What do VC’s look for when they invest in the startups which threaten mega-industries like radio?
Marc Andreessen, VC and cofounder of Netscape, spelled out the formula in an HBR Ideacast episode with his former partner Jim Barksdale.
Here’s what Andreessen and investors like him look for:
A large incumbent…
In an established industry…
With a bundled product or service offering…
In the presence of underlying technology change…
Where there’s an idea for an unbundled version of the product or service the customer might prefer more than the incumbent version…
And an entrepreneur who can build a business around it
That’s it.
A large incumbent in an established industry?
That describes every radio broadcaster in America.
A bundled product or service offering?
That describes every optimized music playlist and every bundle of music, entertainment, and information on every radio station in America.
Underlying technology change?
Check!
Ideas for unbundled versions of the product or service?
And isn’t every incubator full of entrepreneurs who dreams of building a business around their unbundles?
As Andreessen and Barksdale note, this is so hard for incumbents to grapple with because of their very incumbent-ness (the so-called “Innovator’s Dilemma
“).
But, as I like to say, the consumer doesn’t care about our problems – they’re too busy addressing their own, and embracing the nouveau unbundles which technology and inspiration together make possible.
Today, I was asked a sincere and thoughtful question by a broadcaster at the crossroads of radio and digital:
“Is digital actually a path to sustained growth for traditional radio? Some days, it seems like we’re spinning in circles.”
Here’s what I wrote back:
I think you’re asking the wrong question. Rather than asking how digital can sustain the radio business we should be asking how the brands built by radio – even their unbundled bits and pieces – can be as meaningful to consumers in the future as they have in the past. We need to look outside in, not inside out.
Otherwise we will be so busy creating digital add-ons for radio stations we will neglect to create digital solutions for consumers.