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What Is A Technology Company?

May 21st, 2012 Leave a comment Go to comments

New computing and software technology continues to revolutionize our economy. But do we even know what a technology is at this point?

Here are three interesting interpretations:

Marc Andreesen, Netscape co-founder and your favorite VC’s favorite VC: “Airbnb makes its money in real estate. But everything inside of how Airbnb runs has much more in common with Facebook or Google or Microsoft or Oracle than with any real estate company. What makes Airbnb function is its software engine, which matches customers to properties, sets prices, flags potential problems. It’s a tech company—a company where, if the developers all quit tomorrow, you’d have to shut the company down. To us, that’s a good thing.” (See full quote here).

Alex Payne, led API development at Twitter: “‘Tech company’ and ‘tech startup’ are over-applied labels that have outlived their usefulness. Calling practically all growing contemporary businesses ‘technology companies’ is about as useful as calling the enterprises of the industrial era ‘factory companies’; it accurately describes an aspect of what they are (or were), but it doesn’t really capture the totality of their operation. It certainly doesn’t tell you anything substantive about how they’ll behave in the market over the long term, which is probably the most useful reason to label a business at all.” (See full quote here).

Varun Shetty, founder of You Do The Dishes and proud owner of 251 Twitter followers: “Who cares what we call the companies or how we classify them? The real question is where they are extracting value from. Some traditional technology companies build technology and extract value from that core technology – your Googles and Facebooks and Twitters. And then there are companies that use technology to facilitate the extraction of value from some other good. These companies use technologies to make or facilitate markets – Etsy, Groupon, AirBnB, e-commerce sites like Chloe & Isabel. Does the label matter? No, it’s imperfect. The only thing that matters is that technology is driving the creation of value, even if that value is adjacent to the technology itself.”

Your thoughts?

Categories: Entrepreneurs, Internet Tags: , , , ,
  • kipbot

    Great post, and thanks for providing two quotable passages. I don’t have a formal answer that can withstand rigorous scrutiny, but I do think there are relationships with software that need to be better understood. In fact, saying software instead of technology might be a good first step. The analogies and samples above seem to point to software rather than technology.

    1. How important is software as part of their competitive advantage?

    2. How much much value does software add to the customer’s experience of the company? (This is different from the first.) Or how much of the value of the product comes from the software supporting/driving it?

    3. Is the software home-grown, JVed, or outsourced?

    4. Is the competitive advantage coming from software accompanied or even fueled with data?

    I think there is some value to labels . . . at least for investors or people overseeing their operations. The answers to the above question might change over time. People running these companies need to track the shifts and adjust their teams, goals, and marketing accordingly.

  • http://www.varunshetty.com/ Varun Shetty

    I really like the software / technology distinction – it’s certainly more accurate.

    I think the questions become much more complicated as you start building off of other people’s APIs (essentially, your Q #3). That’s when the label as “technology” company starts to really lose meaning.

    Most of the companies that are making markets out of nothing use software to create the market – AirBnB is just a virtual corkboard, right? Does the label matter?