Last week I had coffee with a friend who is shopping his enterprise cloud company on Sand Hill. He was bemoaning the fact that VCs have started to do in enterprise what they have long done in consumer — let the market choose the winners. As far back as my own venture days (1998 - 2003), it had become inexpensive enough to launch a consumer facing website that it was rare for anyone to fund a company based on a PowerPoint alone. We’d send entrepreneurs with good ideas along to go find a technical co-founder, launch a proof of concept and then let the market decide what was interesting and what wasn’t. Lazy yes, but a lot more effective.
Until recently, it was much harder to bootstrap an enterprise facing company. The software was more complex, price points significantly higher, sales channels required substantial investment and quite frankly, no enterprise would buy software from an unfunded start-up. Cloud computing changes these dynamics. Mind you, no company is going to shift its storage from Amazon to unfunded start-up. But it’s much easier for an enterprise to trial new cloud-based technologies because the upfront commitment is much lower (versus a multi-million dollar enterprise software stack) and it seems that the venture world is starting to require the same “go show me” approach to funding the next wave of enterprise companies.
As goes the venture industry, so goes media. The fact is, crowd sourcing innovation can be much more cost effective than making big bets on gut feel. When the crowd works — here’s looking at you Justin Bieber — it works big. Now publishing is jumping on board, please meet Amanda Hocking:
If Hocking seems a bit blasé about signing her first deal with a traditional publisher, and a multimillion-dollar one at that, it’s hard to blame her. Since uploading her first book on her own last spring, she has become — along with the likes of Nora Roberts, James Patterson and Stieg Larsson — one of the best-selling e-authors on Amazon. In that time, she has grossed approximately $2 million. Her 10 novels include the paranormal-romance “Trylle,” a four-book vampire series that begins with “My Blood Approves” and “Hollowland,” which kicks off a zombie series whose second book will come out in the fall. Her character-driven books, which feature trolls, hobgoblins and fairy-tale elements and keep the pages turning, have generated an excitement not felt in the industry since Stephenie Meyer or perhaps even J. K. Rowling.
Fanfic was hugely popular on LiveJournal, it was unfortunate that my only run-ins with the genre as the (temporary) owner of LJ was the more sordid aspects of the genre. Still, I can’t imagine a better training ground for learning the market dynamics of content creation. E-books now have enough mass to allow anyone to publish and some to thrive, upending the publishing process much as the mp3 did for music. The more the crowd gets in the middle of any medium, the better off we’ll all be.
