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Startups a Safer Bet Than Behemoths
Former Slashdot editor ScuttleMonkey raises his voice from the great beyond to say that "TechCrunch's Vivek Wadhwa has a great article that takes a look at difference between startups and 'established' tech companies and what they each mean to the economy and innovation in general. Wadhwa examines statistics surrounding job creation and innovation and while big companies may acquire startups and prove out the business model, the risk and true innovations seems to be living at the startup level almost exclusively. 'Now let's talk about innovation. Apple is the poster child for tech innovation; it releases one groundbreaking product after another. But let's get beyond Apple. I challenge you to name another tech company that innovates like Apple—with game-changing technologies like the iPod, iTunes, iPhone, and iPad. Google certainly doesn't fit the bill—after its original search engine and ad platform, it hasn't invented anything earth shattering. Yes, Google did develop a nice email system and some mapping software, but these were incremental innovations. For that matter, what earth-shattering products have IBM, HP, Microsoft, Oracle, or Cisco produced in recent times? These companies constantly acquire startups and take advantage of their own size and distribution channels to scale up the innovations they have purchased.'"
I'm an angel investor, so I can talk fairly competently on this subject.
Let's compare a well known behemoth (IBM) with a well known start-up (Twitter).
If I invest in IBM, I'm guaranteed a healthy return. Barring any major disaster, IBM will consistently return a profit on what I invest.
If I invest in Twitter, I'm not guaranteed a healthy return. My returns may be enormously higher than investing in IBM if the company is successful, and I might lose my entire investment if the company goes bankrupt.
This actually has some real world ramifications for me. The majority of my money is stored away in Corporate Bonds for major companies, because I know that I have a very low probability of losing the money and a very high probability of seeing at least a two to three percent return on my money every year. That's what makes behemoths a safer bet than start-ups. I only give about 15% of my assets towards start-ups at any time, because for the most part, I will break even in what I invest or lose about five to six percent of my investments.
I angel invest in companies for the fun and excitement of creating something, not because I want to make money.
Real innovation means that their existing products no longer sell because everyone buys the innovative product.
So why would an established company scrap their existing investment?
What they want is something new enough to be interesting ... but not different enough to threaten their cash cows ... that supplements their existing product line.
Apple is great at that. Look at the iPhone. New iterations of their existing product that never threatens their laptop / desktop computer segment. But can supplement it and works well with it.
It is only the startups that don't have an existing investment to threaten that will take the real risks.
Which is why software patents are bad. They allow the existing companies to sue the startups and limit the innovation.
iPod: Reduce the buttons, polish the interface. Integrate seamlessly with iTunes. Made a user experience that was superior to anything else out there. Push for reasonable prices on content. Fought for and eventually won DRM free content with the publishers.
That's not Inovation, that's simple refinement. There is absolutely nothing Inovative about any Apple Products. Even the ][e wasn't inovative. It simply used existing tech in an interesting manner.
I'm sorry to say it but Apple does very little inovating of hardware. Where they tend to be very effective is seeing what the user wants and giving it to them.
Mod me up/Mod me down: I wont frown as I've no crown
Ya the iPhone fans love to forget about Blackberry. Comparisons are always "The iPhone shipped more than any single Android phone producer!" and so on. The Blackbeery is just not mentioned. RIM has long been top of the smartphone market, though unlike what the GP tried to imply, it was not niche.
Also there's Symbian. People forget that while many Symbian phones might not be "proper" smartphones in every sense of the word, they are effectively smartphones and foten sold as such. Take something like the Nokia E70. Like many Nokia phones doesn't get the kind of hype in the US as some others but it sold well here and abroad and it is a smartphone in every way that matters.
I think part of the problem is that many Apple fans seem to be unaware of something until Apple does it. When people are doing it before, they don't pay any attention. So when Apple does it, that is the first they notice it. Then everything that comes after Apple is trying to "copy Apple" in their minds. Often it turns out that's not at all the case.
The iPad is another example. Tablets have been around for a long time. We have some old ass tablet PCs at work that now hang on the wall and show MRTG and Nagios because they aren't useful for much else. They just never caught on. The iPad seems to be catching on better, and perhaps so will other new tablets. However it isn't an innovative idea, it is just perhaps an idea that now the technology exists to make work well, and make it worthwhile.
That isn't to knock devices that are successful and just evolutions/iterations of what is already there. Most consumer devices are. I'm quite happy with my HDTV and there is nothing at all innovative about it. It is just a good collection of technologies, some of them quite old, that does what I want for a good price. It needn't be innovate, just quality. However fanboys, in particular Apple fanboys, seem to have this need to convince themselves that the products they use are new to the world.