Cloud hosting, social media frenzy and the mobile revolution have ushered in an era of derivative start-ups–Yelp for X, Facebook-meets-Y, location-based Z, iPhone app for Q. The start-ups that got the most attention during South By Southwest were doing things like group texting and variations on the check-in. It’s odd that in the gold rush for the next Facebook, we seem to have forgotten that start-ups have the power to violently shake the world or utterly alter the way business is done in an industry, for better or for worse.
Twitter made it possible for anyone with a mobile phone to broadcast a message to the world. Craigslist made classified listings dirt cheap and efficient, sweeping the newspaper industry’s legs out from under it at the same time. Airbnb is creating a whole new market in the hospitality industry with an idea so novel it was difficult to get funded. Zipcar is revolutionizing the way we drive; Square is democratizing credit card payments. The wireless telecoms industry is so complicated and fragmented that start-ups were unable to crack it for a decade–until Twilio came along and built a support infrastructure so powerful that it has resulted in hundreds of new SMS- and voice-based apps, including the dozen or so group texting apps passing out swag in Austin.
These kinds of disruptive companies aren’t always as sexy as a Tumblr or as puckish as that start-up that does nothing but generate hype for other start-ups, and sometimes they’re so radical that the rest of the tech world either rejects them or swallows them whole. One example of the latter was Long Island-based Amie Street, which let artists sell their music priced to demand–a perfect solution to the problem of how to price songs when the cost of distributing them is zero. Amazon bought the company in September; its URL now redirects to Amazon’s music site and the founders said they expect Amazon to simply toss out the business model.
But even as countless founders use the web for social media widgets and knockoff apps, radical thinking is thriving in New York. Check out ten of the most disruptive start-ups trailblazing in New York right now.
Reporters at news organizations including The New York Times, ProPublica, PBS, The New Yorker, The Chicago Tribune and hundreds more have publicly shared almost 10,000 docs using DocumentCloud, a Knight Foundation-funded start-up based in New York that's actually making the internet smarter. Reporters can now upload their primary source documents to DocumentCloud, which converts PDFs to text, runs that text through semantic intelligence engine OpenCalais, pulls out dates and plots them on a timeline and lets reporters collaboratively annotate them. Reporters can then choose to publish the documents with a story so readers can do their own research and verify the reporter's account. Thus DocumentCloud is becoming a publicly searchable database of primary source documents. This is disruptive enough in itself, but DocumentCloud could also prove a solution to an obstacle reporters looking for public documents face all the time--many agencies, especially on the state and local levels, still rely on paper files. Clerks have to pull the public files and may charge reporters a fee for copying or labor. Instead, these agencies could upload their files to DocumentCloud, where any citizen can find them.
The Huffington Post
You may not like The Huffington Post's content or its business model, but there are few other news outfits experimenting with the online format as daringly as HuffPo. The site tests headlines in real-time, running one headline for half its readers and a different one for the other half. It was one of the first news sites to add Facebook Connect. It plays around with news games to further engage its readers; it's pushing hard to find the sweet spot for social recommendations for news; it has perfected the art of writing headlines for search engines and has inspired legacy news outlets to do the same. Some say its heavy reliance on aggregation is parasitic, but a link from HuffPo is a gift from the web traffic gods for most sites. Of course HuffPo is selling advertising against its largely derivative and vapid content, sucking dollars from headier sites, but one could argue that the ferociousness of this new competition has been forcing the long-stagnant industry to innovate--and is proving that there is money to be made if you're nimble and fearless.
Adstruc co-founder John Laramie learned how inefficient the outdoor advertising industry was when he had to get on his bike to scout out spaces for some clients who wanted to buy billboard ads in New York. "It was stunningly frustrating," Mr. Laramie said during a demo at January's New York Tech Meetup. "The larger companies are managing various aspects of their business in Excel, Ad Manager, various online softwares, etc.," he wrote in a follow-up email. "There is no single platform that enables them to work in one place." Adstruc is a perfect example of a disruptive start-up by redesigning a disastrously convoluted market. Adstruc is like Google's AdWords, which lowered the barriers to entry in online advertising for small businesses, and it technology will only become more relevant as more outdoor advertising spaces convert to digital displays.
Jonathan Hefter's Neverware should be making companies like Intel and Dell very nervous. Mr. Hefter's "juice boxes" make old computers as powerful as the latest models by centralizing processing power in local servers and converting the majority of computers in an organization into so-called "virtual desktops." That means schools, hospitals, non-profits and even businesses can save money on new computers and update software on all their machines simultaneously. Of course, talking to electronics manufacturers about radically extending the lives of these machines is like trying to pitch big oil companies on a car that runs on corn. New York City is considering a pilot program that would deploy Neverware in local schools, The New York Observer reported in January. "I think at a time like this, when cities are trying to squeeze every last drop from their budgets," a source told The Observer. "Neverware has the potential to be a real game changer."
Things Kickstarter has made possible: -a Sundance Film Festival submission -a "federated social network" -the People of Burning Man coffee table book -a biotech hackerspace in Mountain View, Calif. -a visual guide to the federal budget -a restaurant that is completely reborn every few weeks And many more. Kickstarter has revolutionized the way artists, technologists and nonprofits raise money. The site not only provides a way for capital to get to entrepreneurs, it fosters a wider community around the project, making people more likely to engage with the product once it's released.
What if your bank had no physical address? What if you could use your debit card at any ATM at no charge? What if your bank was designed from the start to be easy to use from your phone? BankSimple is an online interface between customers and their banks. Legacy banks handle the transactions; BankSimple handles the web, mobile and customer service. "I don’t know what we’re going to call it. A banking marketplace--the word marketplace is kind of wrong. I don’t know. It’s a new type of thing. I don’t know; it doesn’t have a name yet. We’re starting BankSimple," co-founder Josh Reich told The New York Observer in May 2010.
It's not easy to buy fine art; most people wouldn't even know where to start. The market is decentralized among galleries, brokers and private sellers, and taste can be hard to describe. Carter Cleveland (pictured with Art.sy's Caroline Lau) and Sebastian Cwilich founded the site, which will include listings from galleries, museums and private collections. Art.sy has been working on the Art Genome Project, an index of all the attributes of fine art pieces that will feed into a recommendation engine similar to Pandora, a start-up that will soon go public. The site will make fine art accessible for art buffs with a little less cash to throw around, encourage sales of fine art overall and make us all a little classier. (Another New York start-up, Artsicle, is experimenting with online listings for "emerging" artists, who can rent and sell their pieces to those on tighter budgets.)
In New York, you'd expect to see some start-ups innovating in the financial space. Covestor, founded in 2006, lets casual investors "mirror" more experienced investors, automatically duplicating their trades in real-time. There's no reason why casual investors should have to pay brokers or other middlemen to manage their portfolios--just find yourself a maven in whichever sector you want to invest. "Tens of thousands of investors share their real portfolios on Covestor. We license their trading data to create investment models, which can be auto-traded for you in a Mirroring Account," the site says. "Money management ability shouldn't be limited to only the wealthiest." Covestor charges a straightforward management fee, which it shares with the model investors, so they have even more incentive to trade carefully. The implications of this model are fascinating--what happens when an investor has enough of a following to make a significant impact on an asset with a single trade? But it's a novel and elegant idea as long as it remains legal. Members trade more than $500 million in assets around the world a year, the company said last year.
Speaking of financial innovation, SecondMarket started out when founder Barry Silbert was trying to figure out how to unload odd assets in cases of corporate bankruptcy. SecondMarket is an exchange for "alternative investments;" such as stock in private companies like Facebook and Twitter (although the bulk of its trades are in asset-backed securities, restricted stock, convertible debt and assets that surface during a bankruptcy). The company helps people liquidate their assets or snap up new ones using its robust website, which provides market data, a mechanism for an investor profile, an investor social network and access to a broad range of listings. The $1.2 trillion asset management fund PIMCO recently started quietly trading on SecondMarket, Betabeat reported last week.
Rent The Runway
Rent The Runway makes higher-end fashion available to women at affordable prices while giving designers a lucrative outlet for overstock and solving the "closet full of clothes, nothing to wear" problem. The efficiency achieved by the mail-order fashion rental service is clear--we're waiting for ROR to talk its designers into letting them rent wedding dresses--and it lets any woman who cares about style actually wear the fancy dresses advertised in magazines.
Honorable Mention: Kommons
You know how activists are always telling us to write letters to our congressmen? Kommons directs questions to specific public figures--Barack Obama, Kanye West, Paul Krugman, Stephanie Meyer--using Twitter as a platform to amplify individual voices, applying public pressure to elicit a response. It's as if you tweeted at your congressman instead of writing him a letter, and then everyone in your district saw it and pressed a button to indicate "Yeah, me too." "Kommons has been a slow hunch for the past three years," co-founder Cody Brown sad in an email. "I’d say though that there’s a consistent emotional surge we get when ‘big news’ stories roll through Twitter/Facebook and their design, on a social level, isn’t able to handle it. A recent example was the Giffords shooting. Sarah Palin’s Facebook page gets swarmed by people who are voicing their thoughts about the event and Palin’s admins just go through and delete the comments that don’t fit her viewpoint. You want to scream." Kommons has big potential but hasn't gained traction yet.