Brad Feld

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The Three Constituencies

Jul 14, 2006
Category Technology

No – this isn’t going to be a post about the father, the son, and the holy ghost. 

I’ve done a number of investments in the past few years that have three possible constituencies: (1) subscribers, (2) publishers, and (3) advertisers.  While I won’t try to map them to a particular member of the trinity, they share one thing in common with the trinity – if you believe in them, they are all critically important.

Early in my career, I ran a custom software company.  We built PC-based business applications primarily for small and medium size companies back when dBase II was considered state of the art and a Novell fileserver took 24 hours and 600 disk swaps to build (assuming you had the right drivers for v2.0a.)  We had our equivalent trinity: (1) cost, (2) speed, and (3) quality.  After a while, we learned that we could solve for two of these, but not all three. So – we started explaining to our customers that we could deliver on any two of cost, speed, and quality, but not all three. 

I’ve been pondering the same trend today, just with a different set of constituencies.  The metaphor is a little different this time around – I’m finding most successful companies serve one constituency and get paid by another.  For example, Google serves the subscriber (or user – although I prefer to call end-users “subscribers” in this metaphor because I think you can map “user” to any of the three categories) and gets paid by the advertiser. 

Interestingly, I’ve run into a number of companies that can’t decide who they are serving and who they are getting paid by.  In a number of cases, I’ve run into people that think they are serving all three but getting paid by none, or who present potential revenue models to me where they get paid by all three.  Now – a company can have different segments of their business where they shuffle the constituencies around (Microsoft is a classic example of this) – but this is really hard for a startup.

As with my experience with my first company, I’m finding that when companies understand how they are serving their constituencies, they are much more effective at accelerating their business.  It also makes partnering a lot easier, as you know that someone who serves the member of the trinity that you don’t should make an easy partner (e.g. neither of you is a threat to the other), while someone that has perfect overlap with you is a more difficult partner to solve for.

Time to go pray (I mean work.)