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The East African : Aug 16th 2015
34 The EastAfrican OUTLOOK AUGUST 15-21,2015 e -AF R ICAN When a tech startup is not a tech company In business, the≥e is value in being associated with the latest, most cuttingedge t≥end By JIM KERSTETTER New York Times News Service A fter Charles Lindbergh flew across the Atlantic in 1927, a company called Seaboard Air Line Railroad attracted an unusual amount of attention from investors who thought it was in the aviation business. The name actually was a refer- ence to an old railroading term and had nothing to do with aeroplanes. But the confusion was a good lesson for smart business people: There is value in being associated with the latest, most cutting-edge trend even if your connection to it is tenuous. A new generation of so-called tech companies that deliver food to your door or help you get a ride in a car — but don’t look much like an operation that makes computers or phones or software — may be putting a modern spin on that old story. No doubt, they use technology in their businesses. And many of them wouldn’t exist without the development of smartphone apps and ubiquitous Internet access. But these days, every compa- ny is at least a little bit of a tech company. So why then are some startups called tech companies and others just companies? “Tech means more than just producing hardware or software,” said Mark Zandi, chief economist at Moody’s Analytics. “It is synonymous with innovation, research and development, long-term thinking.” The label is a signal that “you want to work for me. You want to buy things from me at a high- iners Club, a New Hampshire company that rents time on the expensive Hinckley yachts that it owns. The company developed an algorithm that works with a smartphone app that helps its clientele schedule time on its boats. Is Barton & Gray a tech com- pany? No, although it is very dependent on its technology. It is difficult to say what the fi- nancial windfall of the tech label is to today’s startups since most of them are still private companies, though no doubt they benefit from being close to the tech industry’s deep-pocketed financiers. But toward the end of the The ride hailing Uber app is seen on a smartphone past cabs passing on Paseo de Gracia in Barcelona, on December 9, last year. Picture: AFP Tech is synonymous with innovation, research and development, long-term thinking.” Mark Zandi, chief economist at Moody’s Analytic er price. You want to give me capital at a lower cost,” Zandi said. For as long as there has been a commercial Internet, there has been fuzziness about what is or is not a tech company. Was eBay, for example, a tech company or an auctioneer enabled by tech? Was Amazon, before it started hosting other sites, just a big retailer that lived online? The definition became a bigger head-scratcher with startups that delivered real-world services with the aid of some clever technology — those so-called on demand or sharing economy companies. “‘Tech company’ and ‘tech startup’ are overapplied labels that have outlived their usefulness,” Alex Payne, an early Twitter engineer and tech investor, wrote in 2012. “Calling practically all growing contemporary businesses ‘technology companies’ is about as useful as calling the enterprises of the industrial era ‘factory companies.’” Take Uber, the ride-hailing service based in San Francisco, WHAT THEY SAID: Alex Payne, an early Twitter engineer and tech investor: “Calling practically all growing contemporary businesses ‘technology companies’ is about as useful as calling the enterprises of the industrial era ‘factory companies.’” Kenny Dichter, the chief executive of Wheels Up, a company that, like Uber, which just secured Microsoft as a backer in an investment round that puts its valuation at about $50 billion. The heart of Uber is a smartphone app attached to a database that instantly matches passengers with nearby drivers. Travis Kalanick, Uber’s chief executive, often describes Uber as a “technology platform.” Use your imagination and you can think of Uber mastering all sorts of logistical problems that lead to something being delivered to a consumer. So why is Uber not considered a logistics or transportation company? uses an app and a database to match customers with a transportation service: “They’re [Uber] in the tech business because the tech was the game-changer for them.” Travis Kalanick, Uber’s chief executive: “Uber is a “technology platform.” “They’re in the tech business because the tech was the gamechanger for them,” said Kenny Dichter, the chief executive of Wheels Up, a company that, like Uber, uses an app and a database to match customers with a transportation service (in this case, flights on small private planes owned by Wheels Up). “We’re all in the same busi- ness,” Dichter said, although he does not consider Wheels Up a tech company — yet. Uber did not respond to a re- quest for comment. Technology was also a gamechanger for Barton & Gray Mar- Facebook d≥one p≥oject is a step close≥ to flight A JOINT REPORT New York Times News Service FACEBOOK HAS moved several steps closer to fulfilling its grand ambition of building an Internet network in the sky, announcing recently that it has built its first unmanned drone and found a way to vastly increase the capacity of the lasers that will eventually beam data between the drone network and the ground. A team in Britain has been work- ing on building the solar-powered drone, known as Aquila, for about 14 months. Now the company says the unmanned aerial vehicle, made of ultralight composite materials and weighing about 400kg, is ready for in-flight tests in the upper atmosphere, most likely in the US. “We have completed plane No. 1,” Jay Parikh, Facebook’s vice president for global engineering and infrastructure, said at a news conference at the company’s headquarters in Silicon Valley. The drones are part of a long- term project intended to deliver the Internet to people who live far away from cell towers and fibre-optic lines. Google, Facebook’s rival for the attention of Internet users, is pursuing its own plan, called Project Loon, to provide Internet access through a network of drifting highaltitude balloons. In Facebook’s vision, hundreds of drones will be lifted into the sky by helium balloons and left to circle at altitudes of 60,000 to 90,000 feet — far above commercial airliners and weather systems. The network would be supplemented by satellites orbiting even higher up. However, there remains a signifi- cant amount of work to do on the technology required to make the system a reality, including devising better batteries that can keep each plane aloft for three months and building lasers for data transmission that can track a moving receiver the size of a dime from 18 kilometres. Like a watch, “there are a lot of moving parts here that need to move in concert to make the net- work work,” Yael Maguire, director of engineering at Facebook’s connectivity lab, said at the news conference. Facebook also hopes to speed up development by making available much of its research and many of its discoveries without cost.. “Getting people to adopt the Internet faster is our end goal,” Parikh said in an interview. “If this gets used by car companies, and that comes back and helps us with batteries for drones, great.” Parikh said Facebook would even be willing to share information with Google to help both companies’ data-in-the-sky efforts. “We would love to collaborate,” he said. By Vindu Goel and Quentin Hardy Facebook’s drone, known as Aquila will help in beaming data. Pic: AFP dot-com boom at the turn of the century, Raghu Raghavendra, now a professor of finance at the University of Cambridge Judge Business School, was the co-author of a study that documented the temporary surge in the stock prices of companies that added the dot-com suffix to their names. Those temporary dot-coms took advantage of an investor behaviour called “categorisation,” Raghavendra said. Categorisation helps us un- derstand something if we’re not familiar with it. “We build up a story in our heads on what we think we are going to see,” he said. “Even if the firm has no cash flows or no profits, we think we know what the story is.” Today’s happy adopters of the tech label, however, should note the follow-up research by Raghavendra and his co-authors after the dot-com bubble popped early last decade. He found that double-switchers — companies that added and later dropped their dot-com identity — saw their stock prices over one month move 38.5 per cent ahead of companies that kept the dotcom name. In a few years, maybe being la- belled a logistics company won’t be such a bad thing.
Aug 9th 2015
Aug 22nd 2015