Creating, funding and acquiring “skins of data”February 13th, 2009 View Comments |
Ethan Bauley riffing on RWW: New Tweetdeck Out Tomorrow, Here’s What It Will Include:
By far the most interesting thing about this to me is what it means for future software M&A deals. Tweetdeck is funded by betaworks, which is also an investor in Twitter. Betaworks also sold Summize to Twitter, which became known as Twitter Search.
I’m sure the geniuses at USV and betaworks have been brewing these strategies for a while, but it’s very cool to see an M&A market built on companies that create value using an API.
Mark MacLeod wrote about the “era of the small exit” a couple weeks ago; what we’re seeing is the result of what happens when people can create products (or even businesses?) based on creating new “skins of data” on top of platforms using public APIs.
As I commented on his site:
Not only might the M&A market might become an efficient hiring market for talent and products, but finding and executing the right acquisitions and partnerships sooner and quicker might become a more important core competence than planning and executing product extension development.
From an investor standpoint, I wonder if there is more value in funding the “skins of data” or the “platforms of data”?
I don’t think that the same investor will fund multiple skins of data on a shared platform; it creates too many conflicts of interest and consolidates the investment dollars into a single platform.
Implications? In the latest iteration of the “build v. buy” and “built to flip” debates,
- The best strategy for building product extensions is giving access to the platform via an API and 1) learning to create and share value with the ecosystem as easily as possible and, depending on the strategy, 2) buying the best products / businesses created.
- The best way to get hired might be to create your own job.
- Entrepreneurs and their investors should revisit and perhaps refocus on early exits as they are creating operational goals and capital structures.
- The best investment strategies might be to focus on either platforms or skins; but note that each strategy requires very different operational, funding and entrepreneur support strategies.
In a skittish entrepreneurial and investment climate, I am doubtful that entrepreneurs will commit the time and effort to build new platforms, especially with investors less likely to fund the gap between costs and revenues.
Until then, creating, funding and acquiring “skins of data” will likely be the locus of activity even if they do not create the most long-term value.
February 14th, 2009 at 11:31
great post man. i am building a 'skin' as you call it right now (on the side). it's actually targeted to be an add-on to three services that many people are using together now. could never exist on its own, but would fit well in that suite of products.
February 14th, 2009 at 11:42
thanks, and I would love to hear more about what you're creating…
February 14th, 2009 at 14:35
Great post again. I like the idea of building skins and extensions coupled with the small exits. Was just thinking about this and wondering what would be the right exit point for Shouldless should it have the opportunity. Might also work well with the peer-produced startup process and kudos equity model. Interesting…
February 14th, 2009 at 14:42
I wonder if “planing for the exit” is more important for a peer-produced organization than a more traditional organization; knowing that the parts will be more flexible during the value creation process, would it be harder to fix the foundation once you're ready for the exit? What would that entail?
Btw, this makes me feel more confident that working on innovating organizations is important: “new institutions demand new kinds of organizations to carry them” fav line from @umairh (58:50) http://tinyurl.com/c5tk37</a>…
Also: I've been toying with an idea for a compensation / equity structure based on the kudos model that I'm contemplating using for a couple ideas; writing the post at the moment and will ask for your (public) feedback…
February 14th, 2009 at 17:22
Great!
I'm not sure about the need to plan for the exit… maybe more like rapidly
iterating product/service around user expressed needs in parallel with
concious reflection and frequent reconnection with the 'core ideology' or
DNA of the 'organization'. This is what I think then informs the type of
organization model that's necessary to be able to keep focus on those two
things and evolve to serve them in the context of a rapidly evolving
external environment. That's why I've been very interested in the Stafford
Beer vsm stuff and the notion of variety engineering in organization design.
Particularly in the context of social media and it's informational richess -
variety engineering of information and communication flows could produce
some powerful results I suspect.
Some other places I've played with this are in the 'venture vortex' model:
http://igniter.com/post33
Venturing on the frontiers: http://igniter.com/post61
Doing differently in the Great Remix: http://igniter.com/post66
And kind of in the influence of Open on venturing: http://igniter.com/post76
Glad to be in startup mode again and be able to bat this around while
actually in the game.
February 15th, 2009 at 00:57
Creating “skins of data” is more entrepreneur friendly than investor friendly. Micro-M&A deals are just glorified hiring bonuses. It follows that investors, in my opinion, should focus on platforms (markets) as they both create and capture the most value. Nevertheless, developing “skins” to help us understand the overwhelming amount of data available on the open web is still a noble cause. I just think it becomes much more meaningful at a larger scale than the word “skin” suggests.
February 15th, 2009 at 11:23
There's probably a business model for investors to focus on platforms or skins, but they are different business models (financial and operational). I'm not really in a position to tell investors what they “should” focus on