For the tech industry, it’s becoming quite clear that we’re in some very unusual times. Valuations are sky-high, venture capital is flowing, and exits are occurring at a high rate. Because of this, many entrepreneurs are being seduced by the siren song of software and the promise of riches.
But there’s an old adage about times like these. When you’re in a gold rush, sell picks and shovels.
The wisdom behind this advice is grounded in statistics. Statistically speaking, only a few companies will “strike it rich” and claim their gold. But there will be thousands of companies that make the effort to become rich. And to find that gold they’re going to need some proverbial picks and shovels.
This is a big reason that the B2B sector of the tech industry is growing so rapidly right now. A lot of B2B companies are picks and shovels providers. They supply the tools that allow the B2C, and some B2B, organizations chase their fortunes.
So, instead of trying to launch the next WhatsApp or Snapchat, instead think about what those companies will need to succeed and build a company that supports those efforts.
New Demands, New Platforms
A great vertical that is in high demand right now is databases. With all the talk of big data, people tend to forget that aren’t prepared to handle all of that data. Instead, there are thousands of companies that are developing software to help process all the data, but most of that software requires much more robust infrastructures than those that are currently in place.
A perfect example of this is in the finance industry. While companies like Stripe, Square, and Apple (with
These new types of financial tech players need to come to the table with better and more agile systems than their more established clients.
Enter groups like Aerospike. They are part of a new breed of database companies that are leveraging advancements in technology to provide financial companies, and other industries, with scalable and fast platforms to run all of the new software and analytics tools that are required to keep up with payments and fraud in the increasingly demanding financial industry.
They are the definition of a picks and shovels company. They are selling a set of tools to help these other groups “dig for their gold”.
Don’t Expect The Spotlight
While the financial industry is undergoing some massive changes, so too is the telecom industry. Apps like Skype, WhatsApp, and others are making landlines obsolete. And every time you turn around there seems to be a new app for communication.
But what is powering all of these apps? How does Google Voice seemingly magically create phone numbers out of thin air? Or how are we able to have phone conversations between a computer and a cell phone and have the computer create a phone number?
It all just seems to happen, but really there are layers of technology in there to keep these apps rolling. One of the main technologies powering these new communications apps is IP networks. They’re virtual phone networks that exist completely in the internet. Gone are the days of wires hanging from phone lines next to the highway. If things continue to progress the way they currently are, pretty soon all communication will occur over the internet using underground fiber optics.
One of the leaders in IP network technology is Bandwidth. You’ve probably never heard of them, but it’s almost guaranteed that you’ve utilized one of the technologies they help support, like Skype or
And this is a fact of life that many “picks and shovels” entrepreneurs will have to accept. They rarely get the spotlight or are able to snag the big headlines. Let’s face it, the consumer products are the things people like to talk about. But let’s also not forget that ORACLE is valued at almost $200 billion and most consumers would be hard-pressed to name one of their products or services.
“Our customer is the organization, not necessarily the end consumer. As a result we’re not at the forefront of technology press and news stories,” says Michael Turcsanyi, SVP of Sales and Marketing for OrderDynamics, a backend commerce solution provider for retailers looking to manage eCommerce websites and automate fulfillment. They’re another brand that most consumers aren’t familiar with, but you’ve most likely shopped on a site that they power. He continues, “But we’re happy with that. We are here to support a rich and meaningful web experience that showcases the quality of brands and retailers using our technology. If our clients are successful, then we’re successful. And really that’s what’s important.”
So, if you’re comfortable with working in the background, but also interested in chasing a more reliable revenue stream, then put down the gold pan and instead hang a shingle and stock up on mining supplies.
