Are there only two types of tech entrepreneurs?
It’s that time of year when niche publishers (like New Zealand Entrepreneurs) begin to feel the adverse affects of holiday cheer in the form of very low website traffic. There’s not much work to do other than preparation and planning for the new year, so I read a lot.
Entrepreneurs should read a lot, or so Rebekah Campbell tells us. Sometimes I read my own work. I like to compare my past work to how I would portray it today, as my perspective constantly changes while I learn from different entrepreneurs and startup founders.
Yesterday I was reading about app entrepreneurs, particularly James Brown, who has made millions off of his iOS-based apps.
On a more disappointing and unrelated note, he apparently cares little for New Zealand media. “Things like this . . . really, publicity in New Zealand is 1 per cent interesting to me, as opposed to something in the American media,” said James Brown to Stuff.co.nz.
When I was reading that article it occurred to me that there are two main types of entrepreneurs, specifically, but not exclusively, in the tech industry. I was going to write three, but I’ll explain why I’ve made it two a little later on.
As Rod Drury said when we interviewed him earlier this year, when Ford, GM and Chrysler were thriving in Detroit, a whole economy popped up around that industry. Cafe’s and restaurants, hotels, supermarkets – they all flocked to the area because those companies had created an economic platform that others could build upon.
It’s very similar in the tech industry. In fact, I think many entrepreneurs limit themselves by not thinking in terms of creating a platform.
Let’s look at the big names in tech. These are the companies that have changed how we live our lives – Apple, Google, Xero, TradeMe, Amazon, and Facebook to name a few. They’re all essentially software platforms. They have created great products, and then opened them up to the public who are developing businesses around them. This in turn makes all those companies household names and extremely profitable.
They seem to follow a familiar John Rockefeller motto.
“I would rather earn 1% off a 100 people’s efforts than 100% of my own efforts.”
It’s unclear to me if that was their direction from the beginning, or if it was the result of world-class entrepreneurship, expert mentoring, and a small measure of luck merging to write the pages of history.
Rod Drury hinted that it was always a part of the bigger picture with Xero. Someday I’d like to ask Zuckerberg and Bezos if they also had anticipated creating platforms from day one.
Although the question of whether these companies’ courses were plotted in parallel is not immediately relevant, what is clear is that they have become global giants not only in the tech space, but within the world economy.
The other type of tech entrepreneur is the one that builds a software, service, or a SaaS, on an existing platform. They’ve made companies that have been very successful, generating millions for shareholders and founders. Let’s consider Zynga on Facebook or all the app millionaires who have built products for iOS and/or the Google Play Store.
In New Zealand we have the add-on providers for Xero and the people who have built businesses around buying and selling on TradeMe. In the US there are multiple-employee stores who only have a presence on Amazon.
I personally would still classify most of them as entrepreneurs. They’ve taken risks and have received large rewards for doing so. However, their businesses are heavily dependent on how their parent platforms operate.
The Detroit situation has taught us that building a business on top of a platform can be very dangerous. Once that platform relocates, changes its structure, or has to make alterations due to its obligation to answer to shareholders, the companies that have been built to depend on them risk losing your source of revenue.
It certainly has clear advantages too. There is an established medium through which those startups can offer existing consumers a product or an extension of the platform’s service. The big companies don’t have the time and resources to make every imaginable extension for their services, or to find every imaginable product and sell it to consumers. It’s up to entrepreneurs who are willing to take very large risks to make our esteemed big names in tech what they are today. Just imagine a world without Angry Birds. Or Amazon and TradeMe without any vendors.
I’m not saying that these companies are less notable or worthy of attention than their parent platforms. Look at Snapchat, which allegedly just turned down $3B from Facebook. That’s a big, bold, capital B.
I mentioned the possibility of a third type of entrepreneur earlier, but in my opinion, this is just a businessman. I’m talking about the person who creates a platform, but failed to open it up. We’ve all seen them, and I won’t name any examples, but is that still an entrepreneur? Someone who can’t see the profit and growth that could be achieved by encouraging community input?
Simply writing this article has made me completely rethink my business strategy. Currently, I’d have to say I’m either the second type of entrepreneur, or the type that hasn’t considered opening up their platform.
Let me know what type you think you are in the comments.