Thoughts on startups by investors that
fund them & entrepreneurs that run them

Jack and the Startup Bean Stalk

If only there was a single idea that could make any startup succeed, huh? Well, it does exist: a business seed that, planted and watered, will grow to the sky. And you can have it without even giving me a gold coin.

Here it is: enable your users to thrive by using your product in a way that expands its utility to others.

First stop: think about how Microsoft beat Apple in PC Wars I: by opening its platform for developers, who could profit handsomely by developing and selling Windows applications. That drove the utility of Windows PCs, which quickly outpaced the more elegant, but closed, Macs in sheer usefulness. Internal development, even by the insanely great, couldn’t match the whole world’s inventiveness and drive.

Steve Jobs learned his lesson well. Not only is the iPhone open to developers: Apple provides them an entire development, distribution, marketing and monetization system. That took the idea of an open system to a new level, and accounts for much of the iPhone’s success.

But you don’t have to create operating systems or paradigm-shifting devices for the idea to work. WordPress dispatched Six Degrees because its developers could develop and sell templates; it’s core product became more useful than the competition’s as a result. E-bay has created legions of power-sellers who live off online auctions, but who also make E-bay an incredible place to shop. Both the HuffPo and Twitter work because they allow content creators to reach large audiences, burnishing the author’s personal brand in a way that’s otherwise not possible. Sure, the companies derive fabulous benefits from the free content; but the authors get easy, massive distribution.

Accelerating other people’s businesses is itself a fantastic business. This is especially true in our “many hats” economy: as large employers fade, nearly everyone is juggling several part-time activities to make money. So, help them. In a weird way, you can draw inspiration from the old “multi-level marketing” systems, like Tupperware. In the digital version, however, you can engage many more people, much faster, and get away with providing less reward to each one.

It’s not so hard to accumulate users when they can look at their time or money spent as an investment in their own prosperity. Work it so your company’s offering becomes more powerful at the same time and you’ll be waking up giants.

Written by Bob Rice

user Bob Rice Managing Partner,
Tangent Capital

Bob is Managing Partner of Tangent Capital, a registered broker-dealer and merchant bank focused on alternative assets and strategies. He is the resident industry expert on early stage and other private investments for Bloomberg TV, appearing daily as Contributing Editor on “Money Moves.” Bob is a Director of asset management companies with over $2 billion in AUM. Bob began his career as a trial attorney at the U.S. Department of Justice and then became a partner at Milbank, Tweed, Hadley & McCloy, where his practice centered on financial products. He left the law in 1996 to found a 3D graphics technology startup that eventually became the publicly traded Viewpoint, provider of the web’s first “rich media” advertising platform. He has been an active angel investor and startup mentor since 2004. Along the way, Bob also served as the Commissioner of the Professional Chess Association and authored the business strategy book Three Moves Ahead.

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Comments

One thought on “Jack and the Startup Bean Stalk”

  1. Awesome coverage! Thanks!

    nice post

    I second albertacowpoke’s question…

    I hate guns If no guns of everyone,the world maybe well.

    Think they would read the BILL if they had to live by it?

    Well, it should be…

    Yep what.s good for the goose is good for the gander. Great idea.

    Notice that the Chinese know how to do a stimulus package, while no one in power seems to know how to do a stimulus package here in the US.

    Thanks for sharing. His music will continue to rock!