
Everyone loves the Google startup story. You know the one… when they started, pretty much everyone thought that the search business was all wrapped up. First by Yahoo, then by Excite, then by Altavista. But it wasn’t, it was only the tip of the iceberg.
People use this example to show that innovation happens in the dark corners, not the light of day. To innovate means going where the rats are scattering from, and not succumbing to the warm comfort that comes from joining them wherever they happen to be headed next.
But Google is the easy example. At the time, the Yahoo’s of the world were still seen as positive, enlightened, poster boy companies. Search worked. All Google had to do is explain that they believe they had a better way, because clearly the way was paved with gold.
The example that I prefer instead is Flickr. Because not only was photo-sharing “done” when Flickr started, many people thought it wasn’t even worth doing. Shutterfly, Ofoto, and others created sharing photos with your family in a nice, clean, private way (after all, who would want to share photos with strangers). And they had proven the streets of photo sharing were not paved with gold. People would not buy enough photos, there were no significant exits, and I remember chatting with many investors who had simply written off the entire category as untenable.
I’ve never talked to Catarina and Stewart about raising money for Flickr, but it couldn’t have been easy. I can see investors rolling their eyes. This was a dark corner of the Internet that should best be left alone. Too much money was already poored in. The results were in.
The pressure for a startup to go towards conventional wisdom is intense. You are constantly getting advice from investors, advisors, mentors, peers - and they will likely point you towards what everyone tells them. I feel this every time we are asked whether we are a “games company” or a “music company.”
I know what our users think, I know what my team thinks, but also know what the conventional thought wants to hear.
Music is also one of those dark corners right now. I hear this over and over. Great for traffic, no way to monetize. Pandora is on the rocks. iMeem can’t get profitable. Seeqpod gets sued as soon as it’s big enough for the labels to bother. And even if you can cut a deal, no business can thrive in any market when 70% of the revenue goes out the door on the way in.
Meanwhile, games are hot hot hot. If you’re not making an iPhone game right now you must be daft, because the gravy train is rolling from every credit card, through every Apple password, into startups’ pockets. Or at least be making a casual MMO or social game. Anything that the unwashed masses can pay for by signing up for a trial subscription to Maxim or a third credit card.
And so the temptation is there. It would be simple for us to emphasize the virtual goods and gaming, try and distract from music. “Music? Oh yeah, that’s a theme we think will appeal to people, but let me tell you more about Kart Rider and Club Penguin. Did you know they sold for $700m dollars? Just think of us as music-themed Zynga.”
The truth is, as will become clear over the next six months, is we are a music company first. Our heroes are visionary companies that broadened, even redefined, our expectations of what a music company could be. The originating visions of MTV, Harmonix, Last.fm, and others.
We believe in the universal and endless passion of people for music. We believe that what people crave and will pay for, when they go to concerts, or dance, or play Rock Band, is to do more with music than listen. We believe in building a new way to experience music together through games.
Especially when talking to investors, or advisors, the temptation is intense to sell the hot story of the day. But to succumb to what people want to hear would be ignoring the vast blue ocean we see right in front of us.
At one of my early startups, internetsoccer.com, it seemed every failed investor meeting or new issue of Business 2.0 lead to the drafting of a new opening paragraph of the executive summary. We wavered from the confidence of our own instincts about the product direction, from our rising traffic, from the passion of our users, and had to learn a hard lesson about succumbing to market spin. We got lucky and got a positive exit ($15m on $1m raised), but not without a lot of uncertainty about what we were even selling and who we were supposed to make happy next.
We forgot that a real measure of the power of a startup is the ability to re-ignite the dark places.