The two types of technology companies

There are two different types of technology companies - deep tech companies and product tech companies. There are significant differences between how these companies work and the types of people who work at them. Think of Airbnb. From a technology point of view, Airbnb is just a website. There’s nothing technically challenging about building a similar website - websites have been around for decades. However, Airbnb unlocked a new experience for users that did not exist before.

Deep tech companies are on the bleeding edge of technology. They are real innovators and rely on continual research of new technologies to stay ahead of competitors who are commoditising their previous work. Since these companies need a lot of R&D they have close ties with academia. They hire a lot of PhDs and their focus is on developing new technologies to sell. The technology itself is the product.

Product companies use known technology in refined ways to target a new segment or improve the user experience. Everything they want to do can be built, the challenge is figuring out what is most important. The focus in these companies is coming up with novel solutions given the constraint of working with existing technologies. To differentiate they have to focus on the user experience and what the user gets from their product. Typically the employees here will be ‘hackers’ who don’t have the background to research new technologies but can come up with creative solutions.

Once companies reach a certain size they start including some aspects of both types, but their core product is what should be used to identify them. Take Samsung and Apple as an example. Samsung are constantly researching novel hardware - the latest thing is high refresh rate, folding screens. This helps them stand out from the competition as they are the first to develop this technology and sell it to users. Apple on the other hand are rarely the first to do anything. Their approach is to make sure the technology is mature enough that there are no compromises for their users. They let other companies like Samsung come up with a new technology and spend time thinking about the best way for users to benefit, adapting it for their needs.

What does this mean for founders trying to start a company? You have to think about the type of problem you want to solve - does the solution demand a new technology? Do you have someone on your team who can research and develop that new technology? On the other hand, you might find your solution can be a simple website. The differentiator is what the user can do on your website - something they can’t find anywhere else.