Today’s Startups Aren’t Just Building Tech to Sell to Other Industries

October 3, 2016, 6:10 PM UTC
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Photograph by Thomas Barwick via Getty Images

A version of this post titled “Today’s startups are playing in the big leagues” originally appeared in the Startup Sunday edition of Data Sheet, Fortune’s daily tech newsletter.

If you think that tech startups have grown beyond their historical confines of enterprise software and computer hardware, you’re right.

Indeed, today’s new startups are not just building tech products to sell to other businesses or selling ads as the industry did for a long time. They’re taking on transportation, lodging, and much more.

“A lot of the best new companies in the last five or 10 years are companies that directly enter markets—incumbent markets—in other industries,” famed investor Marc Andreessen said on Thursday at an event in Palo Alto, Calif. Ride-hailing companies Uber and Lyft, for example, are taking on the transportation industry, while home-sharing service Airbnb is taking on the hospitality industry and fintech startups are trying to replace traditional financial and banking services.

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Take Airbnb, for example, which has built a home-sharing marketplace that directly provides lodging to customers and competes against hotels. This phenomenon, Andreessen points out, is different from tech’s previous relationship with other industries. (Andreessen’s VC firm invested in Airbnb.)

“Ten years ago, the predecessor to Airbnb was not a failed version of that,” he said, but rather “a small boutique software company that sold booking software for small hotel chains.”

Of course, some of these companies made a good business from selling software and services to the real challengers, but they were also limited by the size of their market. There are only so many boutique hotels to sell software to, he said.

Airbnb, on the other hand, as well as Uber, Lyft, and several others, have the opportunity to grow much larger because they can deal directly with the end customers.

Of course, doing business in large existing industries also means there’s an existing body of regulations, something companies like Uber, Lyft, and Airbnb haven’t particularly enjoyed or done at times. But the cost may be worth the opportunity of playing in these big leagues.

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