Wednesday, January 25, 2012

Is innovation dead?

I have been meaning to write this post for a while, and listening to Mike Maples of Floodgate rant about the issue tonight at the Founder Showcase finally got me off the stick.

As an investor I hear a lot of pitches. A disturbing trend in the last 18 months is that most companies can succinctly describe themselves as the [insert hot company] of [insert underserved enormous market]. That almost always means that they are just an iterative solution as opposed to something revolutionary.

The really big ideas are ones that seem like madness. Things that you could not even imagine a few years ago. You could not describe Facebook or Twitter as the X for Y market. They were enabling new behaviours.

Investors are somewhat to blame for this explosion of me too companies. An area gets hot, and investors pile in and fund copycats and "inspired by" companies hoping for an easy hit. But the big money is made by staring into the abyss.

Where this model works consistently well is in foreign markets. There are companies dedicated to cloning business models that work well in the US and applying them in other locales, and then selling them to the US company when they are ready to expand abroad.

Someone told me that the companies to invest in are the ones doing things you could not even have imagined 3 years ago--I like that filter.

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