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Spotting The Next Amazon

A common refrain in startup investing is that the idea a company starts out with very rarely ends up as the product that makes them successful. Microsoft started out as a Basic interpreter for the Altair microcomputer before they dominated the operating system market. Facebook started off as a niche website for college students before morphing into the ubiquitous social media giant it is today. Amazon was an online book retailer and is now one of the largest tech companies in the world.

This makes investing in early stage startups tricky. We aren’t just evaluating the company in front of us, but also judging whether the company can grow to dominate a future market. In the example of Amazon above, it would have been difficult to guess that an online retailer for books would be the leader in cloud computing technology in twenty years, because at that time cloud computing didn’t actually exist yet. (This is why building a product that takes several years to produce a viable MVP is especially hard: you have to be sure that the market for your product will still exist by the time you build it.)

So how can we choose the companies that are going to be huge in the future? In other words, is there a way to spot the Amazons and Microsofts among the other companies that we might invest in?

Well, we know that the product will look different in the future. So one thing we look for is a company that can take risks and iterate on their product quickly, and a world class team that ruthlessly pursues what works and cuts what doesn’t. But even this isn’t enough. The very best companies start off with something in their DNA that allows them to succeed when others can’t. One reason we’re so bullish on Wripple is that Shannon, the CEO, is the former CEO of Razorfish, giving him powerful insight into the agency model Wripple is now disrupting. Going back to Amazon’s example, they had a unique position as a retail company branching into tech when they launched AWS. As Byrne Hobart wrote about, this meant only Amazon, whose plausible competitors were all software companies, could launch an AWS-like service without a huge hit to their margins. So if you’re a startup, the formula for success is finding a problem that you can solve better than anyone else, then build quickly and iterate rapidly on your solution.

We can also try to predict what the world will look like in the future, and choose the companies that we think can succeed in that future world. This is where our commerce expertise gives us a leg up. By growing our community of retailers, investors, and commerce-tech startups, we are in a uniquely good position to spot trends and predict the future of commerce.

So if you’re a startup that is solving a problem in the future of commerce, you can solve it better than anyone else, and you iterate ruthlessly, drop us a line. We would love to get to know (and perhaps invest) in you.

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