Building New Digital Tools for the Stone Industry Has Changed

The stone industry is fairly small - in the US and Canada there are approximately 8,000-10,000 stone quarriers and fabricators. This has made us an unattractive market for software developers in the past. As I see it, we are underserved but that can and should change in the future. Here’s why.

Traditional tech investors look for home runs, not singles and doubles. A typical venture capital (VC) firm invested in tech has a portfolio mostly made up of companies that don’t make money. If there are ten companies in a firm, let’s say 7 completely flame out and never turn a profit, 2 are breakeven or slightly better, and 1 generates a spectacular return. For every 1 Uber or AirBnB there are hundreds of software companies that all promised to revolutionize something or other and only ended up setting a pile of cash on fire. VC firms know this, and plan accordingly. They only bet on companies that can have the huge, rapid growth that can sustain all the other losers and make the firm tremendously profitable on top of that.

To use a baseball analogy, think of VC firms as free-swinging power hitters. Sure, they’ll strike out hacking at some sliders in the dirt or eye-high fastballs (hello, Kyle Schwarber). But they’ll also deposit a few in the cheap seats that end up winning the game (hey again, Kyle Schwarber). Like a power hitter in baseball, VC firms will live with the strikeouts in order to get the home runs.

Will a Venture Capital Investment be a Strikeout or a Home Run?

So, under that model, there’s no reason for a tech company to fund something for the North American stone industry since it’s so small. Even if all 10,000 companies paid $30K per year for some fantastic piece of software, that’s only $300M. Elevate Indiana, the state-run VC fund, will not invest in companies that have a target addressable market of less than $500M. I would imagine large, reputable VC firms operate similarly. Even the best project for such a small user base may only come out to be a single or a double, if we’re continuing with the baseball analogy. And remember, VC companies need the home runs to offset all the strikeouts.

Software development in the US has clustered in a couple regions - notably the Bay Area in California, New York City, Boston, and Colorado. The developers, schools, capital, and other infrastructure has all gathered in these areas. Notably, these areas are not centered around some of the hotbeds in the stone industry. There isn’t a ton of tech infrastructure in or near Bedford, IN, Elberton, GA, or Barre, VT.

There’s Stone Here, but where is the Tech Infrastructure?

Historically, developers are expensive, and it takes hundreds of thousands of lines of code to create an Uber or AirBnB or similar company. This has to be written, tested, debugged, and then implemented. There’s a sizable expense involved in all of this. The median total compensation for a Software Engineer at Google is around $290K per year, for some perspective on talent costs.

So, due to market size, geographic distance, and development expense, our industry’s software needs have been overlooked. But things are changing, and rapidly.

Artificial intelligence (AI) is going to be a disruptive force - more so than the internet was, in my opinion. AI will drastically reduce the amount of time and the expense it takes to create a new piece of software. This makes creating software for smaller markets much more economically viable. What would have cost millions to make may now cost thousands.

Turning back to the baseball analogy, AI software development tools have effectively moved the fences in towards the plate. Those singles and doubles are now sailing out of the park. And a strikeout doesn’t hurt the team as badly, since even failures are less costly. I’ll say this because you’re reading this and can’t throw a tomato at me - it’s a whole new ballgame.

With development tools becoming more available, that sets up what I’ll call an Armageddon problem. Should we train people with advanced technical knowledge on a practical issue, or people with practical knowledge how to use advanced tech? In the 1998 film Armageddon, a team of oil drillers trains to become astronauts in order to drill into an asteroid to destroy it and save earth. Why didn’t NASA simply train astronauts to operate oil drill equipment? Probably because it didn’t make for good cinema.

But our current Armageddon problem is this - is it easier to teach someone from the stone industry to make software, or to educate a developer on what the industry needs? With the new tools at our disposal, I believe it’s now easier for someone from the industry to create the software that we need. Before AI, this version of the Armageddon problem probably gets answered differently.

Again, it’s a whole new ballgame for tech in the stone industry.

It’s a New Day for Tech in the Stone Industry!