This is the main trend in tech startups
Andrew Steele and Reed Snyder are part of Activant Capital venture firm in New York. They are exploring the European startup scene, and will be speakers at Startup Extreme 12-14th of June.
We asked about the main tech trends for startups in 2018. According to Steele and Snyder the main technology trends making the headlines today are voice, AI, AR and VR, etc. Blockchain technologies show huge potential, but adoption will take some time.
However, there is one key trend Steele and Snyder have witnessed undeniably - a shift in business model towards a value share. Value-share refers to a business model that shares in the upside created by the technology.
-The primary reason for this shift is companies focusing on charging using a SaaS structure, or outdated license and maintenance structure, have struggled to adequately maintain deal economics over the long term in many large legacy industries.
-Furthermore, in industries like agriculture, in which business models struggle to align interests with the end user who may not have the capital liquidity to invest in a product that may or may not deliver value.
Their recent investment in Indigo Agriculture is an example of that. Indigo is an ag-tech company that provides growers of commodity crops with agricultural inputs IoT solutions, agronomic advice, insurance, and the ability to sell higher margin differentiated crops as part of a partner program.
-Rather than charging a flat fee for this, they participate in a revenue share agreement with the grower. If Indigo’s seeds and services result in a strong yield for the grower, the growers profitability increases significantly.
According to Steele and Snyder this allows Indigo to align incentives with growers who have been squeezed by big agriculture providers. At the same time it also allowed the company to reach the scale where IoT could be truly valuable.
-It starts with the seed as a tangible product, but Indigo’s most compelling innovation is its business model.
If you were to launch a company today, what kind of company/sector would it be?
-One idea we’ve considered recently is a platform for the construction sector.
-Construction is one of the largest sectors in the economy, estimated to be over $10 trillion in size, yet remains one of the least digitized. This comes at a time where unemployment in the US construction industry is at historic lows, and technological improvements are drastically needed.
Steele explains that they have considered establishing a digital marketplace for raw materials and an IoT platforms for tracking hard asset utilization, among other ideas. Challenges are historical aversion to new technologies, opaque market pricing for materials, complex real-world use cases for IoT technologies, amongst others.
-For a company to crack this market and build a truly valuable technology platform, an innovation based business model will likely play a crucial role. In addition to a deep understanding of the different nodes in the supply chain.