Disruptive Investing – Comparisons and Trends

Following up from my last post on Disruptive technologies and investments, a reader referred me to this May 2013 McKinsey report on Disruptive technologies: Advances that will transform life, business, and the global economy. I thought this was particularly interesting considering my last post and the current round of Seattle Angel Conference startups.Thinking about trend from just the companies that I am seeing right now come to life in the early stage space I am seeing a lot of things that could be called trends, I mentioned three in the last post (AirBNB for ____, Mobile ad monetization, & financial planning).

Expanding on that list from the startups I am seeing within the Seattle Angel Conference as well as startups that I am meeting currently - there are a lot of small trends. I wouldn't say these are THE trends in early stage companies... more like the seeds of trends that we should start to look at. We've had two startups in the publishing industry, two in the space rental industry, one wireless power (with another local wireless power company pitching at TC Disrupt recently), we had two different ways to look at alternative energy, one investing platform, three mobile advertisement startups, and a few food/farming improvement startups.

My list of startup trends doesn't line up with Goldman Sachs list - nor does it line up with the McKinsey list. Here is the full list of twelve disruptive technologies from McKinsey:

  • Mobile Internet - Increasingly inexpensive and capable mobile computing devices and Internet connectivity
  • Automation of knowledge work - Intelligent software systems that can perform knowledge work tasks involving unstructured commands and subtle judgments
  • The Internet of Things - Networks of low-cost sensors and actuators for data collection, monitoring, decision making, and process optimization
  • Cloud technology - Use of computer hardware and software resources delivered over a network or the Internet, often as a service
  • Advanced Robotics - Increasingly capable robots with enhanced senses, dexterity, and intelligence used to automate tasks or augment humans
  • Autonomous and near-autonomous vehicles - Vehicles that can navigate and operate with reduced or no human intervention
  • Next-generation genomics - Fast, low-cost gene sequencing, advanced big data analytics, and synthetic biology (“writing” DNA)
  • Energy Storage - Devices or systems that store energy for later use, including batteries
  • 3d Printing - Additive manufacturing techniques to create objects by printing layers of material based on digital models
  • Advanced materials - Materials designed to have superior characteristics (e.g., strength, weight, conductivity) or functionality
  • Advanced oil and gas exploration and recovery - Exploration and recovery techniques that make extraction of unconventional oil and gas economical
  • Renewable energy - Generation of electricity from renewable sources with reduced harmful climate impact

 

There are some matches between GS & McKinsey - 3D Printing & some form of alternative energy. I was a little surprised that the McKinsey list is missing software defined networking (SDN) and big data but those are sort of wrapped up in their other categories. SDN is in both the internet of things category and the automation of knowledge work category. This is also a main theme in a report by the CEB on emerging technologies (with cloud, collaboration, big data, & SDN being four of the top five on their list). While I was also surprised Goldman Sachs did not have Autonomous and near-autonomous vehicles. At the Alpha Hedge West Conference, driverless cars was also called out as a huge future business (as was the automation of knowledge work under the heading of MongoDB going 'unstructured') by a panel with Chris Schultz (Operating Venture Capital), David Girouard (Upstart), Ari Levy (Bloomberg), Ron Suber (Prosper Marketplace), Pat Grady (Sequoia Capital). The driverless car concept will truly change the way that we do things and interact with society. There will be plenty of money to be made in the parts required to manufacture these systems as well as in the growth of automakers as a result.

One area that McKinsey calls out is advanced materials, while I haven't seen advanced material companies raising funds personally - I have seen startups that are using new advanced materials in their business to gain an edge over competitors.

The other two areas that I find particularly interesting is automation of knowledge and the internet of things. These are booth poorly understood by the marketplace so it makes sense they aren't on the Goldman Sachs list. Heck, I barely understand where the internet of things is going to be disruptive. I have seen a few startups building products in this space, but think many of the existing companies such as Cisco, HP, & the wireless carriers are going to make the lions share of the money in the space. Even smaller companies producing chips and contained systems to enable the internet of things is a low margin business with a lot of players that will enter the marketplace. The other angle is companies like Estimote who are trying to lower the bar for connecting with internet enabled sensors, again an important business to this disruptive area but it will ultimately be low margin.

Given the ability to call out disruptive technologies even if they are vaguely defined and a fractured space, I was surprised that McKinsey didn't call out the sharing economy. Essentially the AirBNB for _____ that I mentioned above. Browsing angellist there are all sorts of startups with this in their tagline and many more that don't explicitly call it out, but they could. Look at ride sharing companies like Lyft, storage sharing companies like StowThat, etc. There is going to be a lot of companies filling into this space and they will all have their own unique variants. Some will live on as stand alone companies and others will easily be purchased as features to a larger product offering - either way this is an interesting space.

Judging by the focus on big data, cloud, etc. I would think this is an area that will have tremendous growth in the next few years and is an interesting area to explore further. I am talking to a few startups in the space at the moment and would love to talk to more of course.

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