When Congress called in tech CEOs to testify a few weeks ago, it felt like a defining moment. Hundreds of startups have become unicorns, with the largest worth more than $1 trillion (or perhaps $2 trillion). Indeed, modern tech companies have become so entrenched, Facebook is the only one of the Big Five American tech shops worth less than 13 figures.
The titanic valuations of many companies are predicated on current performance, cash on hand and lofty expectations for future growth. The pandemic has done little to stem Big Tech’s forward march and many startups have seen growth rates accelerate as other sectors rushed to support a suddenly remote workforce.
But inside tech’s current moment in the sun is a concern that Congress worked to highlight: Are these firms behaving anti-competitively?
By now you’ve heard the arguments concerning why Big Tech may be too big, but there’s a neat second story that we, the Equity crew, have been chatting about: Some startups are racing into the big kill zone.
They have to be a bit foolhardy to take on Google Gmail and Search, Amazon’s e-commerce platform or Apple’s App Store. Yet, there are startups targeting all of these categories and more, some flush with VC funding from investors who are eager to take a swing at tech’s biggest players
If the little companies manage to carve material market share for themselves, arguments that Big Tech was just too big to kill — let alone fail — will dissolve. But today, their incumbency is a reality and these startups are merely bold.
Still, when we look at the work being done, there are enough companies staring down the most valuable companies in American history (on an unadjusted basis) that we had to shout them out. Say hello to the “anti-antitrust club.”
Hey and Superhuman are coming after Gmail
Gmail has been the undisputed leader in consumer email for years (if not enterprise email, where Microsoft has massive inroads due to Exchange and Outlook). Startups have contested that market, including Mailbox, which sold to Dropbox for about $100 million back in 2013, but whenever a new feature came along that might entice users, Gmail managed to suck it up into its app.
Now, two new entrants have joined the market, shaking up this core communications messenger.
The most recent is Hey, Basecamp’s subscription service, an improved experience that’s based on how users actually use email. There’s sophisticated prioritization and a whitelisting feature that allows users to control who emails them and when.
While Basecamp is targeting Gmail implicitly, it also is getting hit by Apple, which declined to approve any updates or bug fixes in Hey’s iOS app until Basecamp allowed users to subscribe in-app to the $99-a-year service — a move that would give Apple a cut of the pie.
Basecamp co-founder and CTO David Heinemeier Hansson responded to Apple’s decision with outrage, citing antitrust laws and appealing to the iOS developer community. Ultimately, the two parties came to a compromise that allowed Hey back on the App Store, but that bout portended a war that has only intensified in recent weeks with the fight between Apple and Epic Games over Fortnite.
Email startup Superhuman is also subscription-based, charging $30 a month for an ultrafast client with keyboard shortcuts, a great onboarding experience and a bevy of small features that make email more delightful.
While those startups take on consumer email, others are rethinking what enterprise email could look like. Front, which raised $59 million earlier this year, is designed to allow teams to collaborate around shared email inboxes, which optimize workflows for customer service managers. It’s not a replacement for Exchange or Outlook, but it definitely is a novel approach that’s invigorating email and forcing incumbents to adapt to new ideas.
Stop Skyping and Meeting me
Zoom’s dominance over video conferencing has allowed the company to become a verb, a metric of success that only a few companies get to own (Google, Uber, to name a few).
But it too was once an underdog in a world dominated by Microsoft’s Skype, Cisco Webex, BlueJeans (now owned by TechCrunch’s parent company Verizon) and Google Hangouts. The enterprise product rose to prominence for a number of reasons: It’s simpler to use, has lower barriers to entries and other apps have stagnated.
Whereby, a video-conferencing platform that works straight from a user’s browser, looks similar to Zoom in that it relies on an access link, lets users chat and send reactions in-call and easily integrates with Google Calendar and Outlook Calendar. The difference in the startup is that it is focused closely on small- and medium-sized businesses, emphasizing collaboration views and tools.
On the opposite side of the spectrum lives Talky, a video chat platform that emphasizes communication between small groups. Users don’t need to download, pay or sign up for anything to use the app. It emphasizes security and encryption, an area where Zoom has struggled.
There’s also a layer of tools that are growing atop these video-conferencing platforms, which is an entirely separate bucket altogether. Instead of competing with the incumbents, they’re trying to cash in on the popularity.
For example, mmhmm got buzz in July for its creative demo that lets users create a broadcast-style video-conferencing experience atop their videoconferencing platform of choice.
But last week, somewhat predictably, Zoom launched a competing feature that calls into question whether the startups that layer atop incumbents look more like features instead of full-fledged platforms.
Is Google Search’s dominance coming to a close?
Have you used Google Search lately? It’s honestly not great, either on mobile or desktop. Once upon a time, search results felt like sorcery, but today, the experience feels more like a late-’90s browser designed by MBAs who never saw an organic result that they couldn’t monetize, or a terrible widget that finds something “related” to the initial search query.
Here’s something related: If we wanted to search for something else, we would have.
But the good news is that there are some startups out there gunning straight for Google, which has our hopes up. Perhaps these companies can crack Mountain View’s lasso around the neck of the global (sans China) search market.
Two come to mind, one of which you already know — DuckDuckGo (DDG) is probably a search engine you’ve tried before, but it’s worth checking out again to see the progress it has made.
DDG is well-tuned to the times. It has a privacy focus and a Chrome plugin designed to help keep users secure from online trackers. Meanwhile, Google is part of the adtech world, setting it firmly apart. Is that different enough to matter? A few years back we would have said “no,” but perhaps in 2020, it has more in-market resonance.
From a venture perspective, DuckDuckGo is a quiet story, having not raised new capital that we are aware of since its 2018 round when it stacked around $10 million from OMERS Ventures. That’s somewhat boring, but what isn’t is that DuckDuckGo has made pretty impressive progress in terms of its in-market presence. It’s not challenging the mighty Google or Microsoft’s Bing (at least not yet), but it has still managed to grow in size enough that Alexa now ranks DDG as the 171th largest website, ranked by engagement.
And then there’s Neeva, which, so far as we can tell, is a skinned version of Bing. Normally we’d not care much about the idea, but given that an ex-Googler, Sridhar Ramaswamy, is in charge of the project, we have no choice but to care at least some.
Even better, he didn’t like the changes that Google was making to search and he worked on the ad side and got tired of it, according to a New York Times profile. Perfect. Neeva will use Bing and other data sources and link to your own stuff, so it will be something of a hybrid web-search tool and personal searcher. Which sounds super cool and we are willing to try it when it is ready.
How much is that worth, per month? Some, we reckon. Hopefully enough for Neeva to stay afloat next to the mighty S.S. Google. Neeva is backed by nearly $40 million from some of Silicon Valley’s most famous VCs. Let’s see.
We’d be remiss not to look on the enterprise side of the search equation here. Elastic has made a huge business out of building out customizable search functionality for enterprises. Today, what began as a cleaner version of the Apache Lucene project has since expanded to a multilayered set of tools designed to help companies collect, index and display their data. The company went public in 2018 and now has about a $9 billion market cap. Not bad, if nowhere near Google or Microsoft so far.
We’re just browsing
Finally, there are a few incumbent products more important than browsers, where Google Chrome, Microsoft Edge on Windows and Apple’s Safari still dominate the install base of all users nearly globally. Yet, the news has been sour. Last week, Mozilla, the organization behind Firefox, announced a second set of layoffs and threw into doubt the long-term survival of that browser.
On the positive side, there are a number of new initiatives to rebuild browsers today that could have a huge impact on the market in the coming years.
First up is The Browser Company, which quietly raised a $5 million seed round. It has been vague about exactly what it intends to do. Currently, the project uses Chromium, an open-source version of Chrome, to offer users a more deliberate interface to use the web.
From there, you get to one of the bigger and louder bets on the space with Brave, which has attempted not just to pioneer a new browser, but also a new economy for the internet around its crypto-oriented Brave Attention Token. It wants to migrate ad-driven publishing to a model where users pay content creators directly. The project was co-founded by JavaScript inventor Brendan Eich.
Finally, there is a whole world outside the United States and Europe. While much of the world relies on the same browsers, the heavy reliance on mobile devices in developing countries has opened up opportunities to compete with incumbents. One of the most notable examples here is UC Browser, which is ultimately owned by Big Tech company Alibaba. StatCounter places its market share for mobile around 5%.
Can the anti-antitrust club thrive?
Big Tech companies are big precisely because they own some of the most profitable markets available. Search, email, browsers, video conferencing — these are just a few of the valuable territories companies like Google, Microsoft, Apple and others have accrued. We didn’t even get to messengers, cloud infrastructure or e-commerce.
For years, founders, product builders and VCs shied away from these markets given the uphill spring any new entrant faces: It’s hard to break into a sector when your competitors literally have infinite resources. Nonetheless, the anti-antitrust club shows that more people are willing to throw caution to the wind and go after these core segments with gusto.
Will they succeed? Hopefully. Will the government still need to do some trustbusting in order to open the field to competitors. Possibly. But we’re heartened that so many people are now finally trying to improve our daily existence in the most important tools on our Docks and Task Managers. If these bets succeed, they are going to be huge.