Tuesday, November 01, 2011

Products "R" Features



As a freshly minted Associate at a venture capital firm in early 2000's, I recall that one of my criteria for evaluating investment opportunities was figuring out (with analytic precision, of course) whether a particular startup was really a "product" or a "feature"... Turns out that was a totally futile (if not counterproductive) exercise!

So many of today's ├╝ber-successful startups in fact are nothing more than features. Google started out as a feature inside a portal (Yahoo) and who knows, may end up being a feature inside a social network or mobile device 5 or 10 years from now. And look at all these neat features on your smart phone called Apps! Wouldn't you have loved to invest in some of the popular ones, like Angry Birds?

I think the traditional problem with investing in "feature" companies is the concern that a "product" company in that industry, with its seemingly infinite resources, can one day easily roll out that feature and crush that "feature" company. Sort of like how Apple crushed (wink, wink, nudge, nudge) Siri to the tune of over $200 million and Google crushed YouTube for $1.7 billion...

Suffice it to say, lots of great VC investments can be made in things that may be considered mere features today, but will end up being far more revolutionary and game-changing than many products in the market.  In the long run, we will all be dead and all products become features anyway!

5 comments:

  1. Vibram's Five Finger Shoes, which is one of the highest selling shoes in the world today, was a mere feature as the sole for many popular shoes...

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  2. Love that example @Urban Girl!

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  3. Very insightful post, Touraj! The difference between features and products mattered much more back when getting a product to a user (selling, delivering, installing, deploying, etc.) was a high barrier. Now that most software is SAAS, the barrier is gone (or at least became much lower), and narrowly focused solutions that previously would be dismissed as "this is a feature, not a product" are able to thrive.

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  4. I have heard of a VC fund hiring McK to come up with an investment strategy ... can you believe it?

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  5. Great feedback @Eugene!

    @Stefan, sounds oddly familiar :)

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