Only Ten Years Too Early
I love the name of our friend and fellow VC Howard Morgan's blog, Way Too Early. It's the cardinal sin of the venture capital business and something we've all been guilty of.
I was reminded of this as I was reading the NY Times' piece on netbooks today. It was this part that stirred the memory cells in my brain:
for just $50 if they signed up for an Internet service plan — an offer
the phone company may introduce elsewhere after a test period.
Ten years ago, my prior firm Flatiron Partners "incubated" a company called Internet Appliance Network (or IAN as it became known). The idea was championed inside our firm by Seth Goldstein and also by our good friend Russ Pillar. We came up with a plan to build cheap internet appliance devices and partner with brands to give them away. The idea was that we could build a large user base and make money through advertising, marketing, and e-commerce. It was 1999 of course.
We invested something like $10mm in the business and built a team of talented engineers and business people and launched a device which we partnered with Virgin Entertainment to take to market. This is what the device looked like:
Needless to say, this was not a successful investment. The device worked but it had a number of fatal flaws outlined in this PC World review from 2000 (you gotta love the internet, history is retrievable in a nanosecond). Tom Spring said the following about the IAN device:
of the time I tried to connect to the Web I had trouble logging on.
Sometimes Web pages took nearly 10 minutes to load. Prodigy,
responsible for connectivity, says slow and failed connections have
less to do with its network and more to do with compatibility between
the appliance's modem and the Prodigy modems I dial into. Worse,
Bill Kirkner, Prodigy's chief technology officer, tells me that
updating software on any appliance with a "nonstandard operating system
and nonstandard hardware is a very tricky proposition."
There were other problems wtih the device, but honestly the business model and the implosion of the internet bubble had as much to do with IAN's failure as the shortcomings of the device.
But another reason this failed is that we were ten years too early. We knew that cheap hardware and connectivity, the emerging era of web based apps, and the value of a one to one relationship with a consumer was a winning proposition. We didn't know it would take ten years to become viable.
Beware of "way too early". It hurts and it keeps hurting. Which is good. Because no pain, no gain. You learn best from your biggest mistakes.