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Which Start-Up Could Be the Next Big Thing?

A test of the Oculus headset, which envelopes the vision of people who wear it in vivid, three-dimensional images, seen on the screen in the background.

When it comes to technology start-ups, there are a lot of paths to success.

Some successful start-ups sell for a billion dollars, as Tumblr did this year to Yahoo. When that happens, it’s a windfall for the founders of the start-ups as well as for the investors and some employees.

Other new companies are considered successful if they attract millions of users and venture money before going public, as Facebook did and Twitter is doing. And still others are considered hot because their products attract demographic groups that advertisers want to reach or because they have come up with some new idea or technology that seems to change the way we live.

About a year ago, right after Instagram was snapped up by Facebook, a few other start-ups seemed poised for some degree of success. Some of them, like Pinterest, Square and Uber, are still thriving, with plenty of users and cash from investors. Others, like Path or Airtime, have lost steam, and users’ attention, and may be on their way to the tech boneyard.

This year, there’s a new class of interesting start-ups to watch. Some are attracting record numbers of new users and significant amounts of venture capital, or appealing to a new and interesting demographic. Some are simply working on a new idea that seems to be taking off. In the unpredictable world of tech start-ups, any of them could fizzle and be forgotten by the end of the year. But they could also be the next big thing.

By JENNA WORTHAM

Published: August 29, 2013

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  Snapchat
  
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  WhatsApp
  
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  Oculus VR
  
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  Wanelo
  
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  Lyft
  
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  MYO
  
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  Braintree
  
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  King
  

1. Snapchat

This mobile application lets people send to their friends, family and crushes text messages and photos that self-destruct after a preset period of time. It sounds like something out of a spy movie, but Snapchat, which was released in late 2011, has caught on as a private messaging application among people who do not want to worry about unflattering photos or silly messages winding up online for others to see. The app is also a lightweight and entertaining way to communicate. Teenagers, in particular, seem to favor the service over traditional text messaging, e-mail and even Facebook messaging.

The company, which has not yet celebrated its second birthday, says it processes 200 million messages each day. That number represents a lot of users.

In June, Snapchat raised a $60 million round of venture financing that pushed the company’s valuation skyward of $800 million. If that seems high, consider that Onavo Insights, a mobile analytics firm, recently reported that Snapchat was used by nearly 20 percent of iPhone owners on a monthly basis, making it one of the most popular applications available on Apple’s mobile operating system. Related story »

58% of Times readers who commented said they were users of Snapchat

Selected Readers’ Perspectives

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  Catherine 24 years old Denver Does use Snapchat
  

Snapchat has made huge strides in terms of shaping culture. But Facebook / other messaging systems could come in and build a competitor easily. Snapchat does not own contact lists or save the images (theoretically). If they don't figure out a way to monetize, they'll sell or die out after running out of funding.

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  Jeff 49 years old California Does not use Snapchat
  

Cool idea but could be easily replaced if any existing chat/photo sharing service includes adds the option to self-destruct messages.

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  Peter 43 years old Berkeley Does not use Snapchat
  

To the extent they can extend their offerings to be a play for simple but secure/controllable communications in general, this has strong potential. That's a mostly unexplored but potentially huge market.

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2. WhatsApp

Paying for text messages is so 2012. As more of our daily interactions migrate to mobile, people are looking for cheap and easy ways to keep in touch, regardless of what device they are using or what country they live in.

WhatsApp is a messaging application that intends to replace the old-time system, known as SMS, and so far, seems to be doing just that. It costs $1 a year, and there is no advertising; it saves costs by forgoing any kind of archive for the messages.

Created by two former Yahoo engineers in 2009, the application is consistently ranked highly in various app stores. In early June, the company that makes it said it processed 27 billion messages in a single day.

With its focus on messaging, the company is clearly on to something: group messaging applications, like Beluga and GroupMe, have already been snapped up by Facebook and Skype, and Google and Apple have recently introduced their own versions of messaging applications. Related story »

53% of Times readers who commented said they were users of WhatsApp

Selected Readers’ Perspectives

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  Lauren Machi 28 years old Sacramento, CA Does not use WhatsApp
  

People don't like having to use a 3-party app for something that should be built into a phone automatically.

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  Mark 52 years old Florida Does use WhatsApp
  

Hopefully, this category of apps will drive carriers to drop fees for SMS on smartphones. I don't see a way to monetize w/o ads, so no revenue. Likely to be acquired by Yahoo, Google, Ffb et al.

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  Susan 49 years old Los Angeles Does use WhatsApp
  

Its strengths lie in (1) enabling seamless communication between iPhone, Android and Blackberry (particularly when sending photos or other attachments by text) and (2) making international texting free, whether to foreign numbers or while travelling overseas. love it.

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3. Oculus VR

The Oculus Rift, a headset that looks like an oversize pair of ski goggles and that immerses the wearer in a virtual reality video game, started as a Kickstarter project to raise a quarter of a million dollars and ended up taking in more than $2 million. In June, the company raised another $16 million in venture financing from Spark Capital and others.

It recently began shipping the first versions of its virtual reality gaming machine to game developers and generated rave reviews at Electronic Entertainment Expo, the annual gaming convention, in June. The device’s technology is still in its early stages — the headset isn’t expected to be released commercially until 2014 — but it could unlock a new generation of gaming and entertainment experiences, one that goes beyond the last big thing in gaming, the gesture controls of the Kinect. Related story »

47% of Times readers who commented said they were users of Oculus VR

Selected Readers’ Perspectives

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  Lucas M. 19 years old Chicago Does not use Oculus VR
  

People have some fun ideas for this, but it still seems a bit too unwieldy to be any other than a stepping stone for more compact powerful VR in the future.

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  Emma 36 years old Grimsby, UK Does use Oculus VR
  

I had a demo on the Oculus Rift at a Con in London recently and was blown away by the immersive experience. It's definitely got potential for the gaming and entertainment industries. I imagine that with more development it could also be used for training purposes for occupations with high hazard risks.

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4. Wanelo

Shopping online replaced shopping at the mall long ago. But unless you know exactly what you are looking for, the abundance of places to shop online can be overwhelming. Wanelo — the name is a combination of want, need, love — offers on one site a collection of stylish goods, selected from shops around the Web. It’s Pinterest but with a business model. The site is one of the first to figure out how to make sense of the riotous selection of goods online and how to profit from them.

Founded in 2010, Wanelo not only has a good idea, it is popular among young women — a group that clothing companies are eager to reach. The site has more than 10 million users, and it recently closed an $11 million round of financing that would push the company’s valuation to $100 million. Related story »

47% of Times readers who commented said they were users of Wanelo

Selected Readers’ Perspectives

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  Jeff 49 years old California Does not use Wanelo
  

I love sites that improve the shopping experience. But once I find what I want, I usually buy it on Amazon.

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  Mary 39 years old San Francisco Does use Wanelo
  

Pinterest is better, easy and has a larger network effect of users. I used Wanelo early-on, but found Pinterest much easier to bookmark and gain inspiration from for clothes, furniture, design, etc.

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5. Lyft

Airbnb transformed the way people thought about the hotel industry by making it easy for people to rent out spare rooms in their homes to adventurous travelers. Ride-sharing services like Sidecar and Lyft hope to do the same for riders and drivers who are looking for ways to supplement public transportation or offer alternatives to expensive private car services like Uber. With the Lyft application, users can request a ride with a tap. Another Lyft user arrives shortly after and drives the passenger to the destination.

Lyft, which was founded in 2007 and is based in San Francisco, seems to have the most momentum of these services, recently landing an additional $60 million in financing, led by Andreessen Horowitz. The company also said it helped with 30,000 rides each week. Although Lyft’s availability is limited to a few cities, the company says it plans to spread across the country by the end of 2014. Related story »

56% of Times readers who commented said they were users of Lyft

Selected Readers’ Perspectives

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  Bill Rosenblatt 51 years old New York Does not use Lyft
  

To me, this sounds like a liability lawsuit waiting to happen. I guess the founders and investors are too young to remember why virtually no one hitchhikes anymore.

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  Sarah 22 years old San Francisco Does use Lyft
  

Lyft and Sidecar are the future in big cities. They are faster, cheaper, cleaner, and more reliable than taxis. The taxi companies will fight back but the flow of money from consumers in San Francisco right now is clear: Sidecar and Lyft are all around better.

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  Katherine 24 years old San Francisco, CA Does use Lyft
  

Lyft has been a godsend. In a city where cabs are often scarcest when you most need them and unfriendly, Lyft is a convenient, community building app that has brought affordability and fun back to cab rides.

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6. MYO

How will we interact with technology in the future — or to put this in tech speak, what will the interface of the future look like?

Apple and Google are experimenting with letting users control their phones and tablets with voice commands, while Microsoft Xbox is perfecting the 3-dimensional scanning software in the Kinect that lets players control video games by moving their arms and hands. But a start-up created in May 2012 in Waterloo, Canada, says its armband, which detects motions and muscle activity produced in the wearer’s arm and translates them to gestures on a screen, will be the real revolution in how we control our computers and other personal devices.

The company is working to develop ways to browse the Web, play games and interact in other ways online with the MYO armbands. It says it plans to start shipping to consumers in early 2014.

MYO is small — it was started by three engineers — but it has already raised close to $15 million from some notable venture capitalists and taken more than 30,000 preorders for its cutting-edge hardware.

6% of Times readers who commented said they were users of MYO

Selected Readers’ Perspectives

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  Amal 30 years old SF Does not use MYO
  

A possible godsend for the fully and partially disabled. 10/10

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  Austin 21 years old Missouri Does not use MYO
  

Voice and gesture recognition software have both had a hard time gaining ground while they're so unreliable. An armband seems like a natural and non-intrusive piece of hardware to incorporate in the process if it means greater precision.

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  Rajesh 40 years old Washington DC Does not use MYO
  

The idea is much more interesting and may span out new apps and products. Maybe not a disruptive technology but certainly has a huge potential in how UI will be perceived in future.

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7. Braintree

Online and mobile commerce is a muddled and crowded business, full of dozens of upstarts vying to be the next PayPal. But one company, Braintree, which provides the technology to process payments on the Web and on mobile devices, is quietly building an impressive list of clients — Rovio, Uber, OpenTable, Fab, Airbnb, TaskRabbit, Heroku and others — which give it a boost of credibility.

Braintree, based in Chicago, was started in 2007, but the company is picking up momentum. It recently acquired Venmo, an application that lets people pay each other through text message, and partnered with Simple, a banking start-up, to make mobile payments easier for people who use all three services.

The company says it processes $10 billion a year, a fraction of which is on mobile. It is a far cry from PayPal, which is on track to process $20 billion in mobile payments alone in 2013. But the Braintree raised a recent round of financing that brings its total venture cash pile to $70 millon, and it says it is just warming up. Related story »

54% of Times readers who commented said they were users of Braintree

Selected Readers’ Perspectives

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  Matthew Zito 33 years old New York, NY Does not use Braintree
  

It's almost always better to be the platform that allows other people to build businesses than it is to try to build a business yourself. In this case, Braintree, Stripe, Square, and others are streamlining something that used to be a huge hassle - accepting money from your users.

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  Bob 50 years old Boston Does not use Braintree
  

Building the backbone for business sounds good but Visa the big gorilla has to be looking at thus space. Of course square is doing well against the big guys and maybe Braintree can also beat the odds.

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  Alex 33 years old Sydney Does use Braintree
  

For us as app developers it's definitely disruptive. Before I heard of braintree, I was looking at huge merchant account guarantees to provide a PCI compliant CC solution (or settle for PayPal express which has a rubbish UI). Integrating Braintree allowed us to provide in-app CC processing with our beautiful UI, with very little effort and without having to worry about PCI.

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8. King

Every so often, a new mobile game charms the masses and becomes the vice of millions around the world. Think of Draw Something, Angry Birds or Minecraft.

Often these games disappear as quickly as they appear. Candy Crush, though, the mobile game from a London gaming studio called King, seems to have a staying power that its predecessors lacked. Candy Crush, released for smartphones in late 2012, is the biggest hit to date for King, which has been around since 2003.

The game is simple enough: get three or more matching candies in a row. But it has 45 million players — more than Spotify, Pinterest and Zynga’s hits FarmVille 2 and Texas HoldEm Poker — and most of them are on mobile. According to the company, the game is played more than 600 million times each day on mobile devices.

Players can buy so-called boosters to help advance to higher levels. Analysts estimate that that these purchases could bring in hundreds of millions of dollars in revenue each month, giving the company a nice enticement for investors in an initial public offering of stock, which many anticipate. There is no advertising in the game.
Strategy+Business

Posted: March 27, 2014

Matt Palmquist
Matt Palmquist is a freelance business journalist based in Oakland, Calif.