Wednesday, February 20, 2008

Community Economics

Is it possible for the traditional startup / venture model to succeed when building community products? I don't know.
Looking past the bubble-inducing imagery seen in the link below, I think the "bloggers" in the following Big Idea broadcast ask interesting, albeit potentially misguided questions:

They ask and assert:
How do you get it to the mass market? How many to sell the first year to survive? How many friends will own one? A lot will depend on pricing. The market's not big enough.
Most of these questions are off the mark, since the premise is that differentiated consumer products address a long tail of needs (not mass market). The one point I tend to agree with is pricing, since the community of DIYers tends to be very price sensitive.

After watching the video, I walked away with three impressions:
1) Hubris - why is it that every time I watch an entrepreneur, they're super confident and egomaniacal? What happened to the charismatic leaders in Jim Collins' "Good to Great"? Where are the closet geniuses, the garage tinkerers, and the purely curious?
2) Disconnection - why is it that I somehow do not "connect" with the personalities in that video? I'm a voice in the community, and I can say this much; I don't feel motivated to join them just to be another cog in the "crowd".
3) Disappointment - I work hard for my money, and I want it to support a real cause. Spending money to satisfy price premiums imposed in order to fulfill venture investor return requirements doesn't get me as psyched as it used to.

Something is missing. I wish I knew what it was. I think it's a structural problem. And somehow, I have this nagging suspicion that traditional VC isn't the right way to go for community-oriented companies. I'm inclined to think other models may be more appropriate. I wish this entry had a solution, but at the least I'm now motivated to find one.

1 comment:

john personna said...

To answer #1, capitalism runs on hubris and unrealistic expectations. That's necessary to reconcile two facts: great business succeed, and 90% of all businesses fail.

For #2 and #3, I'd worry that this is a little of a "scroll saw" phenomenon. Around the turn of the century everybody got a scroll saw and kept their hands busy ("creating value") cutting out clock cases and plant stands. We could call it ultimately futile if the world didn't really need those ornate clock cases etc.

I am doing a little electronics now, but I kind of wonder if today's blinking lights and internet cat doors are really just plant stands, if you get what I mean.

There probably is a business model, for a while, filling hands that want to be busy, but I don't think it's assured that this will break through to universal duplicator maker nirvana.

The competition MSM (mainstream manufacturing) might be too good, and this might fall back to less trendy hobby electronics.