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Specialization

Updated: May 10

In the earliest human civilizations, people were generalists. If you wanted to survive, you had to know how to do everything, from building houses to cobbling shoes to growing food. As civilization grew, however, people began to realize that it was much more efficient to specialize. Today, instead of each person trying to do everything themselves, they just do the things they are good at and outsource the rest. A very strong man who isn’t the quickest with arithmetic can be a lumberjack, and an intelligent woman who would only injure herself with an axe can be a schoolteacher, and society is the better for it.


Specialization has a lot of advantages. For one, it increases diversity of skill. If everyone is a generalist, each person can only learn to do so many things. The total number of functions that can be performed by the ecosystem is constrained by what each individual is able to do themselves. Instead, if each person specializes in what they’re good at, this constraint disappears. The total number of functions is now the sum of the individuals in the ecosystem, and actually grows as the ecosystem grows. Specialization enriches the whole ecosystem.


Second, it provides more opportunity for each person to do what they excel at. Steve Jobs never had to waste time sewing his own turtlenecks. He could buy them at the store and get on with what he excelled at - building Apple.


Third, specialization allows people to become subject matter experts. John Goodenough is the inventor of the lithium-ion battery, and at 98 years old is still publishing papers and filing patents on the cutting-edge of energy storage. He has been a specialist of battery technology for the better part of a century, which has allowed him to continually advance the boundaries of his field. In this way he has created much more value than a general researcher, who might switch fields several times in their career and have to start from scratch each time.


Specialization has some drawbacks, however. A specialist can specialize in a field that nobody cares about, and will be compensated less than a counterpart who chose to specialize in a more desirable field. A generalist can be more confident that their skills are useful. A generalist also is involved in several different fields, and can apply lessons learned in one field to avoid mistakes in another.


Silicon Road is a specialist venture fund. This is a deliberate choice. Although most venture funds are generalists that invest in anything that might produce venture returns, we focus solely on commerce tech, because that’s what we’re experts in. It’s already helped us in several ways. Great commerce tech startups often seek us out and want us to be on their cap table because we know commerce tech so well and can leverage deep industry relationships. Because we’re subject matter experts, we watch emerging technology trends through the lens of application to commerce. As a result, we have developed strong points of view on problems and solutions in this space. We can provide specific advice to our portfolio companies, and we can provide connections to a community of retailers, investors, and other startups that are all trying to solve problems in the same domain.


And these effects compound. In the past year, for example, we’ve heard pitches from several different companies (who approached us because of our commerce tech focus) that are trying to solve the problem of clothes bought online not fitting, with solutions ranging from a simple widget on the site that inputs personal measurements to comparison with different known brands to high-tech computer vision platforms. Our focus allows us to build deep expertise in niche areas like this, which helps us bring additional value to companies and investors. And the venture capital ecosystem is better for it, because now these kinds of problems have someone better equipped to find a solution.


There are a lot of amazing tech startups out there building things like the next generation of clean energy and biotech and social media, but none of that concerns us. We’re laser-focused on building the future of commerce.

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