GenuineVC David Beisel's Perspective on Digital Change

April 9, 2007

As an early-stage VC, I have a unique privilege of confidentially spending time with a number of entrepreneurs throughout their company formation and initial product development process. And it’s amazed me how many times I’ve seen two entirely separate groups of entrepreneurs without any knowledge of the other’s activities independently come to launch very similar products/services.

Information about new startups and trends affecting them is near ubiquitous given the rise of influential and well-read blogs, as well as the mainstream press and conferences. And based on these visible and salient market trends, smart people tend to be led to the same conclusions about wherein lies the opportunity. If a large objective market opportunity exists, it would be unusual for it to go entirely missed by those with experience in the space. However, not everyone sees it that way – entrepreneurs, bloggers, and others sometimes privately/publicly accuse and dismiss other groups of copycat tactics.

This copycat threat leaves entrepreneurs hesitating about spreading knowledge about their startup endeavors, especially early on. Yes, there is certainly risk in this perspective and there is a logical set of reasoning for operating in stealth mode, as I wrote about a couple of years ago (my opinion is that the best course of action isn’t a binary approach, but rather a nuanced one.) But I believe the risk of another someone literally copying an entrepreneur’s startup idea is largely overperceived and overweighted. Generally-speaking, isn’t it better to bang your drum about your idea with better hopes to attract co-founders, employees, advisors, capital, and other important continents to make your company successful?

Of course, there are exceptions to every rule – sometimes a founder has unique perspective given his/her past experiences that allows her to recognize an opportunity in the market which others do not see. And I would highlight a distinction between the essential startup idea and a trade secret or other proprietary information which provides unique competitive differentiation. But I always start with a skeptical stance about first-mover advantage claims as the primary barrier to entry into a competitive set. Sure, network effects provide clear competitive advantages in many markets, but it hardly guarantees success without other differentiation. Defensibility with other aspects of the business model and above all, execution, mean so much more than a few months time-to-market.

Give entrepreneurs credit where it’s certainly due – very few set out to pursue a true copycat strategy. Almost all are reacting to market dynamics and an authentic (though sometimes incremental) idea. The question when pursuing a new idea for a business isn’t “has someone else thought of this and how can we prevent that from happening?” but rather “how can we beat someone else who is thinking of this right now?”

(And when you see a new company that launches that rhymes with another, I wouldn’t assume it’s a copycat endeavor that doesn’t have other tricks up its sleeve which aren’t yet visible.)

  • http://www.ScrollinOnDubs.com scrollinondubs

    David,I think you’re right that the first tendency of a passionate entrepreneur in pursuit of an idea is to assume the copycat scenario. As far as the strategy of how to best release info- there’s no one-size-fits-all but the non-binary, gradated approach seems most effective. If the idea is so simple to reproduce then it’s not defensible in the first place. Keeping it stealth in the early stages can build mystique and help maximize the splash on launch – case in point: the Joost/Gmail invite process of selectively letting in friends-of-friends.

    I recently read Ray Ozzie’s story from the book “Founders at Work” on how he built Groove and they followed the same gradual revelation strategy. Eventually they were comfortable talking openly about the technology because they knew it was a difficult problem they had solved. Likewise, we’re openly discussing our JumpBox technology at this point because it’s not a trivial task to recreate what we’ve built.

    Sean

  • http://www.crowdstorm.com Philip Wilkinson

    Absolutely – I always think that every idea I have had, there are about ten other people around the world who have thought the same thing. Only 3 of them will ever go and so something about it though, and only one of them (or me) will actually make it be the most successful.

    I always say “it’s not how many ideas you have, but rather how many you make happen”.

  • http://www.9thx.com kellygoode

    You make a valid point about entrepeneurs, their passion, their drive, and their ingenuity. Rarely is the idea a copycat – in fact true entrepeneurs drive the curves. I am close to one such entrepeneur – he started EPort and now is CEO of The 9thxchange (which leads the way in the digital marketplace) http://www.9thx.com. His visions are always ahead of the curve – but there will be followers – there must be. Isn’t that what Capitalism is all about – especially in this technologically open marketplace?

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