One thought that i have been grappling with for the past sometime is: Have we hit peak internet? Is consumer innovation driven by the internet sort of over? The business-model of 2 programmers hacking away and building companies(due to free distribution) now over?
Game of scale
6.6BN smartphones across the world and ubiquitous 4G internet led us to software eating the world, the coronation of the moniker FAANG and bigtech topping 25% of S&P market-cap. From entertainment to gaming to education, commerce and retail to logistics and financial services to healthcare to mobility, internet-enabled startups/companies have taken over the old-guard.
Trends/fads:
VC and tech industry has, in general, been a ver fad-driven industry. Dotcom bubble in late-90s, social network in early 2000s, SO-LO-MO post 2008 crisis, sharing economy in mid-2010s, quick commerce in late 2010s, fintech in late 2010s, Edtech in mid-2010s, creator economy in late-2010s. But these days, apart from crypto/web3{we'll get to this later}, don't see any other reasonable thought/trends these days either.
YC as leading indicator of trends
Ycombinator having built the most formidable startup accelerator brand has long been a leading indicator of the trends that shape-up the industry. Off-late, YC has focussed quite a lot on "this-of-that" investing:taking ideas from mature markets and building for newer markets. The increasing trend of YC funding non-US startups(50% of the cohort of summer 2021 is international).
Increasingly, YC has many more startups from Indian subcontinent, South-east asia and africa.
The US startups that YC funds these days are of two kinds usually: Saas+ developer tools and deeptech(Spacetech, self-drive cars, electric vehicles, energytech, biotech et al).
With the increasing trend of VCs pivoting to web3/crypto investing, {not discounting web3 yet} or SaaS, there seems to be a rut of lack of innovation in the consumer-internet front.
Coldwar:
The upcoming re-aligment of the world from a unipolar world to a G2 world or a multipolar world also foretells an interesting trend.
Large government funds will get deployed to fund research that helps countries win the war. If the previous cold war is any indication, then a lot of innovation and research will happen in
Drones
Biotech
Energy: Nuclear, to be specific.
Cybersecurity
Spacetech
China already wants to pivot away from the alibaba/wechat economy and wants to focus more on innovation in pharma, manufacturing, energy. I only see this trend accelerating. As such, this will lead a lot of smart talent moving away from FAANG/big tech and startups to these fields.
The other side:
Having said all this, while we may have hit ubiquity in terms of smartphones, the explosion of IoT devices is yet to happen, we are still very faraway in terms of penetration of smartbands/watches( and the whole new usecases they enable) or smart speakers and smart devices in the home; which will further enable newer usecases and behaviours.
Even with all this, the penetration of utilitarian software(search, music, ecomm) still remains in late-teens/early-20 percentage points, same for a lot of productivity and communication tools. While one may argue that this is due to that audience not needing those usecases, i believe many may have not yet achieved the desired per-capita income to fully utilise YT/google for education, or notion/google docs for productivity or ecomm for purchasing.
Having said that, there are cases of companies coming-in many years later and just blowing away even a mature market with amazingly new product. Snapchat's ephemeral stories, tiktok's vertical short video style do come to mind.
Even in local delivery, model espoused by gopuff/zepto etc have changed the dynamics for local delivery companies and opened up completely newer usecases.
So while, the trend may look bleak now, but we may not have yet hit peak internet and one thing to learn from the last decade(2010-2020) is that trends just keep getting bigger and bigger. While i have no doubt that the internet industry will be a significant part of the world economy whether it drives much more innovation and creates even more newer behaviours is yet to be seen. I remain an eternal internet bull and would love to see how things shape-up.
P.S.
Have excluded web3/crypto from this analysis, just for the risks of the whole space being regulated out of existence.
Also- i believe the innovation in deeptech will spearheaded by the current crop of internet companies(since they have shown the inclination and have the money) but those innovations will be fundamentally different from the innovation of quickly programming something and putting it out in the market. This will be more research-focussed and require specific skill-set along with a very large initial investment.