At the end of the day, you’re not building an e-commerce company, you’re building a brand that has e-commerce as its core distribution channel. The difference is subtle but momentous.
In two decades of e-commerce in the US, we have produced only two standalone e-commerce companies of meaningful enterprise value: Amazon and eBay. One went public in 1997, the other in 1998. We haven’t had an IPO of an e-commerce company that has gotten to a two billion of market cap in fifteen years, let alone double digit billions.
Yet Marc Andreessen is predicting the death of traditional retail as e-commerce “eats the world.”
Startups have been systematized, mythologized, culturally and socially de-risked; reduced down to formulas and recipes. Yet, there is no enduring formula for creativity and rebellion. When we attempt to factory farm innovation we breed out the very thing we’re trying raise: the creative destruction that stokes and re-stokes the fire of capitalism.
There are two primary reasons startups fail. The first is they create a product no one cares about, a solution that doesn’t meet a need for a large enough market. This is a problem the Lean Startup movement has been working to solve. The second problem is they don’t know how to get customers. While they probably pay attention to traffic, the number of users who sign up, and the amount of revenue they generate, it’s likely they don’t know what happens in between. And even if they do, it’s likely they aren’t sure what to do about it.
In choosing to sell the company and hand Tumblr over to a professional management team with a track record for monetization through media properties, the board is implying that they do not feel putting more money into the company would enable the management team to achieve a better outcome in a reasonable amount of time. Investors who participated at the $800M valuation are probably welcoming the prospect of a $1.1B exit in cash – assuming some liquidation preferences were put in place they’ll get their customary 2x-3x late stage return, and the deal won’t negatively impact their respective fund’s overall IRR. Selling now may also allow David Karp to remain in a leadership position at Yahoo! where he can continue his work to revolutionize advertising – maybe even leading Yahoo! to a more competitive position vs. Google for brand advertising and giving them a reason to drop the underperforming partnership with Microsoft in the long term. And if things don’t work out with Karp Yahoo! doesn’t seem to have any problem firing acquired founders who no longer fit with the company’s plans. In the end Tumblr won’t see a bigger exit because they didn’t prove they could monetize their massive traffic before time (and money) ran out.
Technological revolutions happen in two main phases: the installation phase and the deployment phase… Each revolution begins with a financial bubble that propels the (irrationally) rapid “installation” of the new technology. Then there is a crash, followed by a recovery and then a long period of productive growth as the new technology is “deployed” throughout other industries as well as society more broadly. Eventually the revolution runs its course and a new technological revolution begins.
But, these moments are not about being right, they are about being willing to face the test of the market. Sometimes the truth is hard to hear, often it is not what you thought when you started, but the best founders create these moments of truth early and often– through the pain of getting the product built, the agony of raising money, the struggle of recruiting and hiring and managing a team — entrepreneurs live to put it out there and find out if they are right.
The best entrepreneurs craft their companies to generate as many moments of truth as possible.
Facebook released data on the most “Liked” NFL team in every county.
Very cool visualization of the #NFL through Facebook
I think we will see an evolution from the world of mass-produced content to drive SEO results in 2012 to a new world in 2013 where content will have much more of a voice, a heartbeat and personality for the brand. Consumers will not just see content, but will feel it and will feel much more connected to it – not like the impersonal, mass-produced content of the past.
Google – thanks for playing the long game here. I wish more companies, especially other tech companies, did this especially when they have massive resources. Sure – some think they are playing the long game, but they are really playing the short game with a bunch of things that take a long time for them to get out the door. Different game.