Prediction #1 - Acquisitions Overall I expect the startup market to be very hot in 2010 and the year will see many acquisitions -- especially for talent. Larger startups will throw some of their big venture capital warchests to acquire smaller startups to gain the talent in-house. An example of this style of acquisition from 2009 would be Facebook's acquisition of Friendfeed.
In another example of "talent" acquisitions, Twitter acquired Mixer Labs earlier this month. Most seem to believe this acquisition was made because the founders were previously at Google in the mobile department. I expect Twitter to open their bank account for many acquisitions in 2010. While all will be small and for "undisclosed amounts", it's important for Twitter to stock up on talent in 2010.
While larger startups will acquire a large number of smaller startups, the big money will come from the tech giants including Microsoft and Google. One startup that will see acquisition bidding is NY-based Etsy. While I don't expect the company to sell, I do expect to read lots of stories about the multiple acquisition offers they will receive.
Prediction #2 - Location Location-based services will continue to be hot in 2010. You can be sure that the major startup blogs will continue to write daily about anything location-related. I believe that eventually most will realize that no one cares where you are but this will take until early 2011 to materialize. Location will grow in importance to merchants but not to a user's social graph.
Prediction #3 - Utilities will be hot This is the prediction that I post each and every year. I'd like to see utilities get the spotlight in 2010. These are the startups that I generally refer to as "unsexy" but are the ones that tend to provide real time-saving value. Many of these services are profitable and while used by millions of people rarely see the same coverage as other categories. By focusing the spotlight on utility services, this will help to get more developers to create new utility services. Business-to-business startups that service the small to medium segment will see an even brighter spotlight in 2010 based on revenue generation.
Prediction #4 - State and local government will jump head first into the startup market In 2009 we saw some state and local governments across the U.S. start to realize how important technology startups are to the economy both from an income and expense reduction standpoint. My hope is that we see more involvement between startups and government in 2010 to help foster innovation. The involvement will come in the form of tax credits and other financial incentives with a heavy focus on retaining startups in a particular location.
Prediction #5 - Many, many more small and quick app-based startups will launch This year saw tremendous growth of mobile thanks mostly to the iPhone and to the new Android mobile platform. Next year developers will create more mobile apps than in previous years combined. Developers will be looking for the gold rush in the Android app space much like the iPhone market two years ago.
Quick traditional Web apps will also be launched by new developers. The goal of these apps will be to gain quick momentum and visibility in the hopes of talent acquisition by the companies I mentioned in prediction #1 above.
Now that I've shared some of my predictions for the startup market in 2010, leave yours in the comments. I am very interested in where you see the market headed next year.