What’s the next big wave of startups?

By Samer Kallas

What’s the next big wave of startups?

As the golden decade of social network start-ups starts to fade, I am wondering what’s the next big thing for start-ups. What areas are going to be the hot topics in the coming 5 -10 years?

SaaS and Cloud computing? This area has definitely grown big in the last years. We have seen many success stories such as Dropbox, Vmware, Rackspace and the case we had in class on CloudFlare. A key success factor in this space was innovation in technology to provide better quality product at lower cost. Startups leveraged the decrease in technology prices, especially storage prices, to provide better services (faster, more reliable and more secure) at lower prices. The question remains, will technology and hardware cost continue to decrease? If yes, wouldn’t that disrupt current success models the same way they disrupted the ones before?

Clean Energy? This topic has been described as the next big thing for the last 10 years (at least). It still didn’t pick-up as expected. In fact there are different factors that make this market tough to enter: First, hydrocarbon fuel prices are still relatively low and it doesn’t make economic sense for consumers to switch to alternative energy; Opower was able to find an excellent value proposition that helps both consumers and utilities and save money for both, hence it was very successful. Second traditional markets are still dominated by big players who can set the standards for technology adoption in this sector; it seems that a partnership or collaboration with the existing player is necessary for success. Last, the need for high capital investment especially in R&D combined with uncertainty and risk for future returns can discourage both entrepreneurs and investors.

Enterprise and B2B services?

As Fred Wilson told us in class: “Consumer focused startups are in the tougher side of the market...” In fact, there are huge market opportunities in the enterprise segment, but it’s much more difficult for startups to enter that space. In general, enterprise customers require customization of products, high quality of service, direct sales channel and they trust established brands as they want to make sure they get after-sale services and support. All these requirements are much tougher to deliver by startups and disruption is not easy. Will this reduce the number of entrepreneurs in the space? Will a lot of entrepreneurs be passionate about selling enterprise services and solutions as much as consumer product?

What do you think?