I think it was 2011, or right around when Warby Parker raised their Series A, when technology startups woke up to the concept that building a brand could be a core competency.1 Warby’s sense of branding, and how the experience of buying stylish, inexpensive, meaningful eyeglasses through the innovative home try-on process, opened eyes and spawned a range of articles and opinions about how building a brand was the next "thing of the moment" for startups success.
In queue. Sandy Hook, NJ
Many startups since then have focused on building great brands as a key to their growth. I’d argue Uber, Oscar, Birchbox, Barkbox, Harry’s, Hello Flo, Dollar Shave Club, Bonobos, and many others have used aspects of strong identity and voice, visual design, brand promise, and a focus on customer experience as a key differentiator.2 New startups are investing in creating and delivering on their brand. Designers are in demand. UX and UI are critical. Copy and voice and content are key. Customer support is valued. The brand experience is recognized as an important value driver behind today’s new technology startups.
So important, that many of the startups being accepted to accelerators and funded by venture capitalists today don’t fit our mental model of a technology startup. Shirts. Bras. Luggage. Shoes. Mattresses. Furniture. More mattresses, more furniture. Packaged meals. Dry cleaning.
@kane you’re not. Pick almost any consumer good category, there’s a “tech” startup for it.— Taylor Davidson (@tdavidson) September 3, 2015
And that’s ok. People spend a lot of money on food, clothes, furniture, etc, and we deserve new, better, faster, easier, cheaper, more meaningful, more green, more anything. Few companies can survive the cycle of creative destruction and disrupt themselves, in any industry, so it’s inevitable that we’ll see companies started to fulfill age-old needs.
But why are these new companies "startups"? And why are technology venture capitalists funding them?
It’s pretty easy to understand why technology venture capitalists are investing in these companies: investors chase opportunities, low interest rates and cheap money means it needs places to go, and tech startups are where the action is. The harder question to grasp is why new mattress, furniture, clothing and packaged food companies are the state of "tech startups" today.
Upwards of 150k to 200k new businesses are started worldwide every day. 3 But only a very small portion of those are companies that we would describe as a "startup". I like Steve Blank’s definition of a startup as …
A startup is a temporary organization used to search for a repeatable and scalable business model.
… the key ideas being temporary and search. A new organization isn’t necessarily a "startup": the set of risks taken by an entrepeneur building a new business and this particular type of new business called a startup can be quite different. Starting a new business may indeed require a search for a scalable and repeatable business model, but it may be more of a search for an execution path on a more defined set of tactical questions - a known set of options with unknown outcomes - rather than a startup’s search for a solution to solve a problem that potential users and customers may or may not even realize they need.
Perhaps our language hasn’t evolved fast enough, and we’re using the word "startup" a bit looser than we could. Is the the "search for a repeatable and scalable business model" the same for an internet search company as it is for a luggage company? Abstracting far enough, perhaps, but I’d argue that "the search" for a company that’s creating a new human behavior or fulfilling a human desire in a new way has a different tenor than a company that’s delivering a new, better, cheaper, easier product. They are taking fundamentally different primary risks.
Why is this happening?
A couple years ago I wrote that the real challenges technology companies face today are human, not technical:
… We’re still working on absorbing the big structural changes created by transformational technologies of the Internet and mobile telecommunications. Today’s small innovations, fake problems and trivial startups are a key part of the process to absorbing big technological changes: small innovations disseminate new ideas and create waves of little disruptions throughout a wider range of industries, cultures, niches and use-cases (i.e. a dating site for every ethnicity, religion and country) until we reach cultural and economic saturation.
And at saturation (cultural and economic), the world of a million startups collapses into a thousand big companies as they hit the reality of a technological plateau like hitting the Death Star’s energy shield. And oddly, all those features and small business models that made no sense on their own suddenly make sense once they’re combined. That’s how innovation happens today.
So, why are we seeing multiple mattress startups, furniture startups, and men’s shoe startups being created and funded?
To start, tech bleeds into everything. Fundamental innovations in how tech can be built, applied and distributed leads to us using tech in solve new problems in new ways to new industries. Better development tools, available easily and inexpensively (in time and money) to more people to create products that can be used by more people, with the potential for massively scalable distribution, and it’s not surprising that tech becomes a differentiator to more types of businesses.
Why can a Casper compete against a Sleepy’s? Or a Markhor compete against an Allen Edmonds? Yes, they are competing because they are both making designer shoes, yes, but making and delivering in very different ways because technology allowed them to create very different business structures. That’s the core concept behind why software eats the world: software creates more than just new products, it creates new ways of organizing businesses, organziations, communication, delivery mechanisms, everything that’s involved in the value chain from something being created to it being used. Everything becomes a software business.
The state of startups shifts from "technology" businesses to "technology enabled" businesses. But simply introducing technology into new industries doesn’t change how to win in those spaces. Better technology doesn’t necessarily win. Branding becomes a key competency. Scalability isn’t everything. A great community can be a key lever of product success. Operational ability and pure execution can be what wins. Building a full-stack startup can make sense if you need to own the full stack of the experience to deliver on the brand promise. Great product is the first bar, but the flattening of access to technology creates more many more bars.
What wins changes. And what’s fascinating about this shift is that if you alter the formula for success, you create opportunities for new people to succeed. Different backgrounds, different perspectives, different skillsets, different geographical understandings or cultural networks, all can be key differentiators for new companies that intelligently leverage the uniqueness of their teams and situations. The formula for what makes a founder uniquely qualified to succeed above all others changes. We - entrepeneurs, investors, media, users, customers - may not recognize it immediately because it takes time for us to rewire our heuristics and create new patterns of observations, but it will happen. Change the rules, change the game, and it changes the players.
Open to ideas here about what changed the perception of branding in startups. ↩
Obviously there are more, and there’s much more to the product and full experience of all of the ones named, especially Uber. But there’s no question that when you think of Uber, you have an immediate feeling about what they mean and stand for … good and bad. And that their forceful branding been an important part of their success. ↩