The Overlooked Eight
Silicon Valley lore holds that the first Valley startup began when eight bright young engineers left Shockley Semiconductor to form Fairchild Semiconductor with funding from inventor and businessman Sherman Fairchild who had made his fortune in aeronautics and film. The moral of this parable has been elevated to Silicon Valley dogma. Disobedience is good; Management is bad; Technology needs to be set free. It’s a good story and there is a lot of truth in it, but it is also a particular version of history that suits its authors.
Sizing up a new venture at the time of inception is a more difficult task than framing a historical account. Without the benefit of financial statements, discussions with the founders and knowledge of the market nobody should attempt to pick winners and losers. That is why it’s not fair to judge TechCrunch’s top 7 startups from Y Combinator S16 Demo Day 1 and Y Combinator S16 Demo Day 2’s top 8 startups on anything more than clicks and links, they are a media company after all. That said, I found it odd, but not unlikely, that only one of my favorites made the cut.
Y Combinator’s investing model is almost unique. Few other early stage investors invest so prolifically (SV Angel, techstars and 500 Startups not withstanding). The theory and humility behind this method is made of three parts as far as I can tell. First, it is hard to predict the future, so just buy almost everything. Second, startups are good so encourage more startups. Third, startups benefit from a large community of other startups.
Buying the market is a good strategy when you cannot predict individual outcomes, but it also means giving up the hope of beating the market and winning is fun. My favorites in the summer 2016 batch should not be interpreted as investment advice.
Drones, artificial intelligence and virtual reality all make it in to Techcrunch’s topical lists. My picks belie my own biases, security and enterprise technology. Below I’ve listed the eight I liked that didn’t make their lists and the one that did:
- Metapacket One trend in cyber security I have seen is for innovation to move further along in the breach process. First it was firewalls, then it was intrusion detection, now it is network monitoring and obfuscation. The next logical steps are attempting to stop exfiltration and eventually following the perpetrator home to their own networks. That last one is fraught with legal and political ramifications, but denying your adversary’s ability to get data out of your system is the logical step.
- ZeroDB Database management is difficult. Secure database management is near impossible. ZeroDB is trying to take some of the weight off of back end engineers and system administrators, by providing an off the shelf end-to-end encrypted database with local key storage. Want to be sure nobody is snooping on your data? You need to control your own keys. As more data moves to the cloud and more regulations pile up to protect our health, personal and financial data, something has to give. One way to design systems for security is to prevent access as a default.
- Meesho This and Elemeno Health are well outside my comfort zone. Meesho, probably the most so. My knowledge of retail is minimal. I’m not much of a user or nor an advocate for ecommerce. I have only ever spent a few weeks in India. Nonetheless, Meesho stood out to me. The thriving entrepreneurial values I saw in India stuck with me long after my trip there. Millions of budding businesspeople, a thriving social culture and a diverse preferences make me an optimist on social channel selling in India. Nowhere is the long tail longer than in India.
- Techmate Internet of Things was so YC 2015. Efforts to turn Nest or Apple TV into home automation hubs, not to mention Samsung’s continued attempts have not panned out. Integrating devices across standards, without any uniform entrance point for the customer and unclear value proposition has led to an IoT winter after the VC’s harvested what they could. So why am I a fan of Techmate? Simple. Complexity, confusion and unclear value are the domain of professional services.
- Selfycart This pick is a bit more speculative. You may have read about the store in Sweden without cashiers. Most businesses will require human interaction and more technology will often mean more integration, maintenance and emotional services. Think more greeters and repair people, fewer cashiers and warehouse workers.
- Wallarm Web application firewalls aren’t new. Running your app layer behaviors through a reverse proxy is good for identifying and stopping attacks to your web app, but security teams already have too many notifications. They don’t need to know about every scan, probe or even attack. They need to know what in their app is being exploited.
- Elemeno Health Healthcare is . It’s a difficult market with many pitfalls: regulation, information asymmetries, strong unions, perverse incentives, the list goes on… Two trends, evidence based medicine and outcome based billing, bode well for this venture. Clinicians are incorporating research into their decisions making, both in what they do and also the degree of confidence they have when prescribing treatments. At the same time, pressure from insurers and regulators to align financials to quality of care will increase the need for process and accountability in medicine.
- Sway I’ve talked about fintech before in not so friendly terms. That doesn’t mean I’m a fintech pessimist. I just think it will manifest in a not so obvious and probably not paradigm shifting way. Sway is just that. It fits nicely into the current needs of small businesses and is yoked to two powerful trends, Slack and SaaS.
- WorkRamp Learning on the job accounts for most career knowledge. As training becomes obsolete faster and employee turnover increases, companies will have to grow human capital to counteract these growing drains on corporate brainpower. A few months ago I had a conversation with the former CEO of Deloitte, Barry Salzberg, about learning management systems. Among other opinions, he advocated for buy over build.