I spent a lot of part I of my thoughts on 2011 & beyond in our industry focusing on what I don't think will work.  This blog post will be markedly more positive, at least for those companies that I think are going to make it after all.  Thinking about it, though, I think some commonalities are emerging.

But let's step back and review some concepts from Part I.  I spent a lot of time on the concept of economic viability as judged by two simple concepts — customer acquisition costs and lifetime value (LTV).  Simply put, if your LTV after churn exceeds your fully loaded customer acquisition costs, you're a moneymaker.  If not, you're a failure.  There are lots of ways to analyze businesses, but if you comprehensively and accurately know marketing costs and LTV in what is of course an uncertain business environment, you're doing better than most.  That's easier said than done.

Now hold that thought for a moment.

I would argue to you that there is overwhelming evidence that we're in a mini-bubble, a lower-rent, better justified version of the first one (1997-2000).  There are a lot of sure signs — new businesses getting huge valuations even in public markets, investors in those businesses trying to convince people that those valuations are indeed rational, the huddled masses listening in violent agreement (amazingly enough), venture capital raising huge new funds, and billions of dollars going into startups worldwide again.

And to repeat before I go too far, I don't think this is a terrible or irrational thing.  Social media, location services, smartphones, tablets, local/SMB services, and other sectors are getting turned on their heads a bit — and the uncertainty/disruption creates opportunity for investors.  So please don't put words into my mouth that I'm opposed to what is happening or think it's insane, because I am decidedly *not* there.  I'm discerning, and that's fair.

Anyway, as we are at least in a mini-bubble, a lot of businesses have been created in a short period of time.  All have one thing in common: they are fighting like hell for market share.  They're fighting for attention alongside others in the startup community.  Enterprise startups need enterprise validation — and fight for enterprises and/or agencies to adopt, promote, and pitch their products and services to decision makers.

And so what that creates is hypercompetitive frenzy, where there are probably at least 1-2 startups and often more for any opportunity you may perceive to exist in the world.  Tech is one of the most competitive markets in the world because barriers to entry are relatively low (no PP&E in the era of Amazon Web Services) and you can win with your brains, a good idea, and great sales execution.  Thus, the market is incredibly efficient at finding every glimmer of opportunity and taking advantage of it.  So you get a ton of startups seeking attention.

These startups fall into three categories in my mind, and I'm sure there are more.

• Destinations — places that consumers and businesses are expected to visit repeatedly. Branding is critical, otherwise you're out of sight/out of mind.  Think modernized traditional media (Mashable, ReadWriteWeb, Techcrunch, Huffington Post) but also the hundreds of thousands of applications on the iPhone and Android (Gowalla, 4sq), game publishers, daily deals providers (currently), apps like Pandora, etc.  If you're a destination, you're only as good as your branding + your last trick.  Don't rest, because you can't.
• Service businesses — organizations that provide human capital to solve specific problems for clients.  What's critical in these is to not be a commodity.  If you are providing a commodity service, you're racing to $0 margin.  If you have some competency that makes you among the best in the world, you're probably OK.
• Enablers — groups that deliver a product, service, or data that fundamentally makes people more productive.  This can be a tangible time savings benefit, a cost savings benefit, or ideally both.  It can also be a "data benefit" — removing barriers to data can be a huge enabler.  Think of Amazon Web Services — it's a genius bet on the need for developers to quickly conjure processing and storage cycles to develop, run, and scale applications.  Same goes for the Apple App Store, Windows Azure, Facebook with social plug-ins that have now become ubiquitous and of course the Facebook APIs, LinkedIn for resumes and employment/employee data, arguably Twitter for media publishing and content discovery, local Austin startups Infochimps (data) and Famigo (publishing child-friendly content), and my favorite new startup, Twine.  All of these companies, in their own way and perhaps by accident, enable people to conduct business and be more efficient.

Not that all the destination business examples I listed are fads, but a vast majority will be nothing more than that because they're currently capitalizing on something that is presently *hot*.  Mashable is great and a must-read, but would it get 20m+ monthly unique visitors if tech was not hot?  We just saw Gowalla deadpool because it took advantage of the hot LBS market, but could not expand beyond that.  Arguably Groupon has cooled off because daily deals just stopped being compelling, and now as a result, they're dealing with the customer acquisition cost/LTV problem albeit as a public company.  Ouch.  Destination businesses have to grow rapidly and find ways to be essential and build brand, or they're ultimately dead.  The ones that go the VC route therefore raise a ton of cash but they're a lot more uncertain than they appear and are under a ton of pressure.

I'll defer a broader discussion of service businesses to 1Q 2012 for now.  My point today is more about disruptive technology providers anyhow.

Enablers, in my view, are where I'd focus dollars if I were an investor.  First of all, they're differentiated by their ambitions.  They are not trying to change the world, but rather to provide a useful service that other people can some way build upon — be it technology, revenue, knowledge, data.    Ergo, their bet is on the opportunities they see more broadly.  They focus their efforts on the utility of and the benefits of the product/service they're offering *to other people*.  Some of those will win, some will lose.  But enough will win to make access and all the hard work that entails a worthwhile pursuit.  There is less direct interaction with the end customers, but rather tons of interaction with modern-day "channel partners" who can offer products and services to hundreds, thousands, or more end customers.  But the Enabler is not invested in any one per se — it's a "portfolio theory" approach.

The one thing I think winners will ultimately have in common in the 2nd Great Tech Boom is precisely what winners of other eras have realized.  Infrastructure stands a greater chance of winning than apps, destinations, and other properties that are by definition perhaps more "opportunity" plays than "sector" plays.  It's not to say that all Destinations will fail and all Enablers will succeed.  But I'd make a pretty big bet that we'll think of Destinations fondly as relics of a past gone by, and that Enablers will as a group have much more lasting power.