind deploys a proprietary technology that allows you to take a picture of any building or landmark and instantly get aggregated information from Yelp, Foursquare, Wikipedia and other knowledge repositories on the object of interest, as well as other user’s reviews and transportation offers through Uber et al. Parodixically the trends for specialization and aggregation go hand in hand. While there is a market for more specialized networks, the proliferation of networks (and with it, of accounts, passwords and so on) creates the need for services that aggregate and simplify.
4. Big Data Entrepreneurship
We know that by now we are almost drowning in oceans of zeros and ones as consumers generate gigantic amounts of data while businesses are hardly able to keep up with processing that data and putting it to use. With ongoing sensorization and a steady stream of new devices entering the Internet of Things (9 billion devices by 2018) the volume of available data is expanding exponentially. No wonder that ventures are springing up like Adatao which promises to make big data more useful through intuitive visualizations powered by clever machine learning algorithms, or Experfy which offers on-demand big data consultancy, or SQream which has developed an SQL software platform able to process 100 terrabytes of data in close to real time, enabling it to handle the amounts of data required for advanced applications in data-intensive fields like IoT, genome-research, and fintech (e.g. for financial predictions and investment advice). But more interesting from an entrepreneurial perspective is the emergence of ventures that finally bring a big dose of entrepreneurial vision and creativity to the well-known and rather stale mix of big data, natural-language processing and artificial intelligence that most big data ventures have been trying to capitalize on for years.
Take for instance a venture like Digital Genius which has analyzed terrabytes of consumer-brand conversation logs to create a program capable of automatically carrying on the conversation in an authentic and insightful way, minus the phone operators and the time and cost factor associated with maintaining them. Since the program can be easily connected to voice output and voice-reconignition, we may all soon be having a surprisingly pleasant and effective way to communicate with automated assistants for all soirts for brands and services. Another creative application for big data analysis is offered by Relevancy Data which runs sophisticated scans to detect faces, logos, objects and emotionsin video content in order to allow advertizers to match that content with perfectly fitting ads only, moving one step towards making sure that viewers get to see ads that are actually of interest to them. The upside for Relevancy Data as well as other ventures following it is very large, given that marketing is inevitably moving towards the segment-of-one ideal in which every person only gets to see ads tailor-made for them.
Big data is abundantly available. If more blue ocean entrepreneurs bring their creative visioneering to the available recording and processing power we are certainly going to see much more big value creation coming out of big data.
5. Open Source Making Money
The open source movement has been around for a long time. It’s based on two ideas, number one is that there is a shift away from passive consumerism and towards active participation of ‘consumactors’ in the generation of content and value and number two is that creativity is maximized when intelligences and capacities are pooled instead of keeping them locked up in silos and isolated firm boundaries. Corresponding trends have been analyzed under the labels of co-creation, open innovation and value creation in business ecosystems. Open source ventures make it their business to open up proprietary processes and allowing a web of actors to participate in the value creation process. In the software field open source is already widespread and has produced well-known names like Linux, Ubuntu or Apache, even pushing incumbent giants like Microsoft or Oracle into opening up aspects of their software to open source. Apart from software, the approach is making inroads into diverse fields such as publishing, data access, governance and industrial production, giving rise to a whole movement called Open Everything and interesting projects such as Open Source Ecology which is making a vast repository of open source industrial machines in the context of what the makers envision as open civilization.
What makes the open source movement a hot current trend from a business perspective is that we may now be at the threshold of a series of IPOs and big liquidity events coming out of the open source corner. RedHat, MongoDB and Cloudera have already banked massive success and a series of younger ventures like Elastic or Hortonworks are looking to break through. What remains to be seen is if ventures in open source domains other than IT enterprise and big data are also able to produce success stories. There are certainly some great ideas around. Kano, an interesting hot venture, is inviting us to reinvent our relationship to computers by combining open making and open coding to provide computer kits that let us build our computers according to our needs and our imagination instead of buying them ready-made, while London-based Opendesk offers to bring open making to office furniture. In the biotech sector the young venture Biobots – one of the strong start-ups pitched at Disrupt NY 2015 – is making portable bio-3d-printers that are able to produce organic tissues based on openly available blueprints, which effectively ushers in open source human organ reproduction.
The paradox that entrepreneurs and venture strategists have to crack with open source ventures is how you can build big revenues and big valuations on the proposition of giving away free access to stuff. The success of open source ventures in the software field shows that it is possible to accomplish the feat, given the right ecosystems and monetization architectures. Other fields like publishing and manufacture should be able to follow suit.
6. Chasing the Green Rush
The legalization of medical and recreational cannabis use across many US States has opened up a multiple billion dollar industry previously controlled by independent growers and organized crime to legitimate enterprise. The advantages of such a move are obvious. Apart from cutting down an important revenue stream for murderous cartels and decriminalizing a widely accepted practice, consumers can now enjoy the full range of benefits that come with legitimization, including professional product development, marketing, advertizing, distribution and complementary services. Entrepreneurs face the exciting challenge of being able to explore and define an entirely sector, albeit one still fraught with much uncertainty and legal ambiguity. With annual revenues already estimated at $10 billion and expected to rise to $30 billion by 2030 some commentators are speaking of a Green Rush comparable to historic Gold Rushes.
What makes the field especially interesting from a venture strategy perspective is that at this early stage, the entire architecture of the emerging ecosystem can be shaped and influenced by smart players. Where previously users had to rely on their dealer’s sketchy knowledge or had to consult obscure websites to try and identify the product they received, Leafly has now positioned itself as the place for user reviews on taste and effect of different strains of Marijuana, effectively using crowdsourcing to become an information authority which moreover links users with dispensaries. Weedmaps on the other hand, is focussing more on efficiently locating availability at nearby dispensaries and less on reviews which would probably be more of interest to recreational users. Connecting the cannabis business with on-demand delivery, Eaze is offering marijuana conveniently delivered to user’s houses. Getting more creative, HighThere is basically Tinder on weed, a location-based dating and social networking app for marijuana users. Lastly, NY-based Marley Natural has enlisted Bob Marley’s family to pursue the ambitious goal of becoming the ‘world’s first global cannabis brand’.
7. Targetting the Bottom of The Pyramid
In 2004 the late C.K. Prahalad published a book called The Fortune at the Bottom of the Pyramid where he presents the thesis that there is an immense market potential in the strata of currently 4 billion poor people on our planet – the bottom of the global wealth pyramid. To this day, the majority of startups are concentrated in the world’s wealthy countries despite 85 % of the world’s population living in poorer countries. Advocates of bottom of the pyramid business models argue that ventures can succeed by specifically targetting poor global demographics and their specific needs and capacities because sheer numbers will make up for limited purchasing power. Moreover, such an approach can help integrate excluded demographics into the planetary economy and help tackle important planetary challenges like poverty, access to knowledge and opportunities, water, energy and environmental preservation.
The venture approach to developing the bottom of the pyramid is closely related to impact investing which seeks to replace largely inefficient aid and philantropy with the much more promising approach of directing sustainable investment funds into projects that are economically viable while producing beneficial social and environmental outcomes. While some argue that impact investing may be the next venture capital the relation seems in fact to be of a complementary nature as there is now also a proliferation of VC firms like Ignia which focusses on bottom of the pyramid ventures in Mexico, or a range of similar VC firms that have recently emerged in India and other geographies in the Global South.
Apart from developments on the capital side, we are also now seeing a hot trend for ventures based in developed countries to pursue bottom of the pyramid value propositions. There are for instance ventures that attempt to solve access and connectivity problems in developing countries through innovative means alongside Facebook’s solar drones vision and Google’s balloon-powered inernet vision Project Loon. While these mega-projects could increase global coverage it is questionable whether they would also solve affordability. To bridge the gap and connect the 4 billion people currently unconnected to the internet faster, a startup like Pangea which has developed a strong technology for providing a data-over-voice infrastructure that allows the use of existing voice channels to generate rudimentary internet access, while Everylayer utilizes a cloud-based software innovation to facilitate internet access expansion in emerging economies. Targetting a different problem at the bottom of the pyramid, this year’s Disrupt NY 2015 startup-battle winner Liquidity has developed a more affordable and practical solution to water purification based on nanotechnology, a solution with a huge upside and many applications beyond the filtering water bottles now being rolled out by the venture.
8. Reinventing Money
After the great financial crisis of 2008 banks proved “too big too fail”. It would be a nice irony of history if about a decade later they’ll prove not to be too big to fall victim to disruptive innovation. Although it’s certainly premature to sound the death knell for one of capitalism’s oldest institutions, it does seem like fintech ventures are starting to take off and generate workable systems and user acceptance. However, any talk of an Uber of fintech disrupting banking in ways similar to how Uber is disrupting the taxi service industry remains unthinkable because as explained here by Bernard Lunn – the founder of Daily Fintech – the banking industry is far more complicated than transporting people from A to B. Banks rather govern a complex ecosystem which includes technology providers and payment services like the Visa and Mastercard processing rails. Fintech contenders that want to emulate the complete service package of banks in a digital model, including the taking of deposits, would have to encumber themselves with stifling regulations and would effectively have to become banks. Simple, a fee-less online service which offers its own credit card, does not qualify as such since its service is simply a mobile layer added on existing banking infrastructure.
Short of actually setting up purely digital challenger banks, the approach that successful fintech ventures are taking is to unbundle the package traditionally offered by banks and to focus on delivering innovative solutions to specifically cherry-picked services only. Thus Venmo lets you transfer money, Square and Braintree let vendors accept payments, Zenefits and ZenPayroll let businesses pay their employees, and Betterment, Wealthfront or Robinhood let you invest money in stocks and manage your portfolio through your smartphone. Meanwhile Lending Club and Angel List are successfully bringing crowdfunding to loans and to equity investments. A disruptive venture like Canadian fintech startup Kash is going even further, altogether cutting out the credit card payment rail and allowing users to directly debit accounts for purchases through their phones, resulting in lower transaction costs for vendors and customers. With the erosion of bank authority comes the emergence of new types of authority based on the wisdom of the crowd. Following this model Toronto-based startup Nvest has made a beautifully designed social network where users can share recommendations and views on stock developments and build their reputation as experts.
What these ventures are doing can be understood as part of the push towards a more participatory organization of business and society. While in the 20th century model media was centralized, only pictures of stars were publically viewed and you’d need to play golf with your financial advisor to be able to invest in stocks, today everyone can have a channel and a voice, everyone shares their selfies, and everyone can dabble in stock trading. The banking system seems too resilient and too complex to be blown away by these developments. But a future scenario is imaginable where banks share the fate of the post office. It’s still around but most of its old business is now conducted through new media like email and new delivery services. On the other hand, banks are likely to use their tremendous power to proactively anticipate these developments and reinvent themselves through the continuing symbiotic relationship with fintech startups. At any rate, banks will look vastly different in five to ten years.
But the largest disruption of all could come with the proliferation of bitcoin. Listen to bitcoin wallet Xapo founder Wences Cesares, explaining here how bitcoin could become the new gold standard of our age and thereby revolutionize not just money and banking but the fundamentals of our planetary society.