Having recently attended a number of startup and tech events, including the InnoTribe Startup Challenge in advance of SIBOS, the NY FinTech Startup Conference, the Small Business Expo and the Northside Festival, a mini-SXSW in Williamsburg which I particularly enjoyed, I’ve observed several common themes that new startups are capitalizing on.  These key trends have the potential to disrupt existing services as we know it for the usual reasons – they are better, cheaper, faster.  While there are many interesting opportunities to create change, significant challenges do remain for new entrants in any market.

What elements distinguish new business models?

  • whats new pinkSolving problems:  Wherever there is pain, there may be a way to make it better through a business solution. As a weary New Yorker looking for peace and quiet I got a kick out of Kricket, started by recent graduates to solve dorm room issues, they will send an anonymous text to your neighbors asking them to shut up nicely (just in case they weren’t aware of how loud they were).
  • Transparency: Making processes easier to understand by disclosing more information.  eBindle seeks to make online shopping simpler by telling you how to distribute your purchasing experiences based on prices to lower your buying and shipping costs by identifying how to plan your buying and maximize your effectiveness.
  • Simplification and efficiency: By streamlining existing time-consuming business processes that are difficult to navigate, many startups are looking to transform difficult experiences through a better overall user experience.  Fundera is one example of making the loan application process simpler as they provide one source for multiple quotes and streamline approvals.  Similar business models are being created in other niche spaces, like Abaris, which is looking to streamline annuities purchases.  By re-thinking difficult processes and using powerful automated algorithms, these new offerings may be appealing to the DIY generation of self-directed investors.
  • Creating community:  Finding a way to effectively bring together and leverage common interests within a group can be very powerful. This concept is not new and has been effectively deployed by many successful companies, like broker-dealer TradeKing, which was built on sharing investment ideas through social networking.  I liked the idea behind ideacoil, a platform for getting expert advice and feedback, which takes user-generated content and crowdsourcing to the next level.

While several of these startups are in beta and many other examples exist, the push to innovate continues to create new opportunities.  The advantages of these new platforms are greater choice, more information and education (content-driven strategies) and  faster more timely service for users.  One hopes that lower costs will also result due to disintermediation of middlemen, but this is not always the initial value proposition.  Many of the startups need to gain some initial traction and have to rely on existing infrastructure, particularly in the financial services sector.  Perhaps greater savings will evolve over time, but I think they will need to be more competitively priced unless they can truly add significantly higher customer service and responsiveness.

An additional challenge for these new businesses will be to clearly differentiate their value proposition and drive user adoption.  How to create awareness in a competitive marketplace with so many existing established choices?   New players need to create awareness and generate leads.  Having the best product in the world, won’t be helpful if you don’t have an effective marketing strategy to get the word out and the ability to execute successfully upon launch.   Over time the new players will have the advantage of being able to execute faster, but must deliver true value to differentiate themselves from established players.  For the platforms that deal with finances and money, they will also need to convince potential investors to trust their money with a start-up.  This is where establishing a strong brand can create the perception of stability to potentially offset a perceived risk of failure and concerns about longevity.  I am excited by the companies that are introducing innovations and efficiency and look forward to seeing them prove their value proposition and earning the trust of potential new users.