Musing on inevitability, timing, and use cases

I’m at the Web Summit in Dublin this week and attended two interesting talks today. One was an interview with Palmer Luckey, founder of Oculus VR and the other a panel with Rana el Kaliouby, founder of Affectiva and Ebbe Altberg, CEO of Linden Labs (creator of Second Life).

All three of these people have an incredibly high level of conviction that the technologies they are working on will become become ubiquitous. Luckey believes that virtual reality will, for many use cases, be superior to what the physical world can offer and when the price and quality are right we will all carry a virtual device. Kaliouby believes that when our devices can sense our emotions they will be able to serve us better so we will all choose to let them read our feelings via the camera. Altberg believes that virtual worlds will allow people to meet, maintain relationships and be more productive than the physical world and that when they get easy and cheap enough to use we will all flock to them.

I think there’s a very good chance that all three of them are right.

But it’s hard to say when.

As I’ve written before being too early to a market is as bad as being too late, and that generally the idea of first mover advantage is a chimera.

There are two strategies investors can employ in these situations.

The first is to back the early visionary in a space with large rounds to solve the technical problems and create the market. That is the ballsy and arguably most exciting play. Occulus was that play in virtual reality. Makerbot was that play in consumer 3D printing. Fitbit was that play in wearables. Affectiva may be that play in emotionally aware computing.

The second strategy is to wait until the use cases become clear and back companies solving clear customer problems. This approach is more conservative but, I believe, ultimately more rewarding for both entrepreneurs and investors. Most of the biggest startup successes have followed this route and the odds of success more generally are higher. Facebook came after Myspace and others had established the social networking use case. There were many search engines before Google. Oracle was not the first database company. The same is true of the hundreds if not thousands of companies that have gone on to achieve exits in the hundreds of millions.