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The More Boring, The More Exciting !
Don't follow the herd, huge opportunities are hidden in plain sight...
An obvious case,
The general opportunity,
The more boring, the more exciting.
An Obvious Case
I recently chatted with the former executive of a large tech company in the music industry. When I mentioned DICE, a live concerts ticketing app that now serves millions of fans every month, as one of the most exciting consumer opportunities out there, he was a bit embarrassed because he barely knew them and had never used the product. I invited him to ask his daughter if she was using it. On the following call, he jumped straight into the conversation…
Of course, my daughter knows DICE; she loves the product and uses it every week to discover new gigs to go to with her friends in NYC; it’s actually one of her favorite apps!
This conversation was not isolated. For people who haven’t really dug into the world of live entertainment or engaged with fans to understand their experience, it’s challenging to grab the extent of the opportunity.
Yet, it’s hidden in plain sight: The incumbents’ product, customer support, and overall attention to fans, venues, promoters, and artists’ satisfaction are among the worst across the entire entertainment industry. The incumbents claim to provide fair market conditions while, in reality, they have built a paradise for scalpers and hide fees in such scandalous ways that even the president of the United States is tweeting about it…
This particular case also shows how a dominant player like Live Nation / Ticketmaster can feel like a threatening force against which you don’t want to fight. And they clearly have that attitude. The market has sucked in all their bullshit announcements and intentions, their fake releases and failed attempts, but a loaded table of crap always ends up flipping. I mean they can’t even serve their darling stars…
I remember one venture capital investor in Viagogo who had this really condescending tone about how new entrants were changing the natural order in place. he was bragging about how much they enjoyed every dollar they made out of providing a damaging experience to the entire industry. Like it was business as usual.
The live entertainment industry is a particularly obvious case of crazy magnitude. it’s also a perfect example to understand what venture capital investors might be looking for when they look at existing, mature industries.
The general opportunity
A great company going after an incumbent that has been around for a long time, with a repeatable business model and yet extremely low customer satisfaction, it’s irresistible to fund. It’s especially true with a founder who has clarity of vision and manages to surround themselves with the right people to tackle an opportunity.
Some people will argue that those incumbents will eventually catch up with you and smash your face with a much better product down the road or that you will never turn a decent profit as they’re on a zero-margin race. Incumbents love to fuel that narrative by announcing all the new things they are working on and how they will increase their domination through all those new initiatives. And their cost structure is so heavy that it really looks like it’s impossible to turn a decent profit… But in reality, this pessimistic prophecy rarely holds true.
First myth: If they want to, they will build a superior product faster because they have more people and money than you will ever have. Then they will deploy new features and crush you.
Well, for some reason, it looks like incumbents actually don’t want to build those so-called superior products. We haven’t seen any ;-)
Let’s take two opposite spectrums. on the one hand, the oldest players whose foundations are on weak technical and customers care pillars. On the other hand, the most agile and strong tech organizations, like Bytedance, Facebook, Apple, Amazon, Google…
Surely Bytadance would kick your ass if you wanted to drag race with them. They are great at copying, and their ability to scale is spectacular, but stealing your product and then building on top of it is not their forte. The absence of an existential narrative put them in a precarious position. Their attempts often lead to, at best, novel yet misconceived features. And blitzscaling isn’t a recipe for strong foundations.
Second myth: They have the volume to run a thin-margin business. Most certainly, your company will fail before you can reach escape velocity, and even if you don’t, it’s not appealing to investors.
I love that fallacy. Startups are leaner than corporations. They need fewer people to do more business. The quality of their product and customer care allows them to have better operations, higher organic growth, repeat rates, and, therefore, higher revenue per consumer. On top of that, they can improve their business model as they grow thanks to better-integrated products and experiences, on point with future trends.
The more boring, the more exciting…
When a team of three engineers pitched me the most compelling train ticket-selling experience in 2011, I got incredibly excited by this 70 Billion Euros opportunity. Only a handful of investors truly believed in the opportunity, and hundreds passed on them, arguing about the power of the incumbents and the absence of a viable business model. They eventually sold for 300M€ (after having raised 15M€ only…) to Trainline. And under certain conditions, they could have built a multi-billion euros business.
When Tony Fadell told me about DICE in 2018, I couldn’t have been less excited about the prospect of backing a platform where the primitive was to sell concert tickets. it didn’t take long to understand the obvious, tremendous opportunity ahead. Not only are they now serving millions of fans, but also more and more venues, promoters, and artists, all over the world.
If you’ve read the recent report from Coatue about fintech, you will be surprised to see that even if banks have been under assault by so-called neo-banks, very few entrepreneurs actually decided to climb the north face of the industry in order to build a truly complete and scalable banking infrastructure, product and service. Most of them have built product-first experiences, leading to successful ventures, but only serving a small subset of the population. That’s when Memo Bank comes into play. They have built the most agile yet robust bank infrastructure possible, ready to grow and scale all over Europe and beyond. But most people looked at them with crazy eyes during their first couple of years.
Of course, it’s not enough to go after markets where incumbents are lagging behind the most basic expectations of their customers. It requires entrepreneurs to have an extraordinary level of vision, strategy, and execution.
If you believe you’re one of them and you’ve started building, knock at the door :)
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