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.

My comment:

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.