Exploring The “Labs” Trend in Consumer Startups

This post originally appeared in TechCrunch in 2011…

For those of us who studied (or suffered through) chemistry at some point in life, images from the chem lab inspire nostalgia (or dread). White lab coats. Protective goggles and gloves. Glass beakers and measuring cups. It was a place of experimentation. Students were given strict lab instructions, such as “Don’t mix baking soda and vinegar” or “be careful when mixing Mentos with soda,” which many of course ignored. Whether one liked chemistry or not, there was usually an undeniable sense of excitement at conducting experiments that had the potential to cause chemical reactions, the kind that would trigger loud sounds, big messes, and new things.

In the world of technology companies, the “labs” concept and nomenclature found a friendly home. Microsoft Research has FUSE Labs, there’s HP Labs, andMozilla Labs, and let’s not forget the once-mighty Google Labs (R.I.P.), among many others. Digging into the history of big tech “labs” would be the subject worthy of a book, of course, but in the context of this narrow post, it’s worth briefly noting that for those that make things and are builders, every big company needed to have something like this for branding, recruiting, and to keep the innovation engine humming as their corporate parents grew larger and more bureaucratic.  Perhaps each one wasn’t referred to as a “lab” explicitly in name, as Amazon has A9 and Google now hasGoogle X. No matter the name, there’s something powerful in the word that reminds us of the old chem lab and that spirit of experimentation.

Big tech companies have hearty budgets to set up “labs” for their best and brightest to cook up new ideas within. In the world of tech startups, by contrast, the original image “labs” conjures up is of a few people “sitting in their garage” hacking new ideas. In this world, it’s a powerful metaphor and how founders of seminal companies like Atari and Apple etched their legend. Of course, HP was started in a garage in Palo Alto. In these and many other startup garage stories, there’s something primal, something irreverent about the type of experimentation that takes place in the garage versus the big tech lab company.

Fast forward to the eve of 2012, where it’s significantly cheaper to develop web and mobile applications now that software costs have plummeted and large distribution networks exist for startups to harness, though it still remains very difficult to get discovered. The “labs” nomenclature is back in vogue in the consumer web and mobile spaces, and the gritty garage has been replaced with urban loft studios filled with hipster gear and Blue Bottle Coffee.

There are a few high-profile “labs” companies, such as Color and Milk, as well as many others, such as Churn Labs (AdmOb founder Omar Hamoui’s new mobile company), Monkey Inferno (Bebo founder Michael Birch’s entrepreneurial vehicle), Tasty Labs (makers of “Jig,” a site I really like), RG Labs (building the reputation graph), Nest Labs (which reinvented the home thermostat), and of course, Foursquare Labs. There’s everything from the MIT Media Lab (interdisciplinary projects in media) and Dogpatch Labs, an  incubator funded by Polaris Ventures, with “labs” in NYC, SF, Cambridge, Mass. and Dublin, Ireland. (There are many more companies with “labs” in the name, search here for more.)

Why all the “labs” startup companies all of a sudden?

There are a host of reasons. It sounds cool. The language is both inspirational and aspirational. There is a history of carving out these experimental activities within established technology companies, so folks in the community understand the connection and recall their own experiences, either in big tech companies or dating back to school chemistry class. And, it may be easier to find domain names and corresponding social media accounts and username handles with the extra “lab” letters at the end.

These are just surface-level reasons, of course. The deeper trend, especially as it pertains to the consumer web and mobile arenas, is that these shops are being set up similarly to fashion or game design studios. In a game studio, designing just one game can be risky. Instead, these studios work on different concepts on the assumption that they’ll learn in the process and (hopefully) increase the likelihood of developing a hit among different projects.

Not everyone welcomes this trend. Some people in the startup community feel that the “labs” concept comes at the expense of company focus and clarity of mission, or that a series of “smaller experiments” could adversely affect employee morale, consumer loyalty, recruitment, and equity considerations. While some of these “labs” may not resemble how companies like Apple or HP started with grander visions, the spirit of experimentation is still there, just in very different forms.

Regardless of whether or not a startup has the word “lab” on its doorfront or legal documents, all new companies are sort of lab experiments in and of themselves and carry similar risks irrespective of semantics. At the current moment, and perhaps for the next few years, a good chunk of mobile tech and design talent is concentrated in these little pockets that morph into labs companies.

Investors are keen to be involved here. It’s a different kind of gamble, but in the mobile app world, the skills are very specific and in short supply. And with all the competition in the various app stores, it’s nearly impossible to predict if a new product launch will flop like Color’s first release did or hopefully explode (in a good way) like Instagram. Furthermore, many of these founders and employees at “labs” companies could be very valuable to more mature startups or larger tech companies, so by creating their own shops, they have amplified this scarcity and created extra leverage in future M&A considerations.

In this vein, I believe the first release from Milk, an app called Oink, will be something we’ll look back on as a case study. Milk has a small team of seven. The founder is experienced and influential (Kevin Rose). Its angel investors are stars, yet it raised a modest sum. Its overarching mission is to develop mobile applications, and it’s first release, Oink, which was shipped in six months and is beautifully designed (though quite a bit of work), is meant to encourage users to rate things inside places. Given these factors, it had everything an app shop could dream of. As a result, Oink has been downloaded, used, and talked about often in tech circles, though we will just have to wait and see how usage fares as the Milk team tries to get broader adoption or ultimately moves on to the next project.

At the end of the day, however, simply labeling a company a “lab” just boils down to semantics. It really doesn’t matter.

What does matter is how these smaller companies are forming around talent that the rest of the community can’t seem to recruit because there are stronger incentives for them to go down the “labs” path. This is rational, and I’d argue, a good thing for the time being. Until more and more people amass and perfect these engineering and design skills for application development, we need the current crop of those who do to start building the next generation of products and services on their own, free of the trappings of operating within a larger company.

Just how this process unfolds, however, will remain a mystery. Startup “labs” could define a goal right upfront that is well-scoped, or they could just collect the best talent and wing it. There’s really no way for us to know what the best way forward is.

While we knew better than to mix dangerous chemicals in the school laboratory, creating a breakthrough product today requires real experimentation and a certain level of disrespect for the rules and conventions, the type of experimentation outside of the traditional “lab” environment that encourages entrepreneurs do totally random things–like mix mint-flavored Mentos with Diet Coke, as in the picture above–hopefully with dramatic results.