Larry Cheng, Managing Partner at Volition Capital, has a new post up titled My Favorite Value Proposition is Admittedly Boring. The idea is that after 16 years as professional investors, he’s zeroed in on his preferred type of tech startup that has the following criteria:
- Existing Market – People/companies are already paying for the product or service (it’s not a new market)
- Cheaper Offering – Instead of better, faster, and cheaper, the focus is on the cheaper part of the equation
- Structurally Defensible – At it’s core, this new technology or delivery model is different enough from the incumbent that it’s not feasible for the incumbent to switch (many companies have died clinging to their golden goose)
- Sustainable – Like the transition from buying in stores to buying online, it has to be innovative and sustainable (ecommerce isn’t going away anytime soon)
My personal style as an entrepreneur is to invent new products whereby the business buyer didn’t have a solution before, and not the cheaper offering route. Thankfully, there are a number great ways to build successful companies.
What else? What are some more thoughts on a cheaper offering that’s structurally defensible and sustainable?