The End of “Internet” Companies

Al Gore's 2012 Induction to the Internet Hall of Fame

In the wake of the undue frenzy leading up to and now ex post recriminations about Facebook’s IPO, the mainstream media and normal folks keep wondering if the non-existent “bubble” for internet companies has now popped.  Silly stuff like this.  Turns out commerce and advertising are kinda different businesses actually.  But a lot of people who don’t live & breathe internet innovation on a daily basis the way I do just lump everything together, and whether out of ignorance or envy or some other bias all this internet stuff seems like black magic.

I’m not sure whether it’s 10 years from now or 50 years from now, but at some point in the medium to long term future we’ll cease talking about “internet” companies in any meaningful sense.  I believe with unshakable conviction that the internet has been and will continue to be the most distruptive innovative force of of my lifetime.  It’s easily on par with broad waves of innovation of decades and centuries past… railroads, electricity, the automobile, the integrated circuit.

A little over a hundred years ago, when electricity was still fairly novel, people used “electricity” to describe companies in many of the same ways we talk about “internet” companies today.  The corporation Thomas Edison formed to commercialize the lightbulb was literally called “Edison’s Electric Light Company” to distinguish it from the old ways of generating light like candles, whale oil, and such.  Today we don’t say that GE (of which Edison Electric Light was a precursor) is in the “electric light” business as that’s basically obvious and redundant… nobody generates light with anything except electricity anymore.  Similarly there were “electric pump” companies and “electric elevator” companies and such since previously these tasks were accomplished with mechanical energy via humans or draft animals.  Once electricity became part of the fabric of our existence, and really the only means used to power anything, society stopped using the “electric” qualifier for all this stuff.

We now only think about “electricity” companies in the narrowest of senses… the small number of businesses (relative to the overall impact of electricity in the economy) that are actually in the business of generating and distributing electrical current.  Similarly when integrated circuits were new there were “computer calculator” companies and the like because one had to distinguish between calculators which did their tabluation with a chip rather than mechanical means.  There were transistor radio companies and transistor watch companies.  Now we only think of chip companies in the narrow sense of semiconductor manufacturers like Intel.  We don’t think of Apple as a “chip” company even though literally every product they make only exists because it’s chock full of semiconductors.

We still talk about “internet” companies because the internet is still relatively new for society… just over 15 years or so.  It’s been less than a decade that most Americans had broadband in their homes.  And it’s very recent that meaningful chunks of society have an internet-connected device in their pocket at all times.  So it’s only natural to still think about businesses for whom the internet is a key part of their existence as a distinct group.  This is particularly true for new businesses that didn’t exist pre-internet.  That’s why we talk about Amazon as an internet company but we don’t refer to LL Bean as an internet company.  E-commerce accounts for the vast majority of LL Bean’s revenue today (it crossed 50% in 2010 though was as low as 15% in 2000), but because LL Bean is over a hundred years old and started as catalog & physical store retailer we typically don’t refer to it as an internet company.

As a VC I’m thankful for the fact we still talk about “internet” companies.  It means that for quite a while (e.g. within the extent of my professional lifetime) there’s a great opportunity for newly formed startups to disrupt vast swathes of the economy with internet-enabled innovation.  The internet has already had meaningful impact on industries ranging from commerce to media to software.  The transformation of those sectors is still very much underway and other areas of the economy from education to physical engineering will be impacted in the future.

Someone I used to work with insisted on capitalizing the word “Internet” whenever typing or printing it.  It wasn’t that this person was dumb or didn’t believe in the transformative power of the internet, but it was considered a proper noun in years past rather than a common noun (and many spell-checkers treated it as such).  We capitalize “Internet” a lot less these days but still use it as a qualifier for a wide range of businesses.  But I look forward to the day when society stops thinking of internet businesses as some distinct part of the economy.  It means the benefits of internet innovation will be truly pervasive in our world.

Lee Hower

I’m an investor, entrepreneur, and helper of technology startups. I’m currently a General Partner of NextView Ventures, which focuses on seed stage internet-enabled businesses. I co-founded NextView in 2010 with my partners Rob Go and David Beisel. I started in the VC business as a Principal at Point Judith Capital, an early-stage firm. I joined PJC in 2005 and served as a Principal at the firm through early 2010. During this time I co-led investments in FanIQ, Sittercity, and Multiply and sourced investments in Music Nation and NABsys. Prior to becoming a VC, I was a startup guy myself. I was part of the founding team of LinkedIn, and served as Director of Corporate Development from the company’s inception through our early growth phases. Before that I was an early employee at PayPal, and worked in product management and corporate development roles through the company’s IPO in 2002 and subsequent sale to eBay later that year. I went to college at UPenn and received degrees from both the School of Engineering and Wharton School of Business.