STARTUPS
DISPROPRTIONATELY CREATE APPS FOR THE YOUNG AND WELL-OFF... AND THEY'RE MISSING
OUT ON PROFITS AND INNOVATION BY IGNORING OTHER GROUPS
If you're young and poor in America, odds are you use a
smartphone. Back in 2010, Nielsen found that the majority of
Americans 34 and under who made less than $35,000 owned smartphones.
These smartphones, it turns out, are also the main way many users access the
Internet. But despite the fact that tens of millions of American
Android and iPhone owners are struggling to make ends meet--and that there are
even more who are senior citizens, who live in rural areas, lack college or
high school degrees, or are financially
excluded--startups disproportionately target the young,
suburban/urban, and middle-to-upper-class. Because of that, the technology
world is missing out on a lot of innovation--and, even more importantly to the
companies behind technology, missing out on potential profits.
In May, George Packer wrote in The New
Yorker about Silicon
Valley's class dividesand
the strange echo loops created by the young, driven, and geeky creating apps
mostly for the young, driven, and geeky. As Packer put it, “It suddenly
occurred to me that the hottest tech startups are solving all the problems of
being 20 years old, with cash on hand, because that’s who thinks them up.”
Packer was onto something.
That “something” is the fact that startup
founders are missing out on great ideas because they mainly create apps for
people like themselves. That “something” is also the fact that startup culture
lacks diversity in terms of economic background, race, gender, and age. The
solution to this is simple: More techies and investors from different
backgrounds are sorely needed. They aren't needed for the sake of P.C.
inclusiveness; they're needed because the market demands their products.
THE YOUNG AND
WEALTHY FEEDBACK LOOP
Uber and Seamless are
rightfully popular consumer-facing service firms (Disclosure: The author is a
former employee of Menupages.com, which is now owned by Seamless). But both of
these companies exist to take care of affluent (or
on-their-way-to-being-affluent) people's needs. Want to hail a limo in the
city? Want to order sushi instead of ordering Domino's? Those apps are there
for you. Thousands upon thousands of other apps and startups, many of which
have been written about by this very magazine, all exist to target that same
demographic. While that's not necessarily a bad thing--you can't fault
entrepreneurs for targeting an affluent audience, after all--it a surprise
that, just like Packer said, the hottest startups all tackle only the problems
of people the same age and class as startup founders.
Apparently, that's true even if startup
founders don't necessarily happen to be young. Jeff Makowka, a senior strategic
advisor for the AARP,
told me that Silicon Valley has an insular investment culture where startup
founders feel their products will only be funded if they're “young and
cool," meaning both the product and its founders. Makowka also sees a
divide between tech-sector startups: Big data and biotech firms' leadership
tends to skew older, while consumer-facing tech firm leadership skews younger.
Mobile is the fastest-growing segment of the tech market, but
mobile startups tend to avoid making products aimed at 65+ users. Makowka notes
a solid financial reason for this: Seniors have low smartphone ownership rates
compared to other demographics. In addition, many newly launched apps are buggy
and need their kinks worked out. There's a conception, right or wrong, that
older users who aren't longtime tech geeks may become more frustrated with apps
that aren't ready for prime time and move on quickly.
With that said, there has been some success
in creating explicitly senior-oriented products. Gerijoy is an iPad/Android tablet product
produced by an MIT spin-off which provides a talking animal avatar companion
for adults with mild dementia; the talking pet has Siri-like features (such as
displaying pictures and sending emails) and also keeps loved ones apprised of
their health. In the most interesting twist, Gerijoy's virtual pets are
monitored in real time by company employees who help create appropriate
responses in a bid to mimic a real robotic pet. Another firm working in this category
is GreatCall, makers of the
ubiquitous Jitterburg phone; the company created a series of HIPAA-compliant mobile apps aimed explicitly at seniors.
But, as Makowka notes, the apps he has seen
seniors adopt the most have been Skype and FaceTime--produced by
megacorporations Apple and Microsoft.
NO BANK ACCOUNT?
NO TECH LOVE FOR YOU
California's PayNearMe is the equivalent of a unicorn: A
successful tech startup serving less-wealthy users. The company creates a
technology backend for in-person cash payment for bills and expenses. Using
PayNearMe's terminals and cards, users--who mostly lack bank accounts and
credit cards--can pay their bills or purchase Greyhound bus tickets in cash at
over 7,000 7-Eleven stores and 1,600 check cashing stores nationwide. Like most
startups serving underbanked populations, PayNearMe comes from corporate
training grounds. CEO Danny Shader led startups later acquired by Amazon and
Motorola; the company's honorary chairman, Bill Campbell, is Intuit's chairman
and former CEO.
Many new technological innovations
targeting the unbanked, such as various debit cards and prepaid payment
products, charge users steep fees that some might call exploitative. To give
just one example, Walmart's popular prepaid MoneyCard is a new tech product that charges
tens of thousands of unbanked users massive fees. Apart from monthly
maintenance fees and fees for every single ATM transaction, customers are
charged $3 every time they recharge their cards at Walmart. How many startups
are missing out on the opportunity to create more financially competitive
products for the unbanked?
In a phone conversation, Shader said there are opportunities for
companies to serve that market, and that services which appeal to the
underbanked can serve other demographics like teenagers and people trying
to avoid the use of conventional credit or debit cards because of account
limits or other restrictions.
It isn't only the unbanked or underbanked
who are ignored by entrepreneurs as potential customers. Despite the fact that
there are 94 million
credit union members in the United States, web and mobile technology
for credit unions lags far, far behind those for commercial banks. Even the
most wired credit union is at least three years behind your average commercial
bank in terms of customer-facing technology. Meanwhile, customers avoid credit
unions--which offer far fewer fees than commercial banks--because credit unions
are difficult to use. That vicious cycle repeats itself over and over again,
and entrepreneurs miss out on a huge potential market.
HOW HUGE TECH
CORPORATIONS BECAME MORE DIVERSE THAN STARTUPS
The entrepreneurial class of startup
creators is disproportionately male and white. Last month at the Personal
Democracy Forum, a tech-and-government conference in New York, I had
the pleasure of seeing Kimberly Bryant speak. Bryant is the founder of Black Girls Code, an organization that provides
STEM educational services to, yes, black girls aged 7-17. In her talk, Bryant
discussed her organization's goal--to teach one million girls to code by 2040.
By email, I asked her about one trend I've seen as a reporter for Fast
Company; that there seemed to be more racial diversity among
engineers, developers, and leadership at large corporations than at startups.
Bryant's response mirrored what I've heard
before; that many of the past companies she worked for, primarily large biotech
firms like Genentech and Merck “had
extensive programs for diversity and inclusion initiatives. I believe most
startup companies are just starting to focus on increasing their workforce
diversity.”
There are structural and economic factors at work here too.
Writing over at the New York Daily News last year, Anjali Mullany (now of Fast
Company) noted that there are very
few black VCs, for instance--which can cause obstacles in the clubby
world of early-stage investment. There's also the fact that, due to these
aforementioned inclusion programs, there are often simply more opportunities to
earn more money and scale the hierarchy at large tech firms rather than small startups.
But Bryant thinks that's a loss for the
startup world. “I do believe that most startups who develop applications and
digital products design "towards the middle." By this, I mean they
design their products to reach the broadest consumer base possible, which is a
sound strategy in some respects. Yet from a strategic standpoint, I believe
that to be truly competitive and industry leaders, tech companies need to
design to reach consumers on the end of the bell curve as well. In many cases
on the front end of this bell curve you may find a diversity of consumers since
African-Americans, women, and people of color have been shown to be early
adopters across multiple technology platforms and social media. If technology
is designed mostly by white males, who make up roughly half our population,
we’re missing out on the innovation, solutions, and creativity that a broader
pool of talent can bring to the table.“
This is a repost of an article
that appeared on http://www.fastcompany.com on
July 18, 2013
No comments:
Post a Comment