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11 tweets,
4 min read
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1) Interesting to see VC opinions of competitive advantage as expressed by what they are *not* funding. Large, growing TAMs in technology where there is minimal VC funding for new competitors are those with the highest perceived (VC) barriers to entry. Revealed vs. stated opinion
2) By this metric, VCs are most respectful of $GOOGL in search (zeroish VC funding), $AMZN in general retail (Jet.com was the only VC funded competitor in the US/Europe), $NFLX in streaming (no VC funded competition), AWS/Azure/GCP (minimal VC funding).
3) Dovetails with Bruce Greenwald’s assertion in “On Competition” (my personal favorite of his books) that scale is the most durable competitive advantage. Search, general ecommerce, streaming and IaaS are all relatively capital intensive & scale driven.
4) Only large incumbent co’s in adjacent mkts that afford them scale/distribution are trying to compete in these markets. $MSFT, $AAPL, $FB in search. $WMT in general ecommerce, suspect $W slowly expands into new verticals.
5) $AMZN in streaming ($ROKU in ad supported) with $DIS $T as prospective competitors. And only $GOOGL/$MSFT were able to “catch” AWS in terms of features/functionality with $GOOGL still catching up.
6) In terms of VC respect for competitive advantages of incumbents in large, growing TAMs, the above markets are followed by: Operating Systems (could argue that @magicleap/AR is a new OS, or at least the investors hope it is),
8) and Social Networks (@nextdoor, @discordap, @marcopoloap, @tiktok_us – and would argue that all/most of these are vertical/niches than a frontal assault on $FB). These markets - operating systems, productivity suites and social networks - are all dominated by network effects.
9) All of the dominant incumbents in the above markets should be good public equity investments over the next 5-10ish years. But scale – absent disruption - is a stronger barrier to entry than network effects (obviously interactions between the two) per VC revealed preference.
10) Also interesting to note the lack of VC respect for competitive advantage amongst incumbents in travel, most SaaS categories, payments, deep learning semiconductors and EVs – in each case the list of VC funded startups is too long for a tweet. Time will tell!
11) And although obviously way too early to say there are incumbents in autonomous vehicles, I’m surprised at the amount of VC funding here given Waymo’s overall lead and Tesla’s growing data advantage.
