11 April 2008

"new path to liquidity"

Very (very) interesting post from Fred Wilson...

There is no doubt in my mind that he is spot on about many of the underlying forces here (and about some of the issues and likely outcomes as well. But at the same time - I disagree rather vehemently with some of his other points.
The Internet is decomposing into a vast array of micro-services that we, the end user, stitches together to make our own unique web experience. It is the de-portalization of the Internet and it is very real. And yet, these large behemoths are trying to do their normal consolidation play on the Internet. First of all, it's not going to work. They are destroying value with all of their M&A efforts and the bigger they get, the more value they will destroy, for them and their shareholders.
Incredibly well stated - more clear on both topics (the future of web "software" and the issues with the large ex-Portal companies as seen illustrated in MicroHoo) than I could EVER hope to be.

The description of internet features/services/products becoming a "vast array of micro-services" is perfect. But what's been left out is the push on these micro-services (usually by investors I fear) to become something larger (and more "portal like"). See LinkedIn. See Plaxo. See Flikr Video.

And it's really important to realize the implications of the statement that these micro-services are "stitched together" by the consumer. This is truly profound statement. It's profound at a Product level, at a Business level - and of course at a Brand level. This is a fundamental shift in the way things work.
Here's the problem. The company/web service creation process needs some kind of end game. The entrepreneurs who spend years and risking a ton need a way to get paid for that effort. And those of us who finance their efforts need to get some return on our investment. We can argue about the magnitude of the return we need and a host of other things, but the fact remains that without a path to liquidity, all the innovation that is being created by the entrepreneur/VC equation will stop happening.
But here's the rub...
I totally agree that investors need their returns - and that VCs really (really) need that return. Their entire existence depends upon it.

But do the entrepreneurs need that end game?
In this (brave) new world - is it really years and tons of risk? We're not talking enterprise software here.
I'd argue that - for many entrepreneurs - it's reasonably low risk these days and the time investment to get to having a job that doesn't suck and pays reasonably well is not that long. So... is having a job that doesn't suck (and getting reasonable pay) enough? Do all entrepreneurs really want to GetRich?

Here is the scenario.
You see the opportunity for the creation of a new micro-service that people can use. There is a potential revenue stream from it. You join together with two other people and spend three months building an alpha version.
You set it loose. It works or it doesn't.
If it doesn't - you move on (having lost 3 months). If it does - you keep developing and now have jobs that don't suck (and are getting reasonably compensated).

How does this "stop all innovation"?
This implies that all technology innovation is and has been driven by the desire for Fortune.
Sorry man... I don't buy it.


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