In this episode of Startups For The Rest Of Us, Rob and Mike make their predictions for 2016, forecasting bootstrapping related topics as well as the greater technology space.
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Mike [00:00]: In this episode of Startups For the Rest of Us, Rob and I talk about our predictions for 2016. This is Startups For the Rest of Us, Episode 270. Welcome to Startups For the Rest of Us, the podcast that helps developers, designers, and entrepreneurs be awesome at launching software products, whether you’ve built your first product or you’re just thinking about it. I’m Mike.
Rob [00:23]: And I’m Rob.
Mike [00:24]: And we’re here to share our experiences to help you avoid the same mistakes we have made. What you doing this week, Rob?
Rob [00:28]: Things are pretty good. It’s the last week of the year and we have a new Drip HQ. We moved offices just a few blocks to a nicer building. We’re up on the second floor now, with a nice view of a busy street, and it feels cool to be downtown and just have a lot of people around. It’s like a 50,000-square foot building here in downtown Fresno, and it’s good to be around even more tech companies. We were around maybe 27-ish small software companies over at the other building, but it was only about 10,000 square feet, and this one just has a larger feel. And it’s new construction retrofitting a 100-year-old building. It’s got a unique vibe to it.
Mike [01:03]: Cool. Did everybody move from the other building over to this one? Or how does that work?
Rob [01:07]: A lot of us did, yeah. It was up to you if you wanted to move. The rent’s a little higher here. And it’s in a different location, so some folks opted to stay at the other one and then were backfilling with other companies. There’s been a nice tech scene that’s formed here over the past few years. And so what’s nice is there’s a waiting list at both buildings, from what I understand, and so we’re able to keep them occupied and keep the energy level. It’s something that I think’s going to be taken up. We’re one of the first companies, but I think there’s maybe a half dozen, that are moved in here, and there’s going to be 40 eventually. So it’s still pretty sparse, but just seeing people on the hallway and being able to look out over a cool downtown street is fun. It’s a different vibe than I’m used to, but it’s neat.
Mike [01:44]: That’s cool.
Rob [01:44]: How about you? What’s going on?
Mike [01:45]: Well, I’ve realized that one of the things that I talked about last week on our yearly goals episode was I was going to try and be writing more. And I realized that I should probably have classified that as more of a success than I think I initially did because I realized that one of the things that I’ve been doing is keeping a journal and writing in it three times a day. And I don’t know why I completely spaced out on that, but I did. So I would probably say that that was much more of a success than I initially had indicated on the podcast even though I write it for myself. But I write in it, like I said, three times a day: once first thing in the morning, and then once in the late afternoon, and then once just before I go to bed.
Rob [02:21]: Yeah, it’s interesting because your goal was actually “Keep up my writing habit.” And that doesn’t necessarily mean publishing, although that’s what I had read it as. I’d assumed that you meant to actually blog and push stuff live. Was that your intent when you said, “Keep up the writing habit,” was just to write and not necessarily to publish?
Mike [02:38]: It was a little of both. I think I had initially intended to publish more, but at the same time, there’s a certain amount of content that you create that you don’t ever necessarily publish either. And what I wanted to do was to make it more of a habit than anything else, so just getting into the habit of writing on a very regular basis as opposed to writing a couple of blog posts or writing a couple of articles or something like that and then not coming back to it for two of three months and just doing zero work on it in any way, shape, or form of writing.
Rob [03:06]: I see some value in writing and not publishing, but I think there’s so much more value in getting it live. And so I would give you a half pass on this.
Mike [03:14]: Sure.
Rob [03:14]: Just on my personal, metric system, my arbitrary, personal metrics.
Mike [03:18]: Yeah, but I think that when I’d looked at that on last week’s episode, I’d looked at it from the perspective of, “Oh, I haven’t really written anything at all.” And that wasn’t necessarily true. I agree with you I’d probably get half credit on that, definitely not full credit of course because I don’t think it got published. There’s a huge amount of work in there that just never got published. But the idea I had in mind was like, “Oh, I was actually writing quite a bit here.” I do think I need to do a better job of publishing more, so that will make its way to the forefront, I think, this year.
Rob [03:45]: Indeed. Other news, wrapping up the year, was able to finally make a solid hire to help with growth. He started last week. So pretty excited about that, able to pull some stuff away from myself and Anna, marketing tasks that we’ve been handling. And he is going to be able to focus on this stuff. And so one example is I was messing around with retargeting and trying to optimize it and get it to the place where it needed to be. And then eventually we stopped it at a certain point, and he is able to spend 30 hours a week basically focusing on this kind of stuff. And so already he came in with a much more advanced- and it’s a time-consuming approach but it’s definitely one that I think has legs. So I’m really looking forward to getting going in January with our ramping back up marketing. Because as of essentially next week, when this episode comes out, that’s when things start to come back alive and all the dips and trials and the dips and growth and all that stuff I think starts to turn around for all of us. And so yeah, I’m always excited to hit the ground running as we enter early in mid-January.
Mike [04:39]: It seems odd to be hiring right at the very end of December.
Rob [04:43]: Yeah, it was a little bit of a coincidence. I think I posted it in November and then really wanted to find the right candidate. Because what’s interesting is there are a lot of developers, as an example, and designers. And they’re not necessarily easy to find really good ones, but they’re out there, and you know how to test for that. But finding someone who has the right mentality, or the right experience, and the right hunger to actually do pretty intense marketing and really go after the growth opportunities, it’s still such a nascent, unique skill set, right? It’s not something I think that’s easy to test for. And so that’s what I did, was went around and around with a bunch of people. And when he finally came on, I realized that it’s actually a pretty good time for him to come on because it’s so quiet.
And so we haven’t launched anything yet, but it’s been all prep work. I got him onboarded, got him in the system in terms of payroll and all that HR stuff, and then got him into our processes. He’s now the blog editor in essence. And he really hasn’t started doing any outreach or doing any of the stuff yet, but he’s all set up to hit it hard next week when everything actually ramps up. So it turned out to be decent timing even though it didn’t first appear it would be.
Mike [05:49]: Very cool. To circle back on one of the things that we talked about last week, was some of the different monthly experiments and things that I wanted to do this year, and you had ask me to come back with a list of these 12 different things. And so what I did was I sat down and I started looking at those, and what I realized was it wasn’t necessarily a series of month-long experiments so much as it was an extension of what I read in a book called Habit Stacking. You can find it on Amazon. We’ll link it up in the show notes. It’s called Habit Stacking: 97 Small Life Changes That Take Five Minutes or Less. And what I want to do is essentially stack a bunch of these things together. And a lot of them are just little things. They’re not necessarily major life alterations or anything like that.
So one of them, for example, is drinking at least eight glasses of water a day, which I did it for a little while, but I didn’t keep up with that habit. So what I want to do is I want to go back to some of these and revisit them and start working on those and try and stack them up over time. And I’ve stumbled across a website called healthmonth.com, which allows you to put forth goals that are essentially measurable, and you can put things like that in there. So whether it’s getting up early, or exercising, or setting aside time to do X, Y or Z, you can track those things in there. And it will go on a month-by-month basis, and you get to essentially measure your progress against that of other people who have set a similar number of goals for the month.
Rob [07:06]: So are you going to report on that weekly, bi-weekly here on the podcast?
Mike [07:10]: Probably not. Because, like I said, there’s a bunch of them in there. But you had asked me to put together what that list was, so I’ll quickly run through them. We’re not going to spend very much on it, I don’t think. But they included things like exercising at least 30 minutes a day for 6 times a week, drinking 8 glasses of water a day, going to bed and waking up early at certain times, no junk foods or snacks after 7.00 PM, setting aside an hour to write for my blog, working at a co-working facility 3 times a week, which is something I’ve tried in the past but it’s never really stuck or worked out for me. So I think I’m ready to go back and try and revisit that and try it for a month or two.
Another one was to track all my food intake every day, meeting 10 new people in a given month. I’m going to specifically target a non-MicroConf month for that. I’m not going to cheat on that one. And then spending 15 minutes a day doing, I think I’d talked about this before, it’s a mental game called SuperNBack which allows you to train your brain to remember things a little bit better. So I’ve got a game called Reactor on the iPad that is really good for that, and then scheduling my work day in advance, and checking e-mail only twice a day, which I do that on occasion, but I’m not real good at limiting myself and checking e-mail twice a day so –
Rob [08:19]: Is each of those a one-month thing then?
Mike [08:21]: Yes, they are. My goal is to say, “Okay, let me take one or two of these and just do that for at least a month and see if I can maintain that habit over the course of the month.” And the goal, of course, is to, by the end of the month, turn it into a habit as opposed to something that I’ve just tried out. And if I need to extend it as something that I’m going to track, I will. But the idea is to be able to take those things and engrain them into my daily routine so that I don’t necessarily have to think about it or track it anymore, I will just do it. And that way, I can drop off my list of things that I want to stick with. And if it turns out that there’s something that I really just don’t enjoy or don’t want to continue with, then I’ll just drop it off. And then the next month I won’t continue tracking that or doing it.
Rob [09:07]: I think if there’s one adjustment I would make, as you said, you want to look at one or two of these things in a given month, and I would definitely not start with that. If you’re going to go January 1, pick one and focus on it. If you try to do too many things, it overwhelms you and it’s hard to change behavior. So at least for the first five or six months, until you get the hang of this, I would probably try to attack one thing at a time, unless you really feel like you can do multiple things.
Mike [09:31]: Yeah, some of them are easy enough. For example, drinking more water per day, that’s not terribly difficult. Really what it boils down to is just remembering to do it. So you can do that with timers. I found that there is a prescription reminder application from I think it’s Walgreens or something along those lines that you can throw something in there and it just reminds you every couple of hours to do something, and I’ve used that in the past.
Rob [09:54]: So you mentioned drinking eight glasses of water per day, but you missed the one of drinking eight glasses of beer a day.
Mike [10:00]: Well, that is in the water. You can call it beer if you want to, but –
Rob [10:04]: Right. Beer, water with hops.
Mike [10:06]: Yes.
Rob [10:06]: All right. Well, let’s dig in today. We’re doing our predictions episode, which is an episode that we like to have fun with, right? We made some predictions about a year ago, and some of them have nothing to do with entrepreneurship. We had predicts about Google Glass, net neutrality. And so we revisit those and we figure out if we had success or totally whiffed on those. And then we look at some predictions moving forward and what we think is going to happen in 2016. I think we each have one or two that might relate to bootstrapping, and then others that we just see in the greater tech space. So why don’t you kick us off with maybe looking back at some of your predictions from 2015?
Mike [10:37]: So the first one I had was that net neutrality is going to take a bigger stage. And the thinking I had behind that was that Netflix had started paying service providers for higher bandwidth to serve up a lot of their content. And internet speeds, in general, have increased by 50% since the beginning of last year. So what I was thinking was that this was going to be essentially a problem for many businesses where they were going to feel that they needed to pay for their content to be served up. And I don’t think that this has really come true. I haven’t seen a lot of battles or a lot of public discussion about people having to pay extra for their content to be served up. And it could just be that Netflix is so large and serves up so much bandwidth worth of content every single night that they’re more of an outlier than anything else.
What I have seen though is an interesting shift in how a lot of the content providers have started to go direct to people. So I think it’s interesting that companies like HBO and Starz and Showtime have started coming out with their own subscription services that essentially bypass the cable networks. So I don’t think that those directly affects net neutrality. I would probably call this one a miss more than anything else, but it’s interesting to see the shift for the content providers to go direct to the consumers rather than directly through cable providers.
Rob [11:55]: Yeah, I’d agree with you on this one. I don’t think you hit the nail on the head, but there’s definitely something cooking there where we’re going to continue to see shifts and conflicts in this space. My first prediction for 2015 was that Twitter would become profitable and it would piss off its users in the process, but it would be a solid opportunity for paid placement or promotion for bootstrappers and startups. And I think that I was wrong on the first two aspects because as far as I know, Twitter was not profitable during any quarter in the previous year. They obviously haven’t recorded Q4 earnings, but in Q3, they were still losing money. I don’t feel like they pissed off their users in the process of not becoming profitable. What I was trying to imply there was that they would become profitable but they would have to just stuff so many ads down our throats that there’d be a backlash. That didn’t happen. Solid opportunity for paid placement and promotion, I do think that one is correct and that Twitter cards and other Twitter paid placement is still a viable alternative, even heading into 2016, to get some cheap clicks.
Mike [12:53]: My second prediction was that the number of startups in the wearables category is going to skyrocket, both in terms of the hardware and software. And I hesitate to say that this was a complete failure or a complete success in either way. It just doesn’t seem to me like there’s been a huge number of startups in this area. Obviously Apple came into this space with the Apple Watch, and Fitbit and a couple of other companies have started pushing their wearables, but it doesn’t seem like the number has skyrocketed. I was thinking it would have much more of an impact than it probably has.
Rob [13:26]: Yeah. I think there hasn’t been enough of a ecosystem around it since the Apple Watch. It didn’t “take off.” I know a lot of people bought it, but it really has not become a day-to-day use thing. I don’t think I’ve seen anybody in a while wearing an Apple Watch, maybe one or two people at a tech conference or something. But it hasn’t become a day-to-day thing like an iPod or an iPhone did that I think the wearables category is either still getting going or it’s dying at this point, and I’m not sure which. I think eventually wearables will find out which form factors work for us, but 2015 was not the year of that, for sure.
Mike [13:59]: Yeah, I have seen a couple of people use them, but I think it’s going to be probably several years before companies really figure out what people even really want from a wearable device.
Rob [14:08]: Yeah, and that’s what we were saying back in 2013. So my second prediction was that video ads, namely YouTube ads, would be a big opportunity for cheap clicks in 2015. And I think this one was a success. I don’t know how bold of a prediction it actually was. I guess the way they could have not been an opportunity for cheap clicks is if a lot of advertisers had jumped in on it and, to be honest, that’s what’s happened with Facebook ads now, right? Facebook is a lot more competitive. They’ve nailed mobile and they’re making buckets of money off of their ad platform. And typically when the provider’s making buckets of money, like a Facebook or a Google, that means it’s not a good opportunity for cheap clicks anymore.
And so that could have feasibly happened with YouTube in 2015. It did not. It is still a big opportunity for both retargeting and just cheap ad clicks in general, if you can figure it out how to make it work and reach your audience. If you haven’t looked into it and you are looking for another paid marketing avenue, YouTube ads continue to be there.
Mike [15:02]: My third prediction was that Google is going to screw all the bootstrap startups and there’s very little we can do about it. And I don’t think that there was any large event that comes to mind in terms of Google making our lives difficult. Obviously they make changes to the UI in some of their different applications and stuff like that, and the cost of doing paid advertising through Google AdWords is really high. But it doesn’t seem to me like there was any one major event that you could point to and say, “Hey, these guys have really screwed over a bunch of people.” I would chalk this up to an inaccurate prediction.
Rob [15:33]: My third prediction was that VR, Virtual Reality, would actually be a hit with the early adopters set in 2015, and that did not come true. I know that a couple of headsets came out. It does not seem, even with the early adopters, to have taken off in any way, shape, or form.
Mike [15:49]: My next prediction was that Google Glass isn’t going to go anywhere fast. And I would say that this one, it’s hard for me to judge on whether or not this prediction is successful because I have not seen very much uptake and people using Google Glass. But just a couple of days ago, Google came out and said, “Hey, we’ve got another version of Google Glass coming out.” I really thought that they were probably going to be shutting it down. But I just don’t see any demand for it. I don’t think that people are going to use it in a widespread fashion. I can definitely see places where people would use it in very specific scenarios, but I just don’t see it becoming widely adopted.
Rob [16:23]: Yeah, it was an experimental form factor and they were pushing the envelope. It didn’t take off. They obviously sold their early $1500 versions. They’ve redoubled, and they’re iterating on a hardware schedule, right? You can’t iterate as fast with hardware as you can with software. I think it will find some niches and it will be really worthwhile for whatever, airplane mechanics or surgeons or something. But I don’t see that this will have mass market adoption. I would agree that if you look back a year ago, we didn’t know if Google Glass was going to take off or if they were going to do an actual consumer version. So I think your prediction came true. The fact that nothing really happened with it is what happened in 2015.
My next prediction is that we would see our first sub-$100-a-year, consumer-level, five-terabyte cloud storage service. And I think the week after I said this, someone said that Microsoft was already offering unlimited cloud storage. And then within the past month, they actually revoked that. I don’t know if you heard about that, but they basically said, “We’re not going to do unlimited anymore.” And they backed it way off to a couple of terabytes, I guess. So I’m not sure if this has happened. I was trying to Google around a little bit before this episode and I didn’t particularly come across a mass-market, five-terabyte, sub-$100-a-year service. Certainly, if it didn’t happen this year, I think it’s going to happen in 2016. But maybe if someone out there knows of a reputable service that’s not some fly-by-night thing in someone’s garage that is actually offering this level of storage for that price, you could hit us up in the comments or via e-mail at firstname.lastname@example.org.
Mike [17:49]: Yeah, it’s interesting because I’ve looked around at that a little bit as well, and you see places where they’re doing unlimited backups for $5 a month for Backblaze and a couple of other service, but that is more of an archiving service. It’s not necessarily real-time like Dropbox, where even Dropbox is what, $15 a month or something like that. You can get a terabyte, but you can’t get five yet. But I think you’re right though. I think that it’s coming.
My last prediction was that cloud platforms and services are going to be viewed as a commodity by the end of the year, with not much differentiation between them other than their brand identity. And I have gone through and poked around the differences between Amazon, like the AWS services, Azure, and Rackspace. And quite frankly, there is very little to differentiate them from one another. They’re all trying to point to Gartner or third-party companies that are doing experiments and research on the platforms to try and find out which one is the fastest and which one is the best. And of course they’re paying these companies to do that research. So it does make it a little bit suspect when they come back and say, “Oh, sure. Microsoft paid us, but we did find that they were faster.” But I don’t see very much difference between any of these different platforms. I just don’t see it. So I would say that this one’s a win.
Rob [18:59]: My last prediction for last year was that we would start seeing 3-D printers in the houses of our early adopter friends and I would call this a miss. I know very few people who have 3-D printers in their homes. I’ve seen them start to get into schools. Several of the schools in our area have them, seeing them more and more in local labs and makerspaces, also saw them for sale at Barnes and Noble the other day. There was a 3-D printer there, which was surprising. But being in the home thing, it just doesn’t seem to be there, and I’m wondering if it’s ever going to have that moment that computers had where suddenly we all owned one, or if 3-D printers are going to continue to be this external service that we see at schools and maybe in offices and facilities that need to print and we’re all just going to do it on-demand instead of owning and maintaining our own 3-D printers.
Are you ready to dive into our predictions for 2016?
Mike [19:46]: Yeah, absolutely. Let’s go.
Rob [19:47]: Why don’t you kick us off?
Mike [19:48]: Well, the first one is an add-on to last year and it’s about the wearables category. And I don’t see this going too far. I think that there’s still going to be a lot of churning in the wearables category and it’s going to be several years before any of these devices become really big. I think that the Apple Watch is not going to be nearly as big as the iPhone or the iPod ever turned out to be. So I think that Apple is, in the coming years, going to be looking to see what other products they can develop. And maybe they’ll launch a new product by the end of the year. I don’t necessarily think that’s the case, but at the same time, the general prediction here is that over the course of the coming year, we’re probably not going to see a lot out of this category. There’s going to be some new announcements here and there, but there’s not going to be anything major that comes out of it.
Rob [20:30]: Ooh, I like this prediction because it feels pretty bold. Because I think we’re ripe for someone to come in and really nail this. And it is most likely going to be Apple with like a V2 of the watch, because that’s when they start getting traction with stuff, but I think somebody’s out there really doing some good work, and there’s a decent chance that we could see someone disrupt this category this year.
Mike [20:48]: Got you. Well, I’ll take the opposed view on that and say, “Not this year.”
Rob [20:51]: Yeah, totally. Well, that’s why I like the prediction, right? That it’s actually bold, and maybe a little bit counter to what I think some other folks might think. My first prediction is that single-round bootstrapping, also known as fundstrapping, will become a common, viable option, both in our circles and elsewhere. I’m just hearing more and more about bootstrappers who are getting to a little bit of traction, let’s say between 5 and 20K MRR, and then raising around to just up the game to grow pretty quick, and then to get to profitability and essentially issue dividends to the investors and then spit off cash, instead of doing these multiple rounds of financing where you’re just trying to get bigger and bigger and bigger, and eventually most of them implode.
And so whether you call it fundstrapping or single-round bootstrapping, this is a term I’m tossing around right now, I am seeing more of it, and my hope is that it does continue to become a pretty viable option in 2016. The reason I like this model is because it counteracts all of the negatives of raising traditional VC funding, right? The thing of someone taking over your board and taking control is gone because there’s no board seats. The idea that you’re pushed to get just get bigger and bigger and bigger and basically destroy a company that could be viable as a million-dollar or five-million-dollar company is gone because that’s not what you’re doing. It also gets around the idea of “I’m going to build slide decks instead of build businesses, and I’m going to spend six months pitching and trying to raise this $2 million thing. And that’s the big victory lap is when I raise the funding.” That goes away because let’s say you’ve already built the business up to a 5 to 20K MRR business, which means you’ve actually done something interesting and you’ve had the rubber meet the road, and then you’re purely raising the fundraising as a growth mechanism, which is always the point where I have thought that funding is a good idea. It’s when you have some traction and you just need to add $1 in order to pull $5 out the other side.
So all that to say I still think bootstrapping is very, very much alive and it’s going to be far more common. But this idea of a [?] raising a single round, single-round bootstrapping as I’m looking at it now I think is something that I’d like to see more of in 2016.
Mike [22:51]: Are there any other specific metrics you’re pointing at for here or you’re looking at for specific websites where there are terms sheets for this type of thing commonly available?
Rob [23:00]: Yeah, I see your point. It’s like, “How do you measure this?” right? Because I basically said it will be a common/viable option. What we’ve already seen in 2015 is Indie.vc has basically an outstanding offer on their website to do this. I have heard David Hauser was on Rocketrip podcast a few weeks ago talking about this kind of stuff, although he’s investing at a higher MRR. I’m doing it. I’ve talked to a couple of other successful folks, who, if I’d mention their name, you would know who they are, and they’re looking to invest in startups like this. Because the interesting thing is these kinds of startups have a huge chance of success, but it’s more of a modest chance of success. So it’s a lower risk than investing in the next Twitter or Facebook, and there’s a lower rate of return as well, right? You’re not going to 10X your money with this. You’re not going to 100X your investment. But you stand a much, much better chance of hey, maybe you earn 10%, 20%, 30% on your money every year as this thing spits off dividends. And so I do see people moving into it. I don’t know that I have an absolute metric of what I think we could measure this by, but it’s just something that I think’s going to become more prominent in 2016.
Mike [24:04]: Yeah, that leads into my next prediction, which is I think that we’re going to see a lot more bootstrappers in our circles concentrating less on making money for the sake of making money and focusing more on doing what they enjoy doing and living their lives on their own terms. And essentially what that amounts to is a less of an emphasis on consumerism and accumulating stuff. Because I think you get to a certain point in your life or your career, and you look at it and you say, “Having the big house or the big mansion on the hill doesn’t really matter so much as the things that you’re doing and the things that you find enjoyable on a regular basis.” And this is another one of those things where I think it’s difficult to measure, but I feel like we’re going to hear a lot more stories about this kind of thing.
Rob [24:43]: My second prediction is that Twitter will become less relevant than it is today. It will return more back to its roots where a lot of journalists are using it, news continues to spread on Twitter and the technorati will use it. But the adoption curve for Twitter I actually think is going to be on the decline. I think it’s going to be ripe for an acquisition. It’s still has been unable to turn a profit. It’s been unable to monetize it’s user base, and it just can’t do that forever. And I think 2016 will spell some changes for it. I still think Twitter is a reasonable communication tool, but it’s definitely a lot different than it was a year or two ago. And unless Jack is able to get in and really turn things around, I think they’re looking to be on the decline in 2016.
Mike [25:25]: My next prediction is that we’re going to see fewer IPOs and more acquisitions in the tech space, especially at the higher end. And the reason I think that is because from the so-called unicorn companies, there’s a lot more of them now than there used to be, the ones that that are valued at a billion dollars or more. And I don’t see a lot of these companies doing anything dramatic or really innovating in their spaces. I think that they’re going to hunker down. And they may run some experiments here and there, but it also feels to me like their main growth strategy is going to be through acquisitions and acqui-hires rather than building their own stuff and extending their reach. And as a result, I think that we’re going to see fewer of these companies actually go through an IPO, and we’re going to see more of them eating each other alive.
Rob [26:09]: That’s interesting. That ties into my third prediction, which is that the public markets will continue to value companies lower than the private markets. This has already started in 2015 where companies being privately held as they raise rounds of funding, they’ll be valued at a certain level, and then they go public and their stock actually drops when they go public. And this was the exact opposite 15 years ago, right? That was the liquidity event and the big payday when everyone doubled their money from the most recent private round. And it’s been the opposite a number of times in 2015. And this ties in with what you’re saying, that unicorns are starting to stagnate.
A lot of them don’t have unit economics that actually make sense. They have literally been paying a dollar to make 50 cents. And they keep saying, “We’re going to make it up in volume.” And certain business models, like in Amazon, you can do that with, but several of these unicorns have forsaken any type of not even just profit, but any type of unit economics that make sense. And so I think we’re going to see some fallout from that, as you predicted, and I think that’s going to continue to result in these public market valuations being lower than private markets, which is going to keep a lot of people private longer, resulting in fewer IPOs.
Mike [27:13]: Yeah, it almost seems to me like the fact that they’re paying more to acquire a customer than they’re making from the customer, it’s not even just that they’re doing that. It’s just that they’re also not maintaining those people as customers moving forward. So you had said that oh well, companies like Amazon can do that and make it up on volume. And I think what you really mean is that because somebody uses Amazon, they’re so happy with it, they will continue to be a long-term customer for it. So depending on how you’re going to measure the cost of acquisition for that customer, maybe it is a dollar and you only make 50 cents from the customer, but over the course of the long term, you’re going to be a Amazon customer for a long time. I looked on my account, and I think I have been an Amazon customer for almost 15 years now. I’ve spent easily tens of thousands of dollars with them. And they’re able to do that. But I think a lot of these companies are just not getting people to come back because it’s interesting for people to check them out. But after that, they have no real reason to come back and buy a lot of other stuff from them.
My last prediction is that drone technology’s going to take some serious step forward. And I base this on the idea that new FAA Regulations that have come out that essentially force people to register any drones that are over eight ounces, and I think it’s about 250 grams or so. And there are a lot of drones that fall into that particular category, but because of that lower weight limit that says, “Hey, anything underneath this limit, you don’t need to register,” I think that there’s going to be a lot of technology advances in the space that make it feasible to have drones that are very small, or I’ll say featherweight or ultra-light or whatever the term is, that they’re going to be using for that these days. But I think that you’re going to see a lot of advancements in the size of the components and the weight reduction and things like that to essentially circumvent the FAA Regulations for registration.
Rob [28:58]: And my fourth and final prediction for 2016 is that virtual reality will actually be a hit this year with the early adopter sets. So this is just carrying last year’s forward. I think this thing’s going to catch. I think VR and AR really have a future. And I hope it doesn’t turn into an AI thing where 10 years down the line, I’m still making the same prediction. But I feel like with the release of the Oculus, which is supposed to happen, what, here in Q1 of 2016, that we’re going to start seeing something catch on because [?], the Internet of Things, wearables, and VR, right? These are the next big things. One of these has to catch.
Mike [29:30]: I think I heard a podcast episode from, was it the Daily Tech News Show, where they talk a little bit about some of these different things. And especially with the VR headsets and things like that, there are certain things that almost need to be in place in order for it to catch on. Like the early days of the internet, you need to be able to buy stuff and you need to be able to not take the headset off in order to interact with the world around you. And if there’s any sort of pay walls inside of a virtual reality system that you have to leave that frame of reference, it’s going to make it difficult for it to catch on.
Rob [030:02]: So those are our predictions for 2016. It’s our last episode of the year, and we will see you in early January. If you have a question for us, call our voicemail at 888-801-9690, or e-mail us at email@example.com. Our theme music is an excerpt from We’re Outta Control by MoOt. It’s used under Creative Commons. Subscribe to us on iTunes by searching for “startups,” and visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening and we’ll see you next time.