The aforementioned Ross Mayfield comments on my post about the venture model, suggesting that VCs should be more open to portfolios of activities within their ventures. (Also check out the comments.)

He hasn't convinced me, at least not with respect to early stage ventures. I'm looking for monomaniacal focus. The typical early stage company is stretched thin on management talent as it is - everyone is wearing multiple hats, working extra hours, stretching their talents. Last thing I want is a divergent path sucking up more time, energy, and money. Maybe during the bubble a company could get enough capital to hedge, to get a bit of breathing room, but those days are gone. I want the deal I was sold, at least until the team and investors are convinced it was wrong.

We should be careful not to confuse diversification with agility. Ross points to this post as evidence that portfolio behavior is called for. I can't agree. If you're venturing into an unknown market - 'social software' in that case - you'd bloody well better be ready to react when the customers don't behave the way you predicted. That's the whole point of my posting about OODA loops. If the market actually exists, and you can learn from your customers faster than an incumbent can adapt, you will diagnose the market need and get a long way ahead on serving it before they respond. If your board is worth a damn, they should be in there thinking about the process with you, and be open to the shifts required. (If not, you got the wrong investors.)

Once you're well engaged with the market, then it's time to think about expansion. But it should be from leverage points in your initial lodgement. For instance, if you've sweat to build a sales channel, you find out what other needs those customers have that you can credibly serve (and make money at it). But that is not a portfolio strategy, it's disciplined growth. You can be a conglomerate after you're public and I've got my investors' money safely out. Or, more likely, your pure play will end up being a good fit to a existing large company's internal portfolio.
10:51:42 AM    

Check out Charles Hudson's post on what broadband (and the maturing of the Internet market and audience) mean for AOL. It's not good. As a former online service manager, I'd say he's right on.
9:24:38 AM