Startup general interest

Physical products should be things people want first and platforms second

By March 27, 2014 No Comments

There has been much talk over the last couple of days about Facebook’s $2bn acquisition of virtual reality headset maker Occulus Rift, a lot of it suggesting reasons why they would pay so much for a consumer company that is yet to ship a consumer product. To my mind the best answer to that question is that virtual reality could become a platform as important as mobile and that Facebook wants to position itself well if that happens.

You could use a similar argument to explain Google’s recent $3.2bn acquisition of Nest, although this time the next ‘platform’ is the connected home.

I think these arguments are good explanations of why the acquisitions happened – i.e. why Facebook and Google specifically were interested and why the price tags were high – but not why the companies were successful. The success came because they created products with a real wow moment that people love and talk about with their friends (strictly speaking in the case of Occulus Rift products that people think they would love…). The acquisition interest came after that success.

Moreover, there are other hardware companies out there enjoying success because people love their products that aren’t platforms in the same way – e.g. GoPro, which is slated to IPO.

My point is that founders of hardware companies should think first about creating products people love (and a sustainable business) and second about being the next platform. I’m afraid we might see a wave of business plans from companies thinking platform first and product second.