The latest wave of energy in the startup space is focused on what’s called the shared economy. The shared economy is characterized by new services, often on a digital platform, that connect suppliers of basic services with consumers interested in them. The buzz in this sector of the startup field is all about the new middlemen – er middlepersons – that essentially broker a market of goods or services. Sometimes the brokerage element is disruptive to a traditional industry model. Think Uber. Uber does far more than connect drivers and passengers – it opens up a tremendous new source of capacity for local transportation. This is an example of a durable, lasting innovation. In other cases, the services of the middlemen are not really disruptive and perhaps not really innovative at all. They are simply ‘appified’ for lack of a better term. They are commonly described as ‘Uber for this’ or ‘Uber for that’, but this can oversimplify the landscape of startups in the shared economy.
Investors beware; many a bubble are built on over-generalized assumptions about the prospects of an asset or venture. This all raises a question of whether the valuations of some of these enterprises are justified. At its most basic level the dot com bubble and bust in the late 1990′s was built on over valued websites that attracted investment merely by existing online. Is the sharing economy heading down this same road? Are these service app companies durable as a going concern? This article by the Upstart blog makes a note of valuation discrepancies between private VC funders and public investors post-IPO’s. Does accessing a product or service via a dedicated app make it more useful to the consumer, and is this marginal utility great enough to provide a profit to the middleman?
Eventually, these and other answers will be clear in hindsight, but for now the uncertainty keeps things interesting.
Durable innovation in the sharing economy
The latest wave of energy in the startup space is focused on what’s called the shared economy. The shared economy is characterized by new services, often on a digital platform, that connect suppliers of basic services with consumers interested in them. The buzz in this sector of the startup field is all about the new middlemen – er middlepersons – that essentially broker a market of goods or services. Sometimes the brokerage element is disruptive to a traditional industry model. Think Uber. Uber does far more than connect drivers and passengers – it opens up a tremendous new source of capacity for local transportation. This is an example of a durable, lasting innovation. In other cases, the services of the middlemen are not really disruptive and perhaps not really innovative at all. They are simply ‘appified’ for lack of a better term. They are commonly described as ‘Uber for this’ or ‘Uber for that’, but this can oversimplify the landscape of startups in the shared economy.
Investors beware; many a bubble are built on over-generalized assumptions about the prospects of an asset or venture. This all raises a question of whether the valuations of some of these enterprises are justified. At its most basic level the dot com bubble and bust in the late 1990′s was built on over valued websites that attracted investment merely by existing online. Is the sharing economy heading down this same road? Are these service app companies durable as a going concern? This article by the Upstart blog makes a note of valuation discrepancies between private VC funders and public investors post-IPO’s. Does accessing a product or service via a dedicated app make it more useful to the consumer, and is this marginal utility great enough to provide a profit to the middleman?
Eventually, these and other answers will be clear in hindsight, but for now the uncertainty keeps things interesting.