In many ways, the internet industry has undergone an important shift: innovation now focuses on changing existing industries — not creating new ones. But as technology starts to impact more meaningful aspects our economy, the technology industry will face a new set of challenges.
During a panel at Street Fight Summit in New York Tuesday, Tige Savage, managing partner at Revolution Ventures, and Dave Ambrose, managing director at Steadfast Venture Capital joined the Guardian’s east coast tech editor Dominic Rushe to discuss the growing opportunities — and future challenges — in rethinking traditionally local businesses.
For Savage, an early investor in LivingSocial, the largest opportunity is in rethinking existing categories instead of creating new ones. Savage’s firm, Revolution, which invested in an early iteration of Zipcar years ago, led early investments in scheduling software Booker and a later stage investment in on-demand home-cleaning service Handy through an affiliated growth fund.
“Thematically, we focus on categories where billions of dollars are already being spent — and best if it’s being spent in an old fashioned way,” said Savage. “There’s a lot of business categories that have worked the same for 20-30 years. And that’s where we see the big opportunities.”
Today, that thesis largely centers on the sharing economy. The success of companies such as Uber and Airbnb have opened the heavily controlled and regulated taxi and hospitality industry in meaningful ways. Meanwhile, a deluge of startups — firms such as Revolution’s Handy — are attacking other industries ranging from home cleaning to auto repair.
At the core, these businesses generate value by connecting supply and demand in new ways. With marketplaces however, the question for entrepreneurs is whether it’s more efficient to start by aggregating demand (i.e. consumers) or building platforms for suppliers (e.g. merchants.)
“We’ve always had this view that owning supply in the case of the small businesses is quite important,” said Ambrose. “When you look at the sharing economy, it’s largely built around a contract worker. They don’t have supply relationships. They’re hacking supply by funneling demand in mobile.”
However, a more flexible approach to supply — or workforce management — also poses new problems. As the sharing economy grows, the contract-based approach to workforce will require regulators to rethink some of the law and regulations that govern the way they structure labor law. “There’s a lot of opportunity to make a misstep,” said Savage.
The shift in the technology industry from creating new markets to reinventing existing ones has other implications for the role of these companies in the overall business environment. For instance, Savage believes that the tech industry — once apathetic toward politics —will quickly become the defining force in lobbying over the next ten years.
“The next ten years are going to look a lot different than the last ten years. The largest hirers of lobbying talent are the big internet tech companies,” said Savage. “They’re realizing that the biggest customer and largest regulator is the [US] government.”
Steven Jacobs is Street Fight’s deputy editor.