During the industrial age, economies of scale were a major source of competitive advantage. Many production processes exhibited decreasing unit costs over a very large range of output. Steel was a classic example which resulted in a few very large steel companies dominating the market (at least until the rise of mini mills which made steel from scrap). The defensibility of scale in the information age is a lot less clear. Why? Because there are companies that are providing scale to others. Am...

There is something very exciting going on in the world of software: a shift towards developing new application software in-house (as opposed to relying on third party offerings). For instance, at USV we have developed the linksharing on usv.com and our new analyst application process. Why does that make sense now? Because writing small applications has become so easy that it is today’s equivalent of writing an Excel macro. Chris Dixon has a good post yesterday where he describes some of the t...

I am generally not a big fan of strategies that involve pursuing business A now in order to pursue B in the future. I tend to believe that you should go for B right away. For example, if you are planning to disrupt textbooks I would likely prefer a strategy that figures out how to peer produce those instead of one that first tries to make the renting and exchange of existing textbooks more efficient. Why? Because there are few businesses that have pulled off the “A now, B later” trick – most ...

One of the many good things about blogging is that one can go back in time and look at one’s own thinking in a more objective way. Without putting it in writing it is all too easy to pretend, as history unfolds, that one had a great understanding way back. Our minds a terrific at rewriting our own thoughts – this tends to come out strongest when we talk about our career paths. One example where I am reasonably happy with my own analysis is acquisition of Motorola Mobility by Google. I wrote t...

It’s been a while since I have written a post in my Scylla and Charybdis series. As a quick refresher, the basic premise of the series is that startups are hard because on pretty much anything you can do too much or too little and the path to success thus requires navigating a narrow straight with deadly obstacles on both sides. Today’s post is about listening. As an entrepreneur you can do too much or too little listening. How can you do too much listening you may ask? Well, by listening her...

I have been meaning to write about “internet exceptionalism” since I read a post titled “It Always Comes Down to Math” but various political and economic events intervened. The key quote summarizing the post is “but at the end of the day, regardless of what business you’re in, everything comes down to the same math problem. Revenue minus expenses must equal a positive number.” That is of course not much of an insight although it would have been useful to add something like “from some point fo...

At the height of the re-engineering craze there was one fantastic HBR article titled “Re-engineering Work: Don’t Automate, Obliterate.” In light of the changes in the labor market the choice of “obliterate” may now seem unfortunate, but the basic point of the article was spot on: don’t implement your existing processes in technology, come up with entirely new ones that simply weren’t possible before. Much the same applies to building net native businesses. It is not about building a smoother ...

I am quite optimistic about the long term potential of augmented reality. But I question whether now is the right time for a top down adoption strategy with a polished consumer product. It seems to me that we are at the hacker and early adopter stage instead. By going with an immediate mass market strategy and embracing celebrities I think Google is taking a very big gamble. Let’s keep in mind that the iPhone was far from the first smart phone. A lot of software and application tinkering had ...

First time entrepreneurs often ask me what they should do to maximize their chances of raising venture capital. To which I invariably answer: “Not need it.” Why? Because raising capital or selling your company is all about having a credible alternative. If you have a credible alternative you will arrive at a good deal – if you don’t, then bad things will happen. This is true for raising capital and it is true for exits. In both cases the best credible alternative is not needing the capital an...

During the industrial age, economies of scale were a major source of competitive advantage. Many production processes exhibited decreasing unit costs over a very large range of output. Steel was a classic example which resulted in a few very large steel companies dominating the market (at least until the rise of mini mills which made steel from scrap). The defensibility of scale in the information age is a lot less clear. Why? Because there are companies that are providing scale to others. Am...

There is something very exciting going on in the world of software: a shift towards developing new application software in-house (as opposed to relying on third party offerings). For instance, at USV we have developed the linksharing on usv.com and our new analyst application process. Why does that make sense now? Because writing small applications has become so easy that it is today’s equivalent of writing an Excel macro. Chris Dixon has a good post yesterday where he describes some of the t...

I am generally not a big fan of strategies that involve pursuing business A now in order to pursue B in the future. I tend to believe that you should go for B right away. For example, if you are planning to disrupt textbooks I would likely prefer a strategy that figures out how to peer produce those instead of one that first tries to make the renting and exchange of existing textbooks more efficient. Why? Because there are few businesses that have pulled off the “A now, B later” trick – most ...

One of the many good things about blogging is that one can go back in time and look at one’s own thinking in a more objective way. Without putting it in writing it is all too easy to pretend, as history unfolds, that one had a great understanding way back. Our minds a terrific at rewriting our own thoughts – this tends to come out strongest when we talk about our career paths. One example where I am reasonably happy with my own analysis is acquisition of Motorola Mobility by Google. I wrote t...

It’s been a while since I have written a post in my Scylla and Charybdis series. As a quick refresher, the basic premise of the series is that startups are hard because on pretty much anything you can do too much or too little and the path to success thus requires navigating a narrow straight with deadly obstacles on both sides. Today’s post is about listening. As an entrepreneur you can do too much or too little listening. How can you do too much listening you may ask? Well, by listening her...

I have been meaning to write about “internet exceptionalism” since I read a post titled “It Always Comes Down to Math” but various political and economic events intervened. The key quote summarizing the post is “but at the end of the day, regardless of what business you’re in, everything comes down to the same math problem. Revenue minus expenses must equal a positive number.” That is of course not much of an insight although it would have been useful to add something like “from some point fo...

At the height of the re-engineering craze there was one fantastic HBR article titled “Re-engineering Work: Don’t Automate, Obliterate.” In light of the changes in the labor market the choice of “obliterate” may now seem unfortunate, but the basic point of the article was spot on: don’t implement your existing processes in technology, come up with entirely new ones that simply weren’t possible before. Much the same applies to building net native businesses. It is not about building a smoother ...

I am quite optimistic about the long term potential of augmented reality. But I question whether now is the right time for a top down adoption strategy with a polished consumer product. It seems to me that we are at the hacker and early adopter stage instead. By going with an immediate mass market strategy and embracing celebrities I think Google is taking a very big gamble. Let’s keep in mind that the iPhone was far from the first smart phone. A lot of software and application tinkering had ...

First time entrepreneurs often ask me what they should do to maximize their chances of raising venture capital. To which I invariably answer: “Not need it.” Why? Because raising capital or selling your company is all about having a credible alternative. If you have a credible alternative you will arrive at a good deal – if you don’t, then bad things will happen. This is true for raising capital and it is true for exits. In both cases the best credible alternative is not needing the capital an...

Vinod Khosla said yesterday at Techcrunch Disrupt that one of the hardest things for entrepreneurs is to figure out whose advice to trust on what topic. That is spot on because as an entrepreneur you will get advice from just about everyone all the time (including random people you have just met for the very first time who don’t know squat about your product or company). Unfortunately that terrific quote will get buried because of a bunch of other things Vinod said right then, such that a lot...

Vinod Khosla said yesterday at Techcrunch Disrupt that one of the hardest things for entrepreneurs is to figure out whose advice to trust on what topic. That is spot on because as an entrepreneur you will get advice from just about everyone all the time (including random people you have just met for the very first time who don’t know squat about your product or company). Unfortunately that terrific quote will get buried because of a bunch of other things Vinod said right then, such that a lot...