The New FAANG
Future Leaders of the High-tech Economy
Every major business cycle gives way to a new group of market leaders. In the ’50s, US Steel and Esmark Steel were two of the most prominent businesses in the world (#3 and #5 respectively in the 1955 Fortune 500). Fast forward a few decades to the ’80s, companies like Eastman Kodak were all the rage. Zoom a few more decades ahead, and the economy took on an entirely new form.
We’ve come to know these leaders as FAANG: Facebook/Meta, Apple, Amazon, Netflix → Microsoft, and Google/Alphabet. However, just like Oracle wasn’t the end-all be-all of tech (though it did seem so back in its heyday!), FAANG will also inevitably, give way.
Now, the market seems to be reshaping itself again before our very eyes. We have to wonder: who will be the future leaders of the next cycle? And who will be the players that power these next-gen companies? (After all, you have to buy into lithium mines for electric vehicles to succeed.) History may give us some perspective on this, showing how industries have transformed over time.
The 1990s and early 2000s were defined by global players competing by industry…
FAANG then disrupted the world and essentially declared the industry “dead”
FAANG rose to prominence in the business cycle that followed the Global Financial Crisis (GFC), and as of 2021 represented the largest five companies in the world, succeeding on the principles of platform economics: agility, openness, innovation, culture, and of course technology.
Then what happened to the “old guard”?
About half of these former leaders disappeared, either entirely or having to change their market offering. Some ignored the disruption and died, such as Sears who was #16 on the 2000 Fortune 500 list, eventually going bankrupt a few years later. Others accepted the disruption and maneuvered, such as IBM; and while no longer the global leader in computing, is still competitive following its pivot to IT services. Very few respected the disruption and innovated, such as Walmart, following Amazon’s lead by investing heavily in its e-commerce business.
As the market cycles again on the heels of this latest downturn, it seems, amazingly, that industries might now be baaack — but in the form of tech platforms.
Some of the future leaders of the next cycle might be long standing companies who will continue “disrupting themselves”. Think NVIDIA, founded in ’93, which has solidly expanded from semiconductors to already leading in augmented and virtual reality (AR/VR) technology, among other things. Or PayPal, founded in ’98, which has also innovated from its origins as an online banking alternative to later launching game-changing products like Venmo. Succeeding in new directions is far from obvious, especially when considering examples like Palm, which was a larger company than both Apple and Amazon combined just 20 years ago.
Others will have been “born” in the previous business cycle, having laid the groundwork for their future leadership since then. Think Twilio, founded in ’08, having begun as a programmable communications company, but now powering and offering a variety of enterprise applications, evidenced by its 63% annual sales growth over the past 4 years alone ($400m in ’17, to $2.8b in ‘21). Or Uber, founded in ’09, which of course began as a ride-hailing app, now representing a much broader brand of mobility, from food delivery to “flying car” initiatives with NASA.
Then there may be those just coming out of the gate, and we need look no further than in fin-tech. Affirm and Upstart, both founded this past decade, claim to represent the creditors and lenders of the future. Affirm’s “buy now, pay later” offering has already landed major retail partners that include Amazon, Walmart and Target. Upstart, whose AI-based lending model aims to replace traditional FICO scores (1,600+ data points trained in its model, vs. the 6 criteria of FICO), has quadrupled the number of banks and lending partners it serves in the past 5 quarters alone (18 to 71, as of Q2 ‘22).
And of course, Web 3.0-blockchain-distributed/quantum ledger technology, must be mentioned. Let’s take Block (formerly Square), which began by offering point-of-sale payment solutions to small businesses, though now a decade later, is building an open developer platform to make it easier to access Bitcoin and other blockchain tech without having to go through institutions. Block’s aspirations go beyond fin-tech, now extending to services such as streaming music through TIDAL (made popular by Jay-Z), also using blockchain as its foundation.
What about the “guys behind the guys”, or the infrastructure required to power these future leaders?
Which companies are laying the foundation for these future leaders? (Perhaps we can think of them as this generation’s US Steel?) Let’s imagine each company as having its own “software factory” or “software supply chain”, in order to continue producing better and more innovative tech over time.
Companies like Atlassian aim to empower the “factory workers”, providing tech solutions for collaborating across the entire business, whether on the developer side with BitBucket, business side with Trello, or its bread and butter, Jira, for ticketing and planning.
Or how about JFrog, providing companies with the conveyor belt that ties the software factory together, albeit highly automated and at a much larger scale, to build, deploy, secure and continuously update their software.
Plus players like Datadog, allowing companies to monitor, analyze and ultimately improve their tech once it’s out there being used in the world.
Which “future FAANGs” are missing from this list? Does Spotify deserve a spot, or were they more of a junior FAANG of the previous business cycle? What about Coinbase or one of its peers — shouldn’t there be a crypto pure-play somewhere? Or how about Microsoft, who seems to not be listening to cycle-speak and just getting stronger each decade?
What do you think?
