October 14, 2007
There is a term I have started to use: “VC vanitudes,” referring to the numerous vain platitudes that any of you in the startup ecosystem routinely hear us throw around.
For example, 80% of VCs have “top quartile returns.” I haven’t figured out that math yet.
We reject deals that won’t deliver “venture returns.”
We build “world class management teams.”
We spend our time looking for the “next big thing.”
And, one of the most common VC vanitudes is that we only invest in “platforms,” a term of art which, I would wager, less than 25% of VCs have paused to consider what it actually means.
About a year ago I was chatting with a BIG NAME VC from one of the BIGGEST NAME Sand Hill firms. When I told him that I had recently invested in the company behind WordPress (notwithstanding the fact that he holds himself out as that firm’s Internet guy, I had to tell him what WordPress was), he condescendingly explained that his firm would never invest in a blogging “tool,” since they only invest in “platforms.” Having been required to check my ego at their imposing Sand Hill Lobby, I didn’t respond, though I can’t resist noting that last I checked his portfolio consisted of a hardware product, an ecommerce tool, and two web consumer apps. Platforms are great when you find them, but, let’s be honest, most big VC hits really aren’t platforms at all.
With Facebook’s announcement of the opening of the “Facebook Platform” a little while back, there has been lotsa chatter in the blogosphere (not to mention VC pitches) about internet “platforms,” a widely used but poorly understood term.
Coming to the rescue, recently converted powerblogger Marc Andreesen has offered a lucid exposition on what it means to be a platform:
“A ‘platform’ is a system that can be programmed and therefore customized by outside developers — users — and in that way, adapted to countless needs and niches that the platform’s original developers could not have possibly contemplated, much less had time to accommodate.
We have a long and proud history of this concept and this definition in the computer industry stretching all the way back to the 1950’s and the original mainframe operating systems, continuing through the personal computer age and now into the Internet era. In the computer industry, this concept of platform is completely settled and widely embraced, and still holds going forward.
The key term in the definition of platform is ‘programmed’. If you can program it, then it’s a platform. If you can’t, then it’s not.
So, if you’re thinking about computing on the Internet, whenever anyone uses the word ‘platform’, ask: ‘Can it be programmed?’ Specifically, with software code provided by the user? If not, it’s not a platform, and you can safely ignore whoever’s talking — which means you can safely ignore 80%+ of the people in the world today who are using the term ‘platform’ and don’t know what it means.”
Andreesen goes on to summarize the 3 different levels of internet platform:
- A Level 1 platform’s apps run elsewhere, and call into the platform via a web services API to draw on data and services — this is how Flickr does it.
- A Level 2 platform’s apps run elsewhere, but inject functionality into the platform via a plug-in API — this is how Facebook does it. Most likely, a Level 2 platform’s apps also call into the platform via a web services API to draw on data and services.
- A Level 3 platform’s apps run inside the platform itself — the platform provides the “runtime environment” within which the app’s code runs.
Not surprisingly, Andreesen states that the only Level 3 platform out there today is Ning. I think he may be missing one.
Specifically, WordPress honcho Matt Mullenweg has offered the following:
“I think WordPress and WP.com is a level 3 platform, because plugins run on the same platform as the application itself, so you get whatever scalability is there in that system.
For WordPress.org users this is just their blog host, but on WP.com it’s our internet-scale infrastructure. However we don’t allow arbitrary plugins on WP.com, so it’s like an invite-only level 3 platform.”
I like that — an “Invite Only Level 3 Internet Platform.”
I am checking with Marc to see if he agrees. I’ll let you know 🙂