Here as some buzzwords, you might be familiar with: #Artificial Intelligence, Internet of things, #DataScience, Driverless Cars and Wearable Tech such as Google Glass. Two decades ago, these technologies had not become a reality but in today’s world, we are seeing these technologies being applied in our daily lives. Despite the promise of technology to transform our society, we still have a long way to go and one wonders, where technology will go next.
The start-up ecosystem is one area we should focus on, to better assess the hype surrounding emerging technologies. In the United States, the IPO valuation of start-ups has often misled investors and the public about the nature of a company considering the estimated losses of more than $7B according to a recent report on start-ups. Thanks to the vibrant venture capitalist industry in the US, start-ups such as #Kikand #Wework acquired a platform for scaling up but unfortunately, these companies have not lived to the expectation. Instead, they have posted major losses!
The list of VC backed ventures incapable of building competitive business models continues to grow and leads to one conclusion: Contrary to popular belief, raising $1B during the start-up phase does not guarantee success in the market, and the examples are many as seen from Silicon Valley. Additionally, large capital injections do not translate to profitability as seen in the case of #Magic Leap. Most often, these injections fuel mismanagement and a loose vision as a result of the sky-high inflated valuation projections.
1. Start-up Failure and Record Losses
The #sharingeconomy has not lived to the promise because of the current challenges facing the industry in areas including peer-peer lending, food delivery and ride sharing. For example, start-ups in these areas continue to post losses despite the VC backed confidence and high valuation. The choice to remain private for these start-ups has not either cushioned them against losses and the situation could get worse, if the numbers are anything to go by. The same holds true for start-ups in China and India where losses rise each day. Then, what is really happening? Why is technology not delivering on its promise? Why are these start-ups failing?
2. Explaining the Losses
Irrational exuberance explains the massive losses facing start-ups in the US and Asia as coined by former Federal Reserve Board Chairman, #Alan Greenspan. By extension, there is much hype about technologies despite their failure to deliver results alongside venture investors joining the bandwagon. The stock market experiences bursts and bubbles as seen from the past years and this applies to the current technological ecosystem. For instance, during booms as seen from start-ups, the prices hike with VCs believing that the market will continue to expand.
Accordingly, the media and the financial industry fuels the hype with explanations about the current market situation by painting a positive future that might not hold true for technology start-ups. The New Age Economy hype of the 90s is an example that best suits this narrative where investors assumed that online ventures would amass record profits owing to value chain and product re-organization. During market bursts, technology companies find it harder to survive the market waves leading to declining market value. The launch of platforms including #drive.ai and #EOS is another sad story about technology failing to live in the hype and goes to show the lack of strategic understanding from start-up founders, co-founders and VCs.
The concept of irrational exuberance is captured in the book: The Singularity is Near by Ray Kurzweil who explores the technology market bubble. Martin Ford in his bestselling book: The Rise of the Robots demonstrates the same school of thought about market rises and venture investments increasing in billions of dollars. These authors explore the reality, hype and deceit surrounding technology market where they explore the implications of technological disruptions such as growth and increased joblessness.
The sudden slump of wag, a start-up in LA that was poised to become the next biggest tech platform speaks volumes about the illusions mentioned in these books. As the media continues to hype the booms in technology, one wonders about the authenticity of this hype given concerns about unemployment and productivity levels.
As these start-ups conform to this hype, massive losses are reported as investors panic with technological companies failing to find profitable alternatives. In the same vein, the hype holds back these start-ups from innovating and seeking better designs to make them competitive again.
3. Technological Solutions and Innovation
Achieving productive innovation is critical among start-ups in the era of hype and online news. Technology leaders should come back to reality by understanding their business models and applying technologies that add value to customers. As the #futureofwork sets in, innovation should expand rather than shrink, in order to deliver on the promise of consumer satisfaction.
Whether you are building new hardware or scaling a marketplace, you must consider several objectives, the most important of which result from a team, which can market product, and scale the sales organization.