![](\"https:\/\/fortune.com\/img-assets\/wp-content\/uploads\/2025\/12\/nest-founder-headshot.png?w=2048\")
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Apple famously rendered scores of startups and third-party tools obsolete with nearly every OS update since the mid-2000s. \u201cSherlocking\u201d regularly kicked promising companies to the curb by effectively erasing their reason to exist \u2014 in many cases, by delivering nearly identical features and functionality.<\/p>\n
I saw it firsthand when I worked on the iPhone, iPod, and iPad under Steve Jobs. Every product launch and OS upgrade generated excitement for users and existential fear for founders. Founding teams spent years building capabilities that Apple could absorb into the operating system overnight. Life\u2019s work became dead on arrival.<\/p>\n
Sherlocked, but Not Forgotten<\/p>\n
There are\u00a0several companies that folded worth mentioning, but here are three that stand out to me:<\/p>\n
Tile kept pace with AirTag for a while because even though Apple made a slightly nicer tracker, Tile had years of market leadership, retail distribution, meaningful hardware revenue, and a defensible head start. But the balance did eventually tip toward Apple when they launched AirTag with deep integration into the Find My network and the U1 chip. Suddenly, Tile no longer had access to the same system-level advantages. It lost access to the oxygen that mattered: defaults, permissions, hardware integration, and distribution.\u00a0The company was eventually acquired by Life360 in 2021 for approximately $205 million \u2014 a fraction of its peak valuation.\u00a0<\/p>\n
Pebble invented the modern smartwatch category years before the Apple Watch hit shelves. The company built a passionate developer ecosystem and sold millions of devices. But Apple reserved the deepest iPhone integrations \u2014 notifications, payments, health data, system hooks \u2014 for itself. Pebble wasn\u2019t outcompeted feature-by-feature. It was boxed out structurally.<\/p>\n
Even f.lux, which pioneered blue-light reduction software to help us sleep better at night, learned the same lesson. Apple initially rejected its iOS implementation for using private APIs. It wasn\u2019t until\u00a0Apple\u00a0launched Night Shift directly inside iOS itself that f.lux experienced existential competition.<\/p>\n
Other tech giants, like Google with search and Microsoft with Office, also shuttered numerous companies with authority and efficiency. But they weren\u2019t destroying startups simply because they built better products. They entered the market with viable alternatives, consistently improved\u00a0those products, and then maintained control over the platforms.<\/p>\n
The key thing for founders facing similarly harrowing dynamics to remember: when a platform decides to compete, it\u2019s impossible to win with price alone. Survival requires\u00a0understanding how platforms collapse distribution, bundle features into defaults, and remove the dependencies third parties rely on.\u00a0<\/p>\n
Survived, Thrived, and Still Alive<\/p>\n
Recent history also provides examples of companies that survived platform attacks by evolving beyond standalone consumer features.<\/p>\n
Dropbox should have disappeared the moment Apple and Google bundled cloud storage directly into their operating systems. Instead, it became a multi-billion-dollar enterprise software company because it expanded beyond consumer sync into collaboration, team workflows, e-signatures, and cross-platform infrastructure.<\/p>\n
Spotify survived Apple Music despite Apple owning the operating system, the App Store, the hardware ecosystem, and the distribution advantage. In addition to investing in brand and artist partnerships, Spotify built network effects around playlists, discovery, creators, podcasts, and social behavior that could not simply be copied into existence overnight. Its value came from the ecosystem surrounding the platform, not merely the app itself.<\/p>\n
1Password faced extinction once Apple and Google bundled password management directly into their platforms for free. Instead of competing feature-for-feature at the consumer layer, it moved upmarket into enterprise identity management, developer tooling, secrets infrastructure, and organizational workflows. The consumer feature became the wedge. The enterprise system became the business.<\/p>\n
As we saw with Dropbox and 1Password in the last cycle, offerings from smaller companies that deeply integrate with customer architecture and offer tailored features\u00a0can become the wedge in enterprise AI.<\/p>\n
AI Is Firmly in Its Sherlocking Era. Be Aware.<\/p>\n
Every new Claude release, ChatGPT capability expansion, or workflow agent launch creates excitement among users and customers.\u00a0It should also unsettle founders.<\/p>\n
Products historically most vulnerable to Sherlocking shared a common trait: they were single-purpose features built on platforms they did not own\u00a0\u2014 small enough to bundle, and lacking network effects, alternative distribution, or deep operational integration.<\/p>\n
AI-native companies need to operate as more than model wrappers or generalized copilots.\u00a0To compete with foundation models in any given vertical,\u00a0startups must become operationally embedded inside enterprises, law firms, financial institutions, and medical facilities.\u00a0<\/p>\n
The best enterprise AI companies will integrate deeply into internal operations spanning approvals, compliance systems, procurement flows, analytics pipelines, reporting structures, and institutional knowledge. Once that happens, ripping them out becomes painful.<\/p>\n
This matters because the frontier labs are optimized for horizontal scale, not deep operational integration. OpenAI, Anthropic, and Google can build extraordinary foundation models. But they cannot realistically provide white-glove implementation and workflow redesign for every logistics provider, hospital system, insurer, law firm, or manufacturer in the world.<\/p>\n
That asymmetry creates enormous opportunities for startups facing fight-or-flight moments.\u00a0Margins\u00a0and automation capture attention and investment. But customer integration and high-touch service\u00a0make\u00a0up the moat.<\/p>\n
A Parting Word to My Fellow Founders<\/p>\n
The next generation of great AI companies can\u2019t beat hyperscalers and tech giants with endless budgets on price. They definitely can\u2019t win by competing head-on with OpenAI or Anthropic on generalized intelligence. However, it\u2019s possible to thrive \u2014 and grow \u2014 if you can accomplish what giant platforms historically struggle to do: become indispensable to the operation of a customer\u2019s business.<\/p>\n
We\u2019re in the early days of\u00a0AI-for-everything. As in previous cycles, scores of young companies will be Sherlocked. The model I\u2019ve used to build\u00a0and scale\u00a0Nest\u00a0and\u00a0now Mill\u00a0\u2014 going deep on vertical integration \u2014 works. Founders interested in longevity should build and forward-deploy teams vertically around specific offerings or products. Hardware, software,\u00a0and product design\u00a0should all work on something together. The hyperscalers are delivering world-class innovation on a nearly daily basis. But they\u2019re also clunky and siloed. If you want to survive and grow in the face of fierce competition, make sure you never join that group.<\/p>\n
The opinions expressed in Fortune.com commentary pieces are solely the views of their authors and do not necessarily reflect the opinions and beliefs of Fortune.<\/p>\n
#worked #Steve #Jobs #Apple #update #killed #startups #founders #face<\/p>\n","protected":false},"excerpt":{"rendered":"
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