Wednesday, February 23, 2005


Brad Feld, a partner at Mobius Venture Capital (investor in HeyAnita, whose Korean entity I helped establish), has a great post on the soon-to-be overfunded blog and RSS startup space:

As I was reading through his posts on each company, I had a strong feeling that the RSS / Blog universe has entered the “me too zone.” It started when I read about Five Across (a Six Apart clone, but better – please change the name ), saw the aggregator congestion (Onfolio, Pluck), and more blog / audio / video / photo tools (Serious Magic, Imeem, WhatCounts, Photoleap, iUpload).

Every emerging market hits a point where there is a mad rush of early stage entrepreneurs and VC’s piling in. In some cases, it drives rapid innovation; in most it creates near term over-saturation, lots of irrational financings, and plenty of carnage as the laws of Darwin play out over the next couple of years.

I’m afraid we just hit that point with RSS / Blogging. The meme has spread broadly - which is great. Now we’ll watch all gods children pile in to try to get something up and running in this “space” (more on the fallacy of “space” in an upcoming blog). Again – nothing wrong with this - it’s the natural dynamic of an early emerging market, but anyone that is experienced (and still has their long term memory intact) knows how it plays out for so many companies, entrepreneurs, and investors.

Clayton Christensen discusses this phenomenon in detail in his classic book The Innovator's Dilemma – and reaches back to the example of the hard drive industry from 1976 to 1995. In 1976, there were 17 firms in the hard drive industry. Between 1976 and 1995 there were 129 new entrants to this industry. By 1995, of the 17 firms in the industry only one – IBM’s hard drive operation – still existed as a stand alone business. Of the 129 new entrants, 109 had failed. Christensen developed his “technology mudslide hypothesis” from this – “coping with the relentless onslaught of technology change was akin to trying to climb a mudslide raging down a hill. You have to scramble with everything you’ve got to stay on top of it, and if you ever once stop to catch your breath, you get buried.”

Sound / feel familiar? Christensen then studied a lot more data and concluded his “technology mudslide hypothesis” was wrong. He concluded that neither pace nor the difficulty of technological change lay at the root of the leading firm’s failures. This led to Christensen’s theories on sustaining vs. disruptive technologies – where the real meat of the discussion is (and I’ll encourage you to read the book for more – it’s worth it – even if you learn better from conferences then from reading books).

While Christensen addresses what happens in the early stage of a disruptive market, I can boil it down into my own simple phrase – “the me too zone.” It’s as if the whole world wakes up one day and starts working on the same types of things. Lots of innovation continues at the core – and the first movers either aggressively extend their lead or completely fuck up somewhere and self-destruct – but in either case a huge number of “fast followers” (or “me too”) companies appear. VCs suddenly get religion and the funding piles into the sector. Suddenly everyone is talking about the “hot new “X” space”.

The cliche “watching a car wreck in slow motion” comes to mind. It’s definitely fun in a sick sort of way. Welcome to the me too zone – I believe we just entered it for the RSS / blog world. There is a huge adoption (and innovation) curve ahead of everyone who is doing stuff with RSS / blogging – and there are plenty of good investments left to make and companies to create – but the noise and clutter is about to get really loud. (full post)

No comments: