- The past decade was an eventful one for the startup world.
- The rise of smartphones, online marketplaces, the sharing economy, and cheap access to the cloud have enabled entirely new business models – some more successful than others.
- Business Insider spoke with five venture capitalists about the startups that had the biggest impact on the tech world throughout the 2010s.
- They noted that companies like Theranos and WeWork demonstrated the pitfalls of “founder worship” and the pursuit of growth at all costs.
- But startups like Dollar Shave Club and Warby Parker stand out as companies that have successfully built direct relationships with consumers.
- Stitch Fix and Rent The Runway are showing investors the promise of women-led ventures in an industry that grossly lacks diversity, while Shopify and Atlassian have proven that markets outside of Silicon Valley are taking off.
- Visit Business Insider’s homepage for more stories.
The 2010s were a wild ride for startups and the investors who pumped money into them.
As the decade kicked off, smartphones were becoming ubiquitous, connecting billions of people to the internet – many for the first time – and paving the way for a wave of innovative business models.
Online marketplaces and sharing economy platforms – Amazon, Facebook, Uber, Airbnb, and many more – demonstrated the power of network effects, and in doing so, completely changed how people and businesses interact with each other.
Companies seized on the stream of constant, real-time, location-based, and personalized data that consumers volunteered via a growing list of smart devices to provide them with faster and more convenient services.
Entrepreneurs had the wind at their backs, thanks to a flood of venture money and access to technical infrastructure - Amazon Web Services - meaning they could spin up and scale up their startups like never before. Unicorns seemed to appear everywhere, and tech IPOs had investors excited.
But the tides began to turn in the second half of the decade as a flood of scandals chipped away at the idea that tech companies - and tech founders - are inherently good. Public investors became skeptical of the premium price attached to some tech companies, and the batch that went public in 2019 had a rough go of things.
Four months into 2020, the unprecedented coronavirus pandemic has rocked the global economy and startup world, leading to at least 30,000 layoffs at venture-backed companies and even impacting unicorn tech darlings like Uber, Lyft, Airbnb, and Peloton as funding and sales have dried up.
After speaking with five venture capitalists about how things have evolved since 2010, some clear lessons emerged - as well as some clear examples of those lessons. While it would be impossible to include every important startup, below are the companies that investors said have had the most impact on their industry in the past 10 years.
Uber, Theranos, and WeWork demonstrate the pitfalls of "founder worship" and the pursuit of growth at all costs.
Uber's Travis Kalanick, Theranos' Elizabeth Holmes, and WeWork's Adam Neumann: All were considered charismatic and visionary founders who sought to change the world, but each was eventually forced out of their respective companies amid scandal.
When Holmes resigned in 2018 in the face of criminal charges and reports of fraud at Theranos, "everyone in venture really questioned their own diligence," Kristin Gunther, a principal at Revolution, told Business Insider. Gunther added that it made her reflect on how she engages as a board member.
"Against a background where, for a couple years here, hot deals moved really fast and people could get funded based on two PowerPoint slides, it became even more important to say, 'Hey, fine, this is a hot deal, but I'm going to miss it because it's not worth it to cut the corners,'" Gunther said.
Kalanick was also forced out for cutting corners. In 2017, investors orchestrated his resignation at a time when Uber's public image had plummeted. Once a company that every investor wanted in on, critics had started alleging that Uber enabled workplace harassment, skirted local regulations, and that Kalanick's own behavior had put the company on a crash course.
Neumann, WeWork's eccentric founder, stepped down earlier this year after the company's failed attempt to go public led to reports of his extensive conflicts of interest, mismanagement, and bizarre behavior.
All three companies epitomized Silicon Valley's obsessive focus on growth and a celebration of ambitious founders, which often ignored problematic behavior and business practices.
"I just think we abandoned values in terms of, not just how we invested, but managed companies," Elliott Robinson, a partner at Bessemer Venture Partners, told Business Insider.
Jet.com, Dollar Shave Club, Glossier, Warby Parker, and Casper stand out as just a few of the many companies that have successfully built direct relationships with consumers.
The pervasiveness of social media and digital ads has given companies powerful new ways to connect with their target audience and helped enable the rise of direct-to-consumer brands.
Anu Duggal, founding partner at Female Founders Fund, told Business Insider that social media has "enabled brands to have a direct conversation with those consumers and have that impact their actual product design."
Duggal highlighted brands like Warby Parker and Glossier as companies that have effectively leveraged conversations with those consumers to inform product development.
Jenny Lefcourt, general partner at Freestyle and founding member of All Raise, said another reason these brands have been so successful is that they've created "authentic community" among their consumers.
"Maybe you go to Glossier because you love makeup and you start connecting with the community about that and before you know it, you start becoming friends and you're sharing travel tips," Lefcourt told Business Insider.
These companies didn't initially seem like sure bets, however. Gunther pointed to online retailer Jet.com and its acquisition by Walmart as an important proof of concept, and said it "showed the exit path for some of these direct-to-consumer companies where that was really a question."
Stitch Fix, Rent The Runway, and Away are showing investors the promise of women-led ventures in an industry that grossly lacks diversity.
It's no secret that venture capital firms - and, as a result, the entrepreneurs they fund - suffer from a lack of diversity. A recent survey by RateMyInvestor found that the typical founding team was a "two person, 'all male,' 'all white,' U.S. university-educated team residing in Silicon Valley."
Over the past decade, however, with several women-led ventures reaching multi-billion-dollar valuations and Stitch Fix founder Katrina Lake becoming the youngest female founder to take a company public, investors are finally taking notice.
"Venture capitalists are pattern matchers," Lefcourt said. "Seeing these women take these companies from start to IPO and be incredibly successful enables other venture capitalists - whether they're men or women - to change their view on what successful looks like."
Venture capital firms still have a long way to go both in terms of who they invest in and who is doing the investing, especially when it comes to racial and educational diversity. But, at least when it comes to women-led ventures, Duggal said investors are "recognizing the fact that there are real returns to be made."
Shopify, Atlassian, and Waze proved that markets outside of Silicon Valley are taking off.
RateMyInvestor's survey also found that venture funds have a strong geographical bias, with nearly half of all investments in the past five years going to startups based in Silicon Valley. But in recent years, several companies have revealed the untapped potential of other markets, particularly outside of the US.
"There were always great companies and great innovation outside of the US," Victoria Treyger, general partner and managing director at Felicis Ventures, told Business Insider. But prior to Shopify, she said, "there was a belief that VC-backed companies outside of the US exited earlier."
Shopify, which is based in Ottawa, Canada, is notable for its outsize role in empowering small and medium businesses. Robinson, who invested in Shopify, said that by building ecommerce tools and "multiple revenue streams off of a really large user base, that just really changed the way people thought about [software as a service]."
Atlassian, an enterprise software company out of Sydney, similarly put Australia on the map. "I just see the number of [Atlassian] alums that are in that ecosystem," Treyger said, noting how employees of pioneering companies like Shopify and Atlassian often go on to start their own ventures.
Israel has also become a hotbed of entrepreneurial activity. It has produced household names like Waze (which was acquired by Google) and, in 2018, 61 companies exited at an average deal size of $81 million.
Within the US, cities like Chicago, Seattle, Denver, Portland, Atlanta, and Washington, D.C., have also seen massive increases in both investment and startups.
Stripe, Square, Lending Club, SoFi, and Robinhood are just some of the key startups flipping the financial services industry on its head.
Fintech was another sector this decade that saw major disruption and a flurry of new companies achieving massive valuations. Startups took advantage of the rise of smartphones, digital banking, and machine learning to bring more consumers into the financial system and upend how people spend, make, borrow, and exchange money.
"When you look underneath, there is true technological innovation," Treyger said. "It's really exciting to see that the dollars went into companies that have truly transformed the financial service sector."
As just a few examples, Stripe and Square helped change the way businesses get paid, Lending Club and SoFi took on incumbents in the personal loan space, and Robinhood reinvented how everyday consumers invest.