There’s a new trend in the tech world called the “Full-Stack Startup,” coined by Chris Dixon. Here’s his take:
Suppose you develop a new technology that is valuable to some industry. The old approach was to sell or license your technology to the existing companies in that industry. The new approach is to build a complete, end-to-end product or service that bypasses existing companies.
Prominent examples of this “full stack” approach include Tesla, Warby Parker, Uber, Harry’s, Nest, Buzzfeed, and Netflix. Most of these companies had “partial stack” antecedents that either failed or ended up being relatively small businesses.
It sounds surprisingly similar to the Tech-Service Hybrid concept which I published 10 days after Chris. I hadn’t seen his article or heard of his term yet, but had noticed the exact same trend coming from the other perspective: the service firms that know customers best were adding a technology component to take a fully integrated approach.
The same benefits reaped by startups in Chris’s article also apply to service companies:
The challenge with the full stack approach is you need to get good at many different things: software, hardware, design, consumer marketing, supply chain management, sales, partnerships, regulation, etc. The good news is that if you can pull this off, it is very hard for competitors to replicate so many interlocking pieces.
Chris lists a number of disciplines that both full-stack startups and tech-service hybrids will encounter. What’s most interesting about the passage above is that things like “supply chain management, sales, partnerships, and regulation” are often the most difficult parts of the business now that technology has become more accessible, and it’s significantly easier to partner with a technology and marketing expert (shameless plug) than it is to partner with an expert in the other areas of the business. I believe this puts service companies at a tremendous advantage to tech startups in the fully integrated game. The exciting thing about Chris’s article, as well as Ben Horowitz’s video, and what they validate, is that technology and service are colliding. We’re seeing players like tech startups approaching integrated business models from one side, and the service companies that know customers best from the other, but ultimately we are headed in the same direction.