Jeff Richards of US VC fund GSV Capital has a good post up today: Content, Community and Commerce: Why Verticals Win. His investment thesis is that vertical platforms combining content, community and commerce will make great investments over the next period, and he cites existing portfolio companies including Houzz as good examples.
The strategy of blending content and commerce has been around for a while now and underpinned the success of companies like ASOS and Net-a-porter, but it’s only recently that companies have started to understand the power of adding community. Communities come in three flavours:
- Consumer communities (e.g. discussion groups and review sites) – valuable because they bring users back to the site regularly and validate the product – e.g. Yelp
- Hobbyist or maker communities – valuable because they increase the quality and reduce the cost of product development – e.g. 3D Robotics
- Manufacturing communities – valuable because they reduce working capital and bring innovative products – e.g. Etsy
Content and community only work for vertically focused sites. As evidence, look at Amazon. They get these trends, it’s why they bought sites like IMDB and Goodreads, but there is no way they can take advantage of them on Amazon.com.
Vertical often means local, which is good news for those of us in startup hubs outside of Silicon Valley.