Brad Feld was with us in Chicago last summer at the Excelerate Labs presentations. He writes a blog, Feld Thoughts and we thought this recent post was particularly interesting to entrepreneurs thinking up their next company. In it, he talks about how one entrepreneur builds a Company X, and then other entrepreneurs desire to get funding for companies that are derivatives of Company X. Click the link and read the whole thing.
Good Advice from Brad Feld
Derivative companies often times can be profitable companies. It depends on the niche they want to exploit. They can be great lifestyle businesses for the entrepreneur. But, the derivative of Facebook will have a hard time competing with or being a game changer like Facebook.
Going further, Brad made a really good point to keep in mind,
“As an investor, I’m not really interested in any of the verticals that are derivatives of platforms. Other than a few specific cases, where we actually believe a platform company can be created, we stay away from vertical markets. And often, the driver of the decision is the entrepreneur and his obsession with and experience in the particular vertical market in question.”