Victus Spiritus


VCs building sand castles that float

16 Apr 2009


Mo Koyfman's post "First Destruction, Then Creation" challenged my imagination of the ideal information business.  In it he briefly discusses the large gradients of change in today's economy.  The needs of our society are being fulfilled by changing business models.  Fundamentally different systems are being formed in the new market space.

The following are key concerns raised by Mr. Koyfman for any emerging entrepreneur or company:

"We have to start by asking what does the consumer or customer *really*
want?  How can we deliver it to them as efficiently and effectively as
possible?  What is the least it can cost us to deliver?  What can we
fairly charge for it?"

I included my initial comments from his post with some extended answers:

  1. We have to start by asking what does the consumer or customer *really* want?
    • Consumers want the truth, entertainment, and sometimes to be lied to. I'd like to work on the first two. I just honed in my comment on a slice of the consumer market that desires information.  There is a (thankfully) small sector of the market that really does require spin doctoring, but I'm not interested in that business.  Most people want honest information from a trustworthy source, and they'd like to enjoy the experience of getting that information.  Hence, truth and entertainment.
  2. How can we deliver it to them as efficiently and effectively as possible?  What is the least it can cost us to deliver?  (I grouped these two questions together as they're related)
    • How much of your time are you willing to sacrifice on optimizing & market tactics?  As I like to envision myself an "idea guy" I'd prefer crafting novel tools instead of endlessly reworking broken ones.  Obviously, that doesn't get me too far unless I can find an army of energetic workers to help make my abstract concepts become concrete. The majority of our businesses are focused on keeping momentum going, and maintaining products rather than innovating.  That's why I'm pretty psyched about the role VCs are playing.  They are ultimately after profit, but they are doing it by funding small groups with big ideas.  Sounds like a pretty fantastic job (I guess it has to be if it's going to require 70-80 hour work weeks to juggle all the responsibilities).
  3. What can we fairly charge for it?
    • More than it's worth, but less than people are currently willing to pay. It has to be a profitable product or service, and it has to be high value to the customer by being priced at a lower level than they are willing to pay.  Some would say you should charge precisely what a customer is willing to pay, but I'd prefer my customers always feeling like they got a bargain by shopping from me.

Another venture capitalist's (Fred Wilson) post illustrates an example of a company that is poised to thrive in the emerging media market, Facebook.  His entry When You Are A Public Company Without Being Public discusses the fairly open nature of Facebook's finances, some rumored revenue numbers and a forecast of Facebook going public.

One commenter, MartinEdic, drew attention to the fact that Facebook has grown into a ubiquitous social beast:

"I am middle-aged and have 160 active friends on Facebook, most of whom have joined in the last six months and are not techies. Virtually none of them Twitter for example (I have posted guides to Twitter at the request of some). What does this mean in the real world? Facebook, as a platform, has crossed the chasm. No other social media platform, including blogging, has done this. This means the market they are creating is not demographically techies, young people, niche interest groups- it is everyone.
When you are reaching everyone your revenue models don't have to be earthshaking innovations. They not only reach a broad swath that is growing, they have a lot of data about everyone- much more, for example, than Google has. They not only know our demographics and
interests, they know our range of people who share those interests. Our 'influence' in other words. From a marketing POV, we only need to focus our Facebook buys on the influencers and we exponentially increase our reach with relevance. This is huge."

And my response:

Great viewpoint Martin (breaking out of the tech market), you just have to sell the tops of the social trees in facebook to create massive need for your product(s). But any social media is going to have to keep users engaged. That's a tough job. Facebook has to make our social
lives not just easier, but better for it to keep people coming back.

My opinion on the direction of social media:
What I think many folks want is a big virtual hub where they can hang out and catch up with friends. Text and images only go so far. Sharing a game together can be fun (mmorpg) but can get stale. Even voice conferencing has it's limits for large group back and forth  interaction.

I perceive winning social media companies sharing deeper: People need to able to share not just a brief picture of a restaurant they went to for dinner, or a family gathering. In order to really connect we need to share deeper. I'm talking about sharing fears, hopes, dreams, future plans all the stuff that makes us who we are in a virtual environment. It's hard to feel comfortable opening that much of ourselves to the public (and we probably shouldn't).

This simple blog entry can't capture the gratitude I have for all the hard working venture capitalists that make our world better one company at a time.  Hope you fine ladies and gents know that your tireless efforts don't go unnoticed.