Tracing Change in Venture
How platform shifts are a part of Venture and make the world as we know #42
Good morning and welcome to another edition of Notes by Letícia! This is a personal newsletter where I write about topics that have brought me some kind of reflection and discussion, whether it's sparked by a news article, a conversation with a peer in the industry, a macro-level market perception, or any other inputs that daily life may bring.
Moments of change in the market are unique and yet they possess similarities regardless of when they occur, as seen, for example, in platform shifts. It was this reflection that inspired today's content, exploring the similarities between different moments and similar phenomena that have brought about significant effects.
If you'd like to receive more content like this directly in your email, just subscribe!
Firstly, I believe it's valid to introduce the concept of platform shift. Therefore, a platform shift is a change in the dominant layer where applications are created, for example, from desktop to mobile-based apps.
Looking at recent history, there's an observation that every 10 to 15 years, some technology emerges bringing significant changes in the world, affecting the distribution of knowledge, business models, and different ways of carrying out daily activities. This pattern has been observed in the cycles of personal computers, the Internet, mobile, and cloud, from the 1970s-1980s until today.
As the image above exemplifies, many of today's market leaders have built large businesses based on these changes.
It's possible to notice some important points about each cycle, guided by certain similarities:
Technological change: the ability to have a mini-computer in the palm of your hands compared to a desktop.
Distribution change: automatic and widespread distribution to everyone with internet access, unlike before when information was tied to specific locations.
Business model change: usage and payment on-demand for cloud services, as opposed to pre-defined usage sizes.
New ways of accomplishing tasks: app-based applications with new forms of interaction between people (WhatsApp, Instagram…).
And not coincidentally, these points are some of the signs of a platform shift, where not necessarily all need to occur in the same proportion or at the same time, as Casey Winters suggests.
What separates a major platform shift from a minor platform shift is a platform shift that enables both a technological shift (new ways of making things possible) paired with a distribution shift (new ways of reaching people with it). - Casey Accidental
An interesting point that Benedict Evans brings up is the curve of a new technology, very similar to the curve of the well-known Hype Cycle. It shows a maturity of the technology, use cases, and actual generation of value reaching a plateau, making room for a new wave to emerge.
An interesting current question is: Is AI a new platform shift? Everything seems to indicate so.
Back in 2013, Forbes published an article titled "The Cloud Hits the Mainstream: More than Half of U.S. Businesses Now Use Cloud Computing", fitting into the platform shift time frame. While some of the remaining characteristics may still be somewhat obscure, as mentioned earlier, not all points necessarily become evident at the same time, but there are already signs emerging.
New workflows with the shift in interaction mode, such as from text to voice and images, for example.
In terms of business models, there are doubts about what will make more sense for the technology's use cases, but the use of certain data as shown by The New York Times vs OpenAI is a current question. However, significant changes here may not necessarily be visualized, prevailing the recurring revenue model.
The distribution issue is intriguing, as it can be viewed from the perspective of never having had such a low barrier to mass content creation. With the help of tools like ChatGPT, marketing and sales areas are leveraging this to be increasingly present in the market through content distribution. This is a different perspective from what was observed in the past with technologies like desktop and cloud, for example.
Even thinking about the technology's maturity curve, similarities can be visualized. There's a big boom in AI solutions, some generating value while many others do not, and without really having a use case with great value for the user. Achiving product-market fit becomes something that few startups can execute, and many end up dying along the way. Looking ahead, it's about monitoring the maturation of use cases and the ecosystem as a whole.
If you enjoy the content share it with your network!
Recommendations
⬛ Long-term profit potential for foundation model companies
⬛ Can you scale a venture capital fund - Superfluid
⬛ Venture Capital Portfolio Construction - Moonfire