In Egyptian mythology there is the concept of Ouroborus, a serpent eating its own tail, signifying that the beginning and end are the same point.
A similar concept is in Mathematics — the Mobius strip, an object with a single side with no beginning and end, a shape that is continuous and infinite.
Both of these showcase how time moves in a circle instead of linearly and how the past is likely to repeat itself.
The real world examples — cycles (economic, business or technological) as distinct waves/loops that repeat over time albeit with some differences, is well known and often used in evaluating businesses.
Let’s take a look at how these cycles in technological development affect businesses and how they can be utilized for investment purposes.
The Cycle of Disruption
Technological advancements follow a predictable cycle:
- Emergence (R&D): A new technology emerges, often facing skepticism and resistance from established players.
- Early Adoption: Early adopters embrace the technology, paving the way for broader acceptance.
- Disruption (Ascent): The technology disrupts existing industries, challenging traditional business models.
- Maturation: The technology becomes mainstream, and its impact is fully realized.
- Decline: Existing technologies either get slightly updated (also-run case) or entirely replaced by newer products (decline case)
The Ripple Effect
Technology’s cyclical nature creates ripple effects across industries. Take the case of computers — from static tube based machines to transistor based mainframe computers to personal desktop computers to portable laptops and now to mobile phones.
Innovation in technology in terms of processing chips, connections and even software helped democratize computer adoption (via personal computing) which then enabled several other products and services to be built on top of it.
Moore’s Law states that a chip’s processing capabilities roughly double every two years.
As the processing power improves we also see a reduction in overall manufacturing costs because of which OEMs can launch affordable versions of existing products that further improve access to technology.
Primebook, one of Auxano’s portfolio companies, in the space of portable laptops, makes affordable laptops for the community across demographics, increasing access to technology for lower income groups.
Evaluating Startups: A Cyclical Lens
Voltaire’s quote “History never repeats itself. Man always does” is a testament to how those who don’t learn from the past are bound to repeat it.
From a VC point of view this translates into applying a cyclical perspective when evaluating startups not just at a macro (industry) level but also at a micro (company) level:
- Timing: Assessing a startup’s timing within the technology cycle is crucial. Early entrants may face higher risks but greater rewards, while late entrants face established competition.
- Scalability: Startups should have the potential to scale and adapt as the technology cycle progresses, ensuring long-term viability.
- Ecosystem: Evaluating the startup’s ecosystem, including partners, suppliers, and customers, is essential for sustained growth.
Navigating the Future
As the cycle continues, new technologies will emerge, and existing ones will evolve or get replaced over time.
It becomes important to recognise where in the stage of development a particular business to get an idea about it’s position in the future.
- Anticipating Trends: VCs must stay attuned to emerging trends, identifying potential disruptors early in the cycle.
- Adaptability: Startups and established companies alike must embrace adaptability, pivoting strategies and business models as cycles shift.
- Continuous Learning: Creating a culture of continuous learning is imperative, as knowledge and skills rapidly become obsolete in the face of technological change.
Embracing the Cyclical Mindset
The cyclical nature of technology underscores the importance of a forward-thinking mindset.
By understanding these cycles, we can make informed investment decisions, while startups can position themselves for long-term success.
Ultimately, those who embrace the cyclical journey will be poised to grow in the shifting landscape of technology.
Takeaway: Technology’s cyclical nature demands a continuous cycle of adaptation, innovation, and growth. Recognizing and navigating these cycles is essential for VCs and startups alike, enabling them to capitalize on emerging opportunities, mitigate risks, and drive sustained success in an ever-changing landscape.
Author
Aditya Golani
