03 Aug Why Some Start-Ups Are Called Tech Companies and Others Are Not
After Charles Lindbergh flew across the Atlantic in 1927, a company called Seaboard Air Line Railroad attracted an unusual amount of attention from investors who thought it was in the aviation business.
The name actually was a reference to an old railroading term and had nothing to do with airplanes. But the confusion was a good lesson for smart business people: There is value in being associated with the latest, most cutting-edge trend even if your connection to it is tenuous.
A new generation of so-called tech companies that deliver food to your door or help you get a ride in a car — but don’t look much like an operation that makes computers or phones or software — might be putting a modern spin on that old story. No doubt, they use technology in their businesses. And many of them wouldn’t exist without the development of smartphone apps and ubiquitous Internet access.
But these days, every company is at least a little bit of a tech company. Some Wall Street banks employ more tech workers than all but the biggest Silicon Valley companies. And large manufacturers like General Electric are leading the way in efforts to put Internet-connected sensors on things as varied as streets and turbines.
So why then are some start-ups called tech companies and others just … companies?
“Tech means more than just producing hardware or software,” said Mark Zandi, the chief economist at Moody’s Analytics. “It is synonymous with innovation, research and development, long-term thinking.”
The label is a signal that “you want to work for me. You want to buy things from me at a higher price. You want to give me capital at a lower cost,” Mr. Zandi said.