With the economy cooling, the current market provides a hospitable environment for entrepreneurs who want to create new companies. I’m sure you’ve heard many times that Uber, Airbnb, and other great companies were created during the Great Financial Crisis. Now we find ourselves in a very similar environment, and we are eager to identify the next companies that will define the coming generation. Company creation funds and venture studios are uniquely positioned to create the next big category game-changers, but they have a daunting task of coming up with new ideas that are commercially viable and solve big pain points. Part of this is separating innovation from “incrementalism.”
Innovation solves a major pain point within a particular category. Sometimes this pain point is well known, but previously unsolvable. Sometimes this pain point is just under the surface and becomes more obvious when the solution is provided.
Incrementalism occurs when the problem has already been solved and multiple entrants try and offer their take on the solution. Hot categories tend to drive a lot of entrants and money into a market, but often don’t generate big, sustainable companies when the category starts to cool. Some examples of categories where we see more incrementalism than innovation are:
- Personalized consumer products (shampoo, vitamins, skin care)
- Small business POS systems
- Tech-enabled real estate brokerage
- Online weight loss
- Online ticket sales
- Tokenized gaming
- Apps of any kind, but especially travel and media
- Pet food
- Food subscription services
Innovation, on the other hand, creates such strong differentiation and uniqueness from current available solutions that it generates organic demand or uncovers latent demand. Areas where major innovation is still occuring include:
- Biotech and therapeutics
- Connecting traditional finance to decentralized finance and blockchains
- Fintech generally
- Food production
- Climate change and carbon capture
- Cybersecurity
At Vault, we are focused on high quality innovation and are averse to incrementalism. Studios are positioned to be innovation machines because they have the resources, talent, data and experience all in one place. They can respond and adapt quickly – capitalizing on new category shifting solutions and quickly pivoting away from incremental offerings that aren’t performing. We’re confident the next big world-changing companies will come from studios.
