During a gold rush, who makes the most money?
Chris Dixon explains the saying, “There is a saying in the startup world that “you can mine for gold or you can sell pickaxes.””
He goes on to say:
When a major new technology trend emerges — say, the rise of online video or social media — entrepreneurs can try to capitalize on the trend by creating a consumer product (mining for gold), or by creating tools to enable consumer products (selling pickaxes). For most technology trends, the number of successful companies created in gold mining and pickaxes are comparable, yet the gold mining businesses tend to get much more attention. In online video, YouTube is often thought of as the big winner; however, to date, more money has been made by online video by infrastructure suppliers like Akamai. Y-combinator is known for their high-profile B2C startups but their biggest exits to date have been in infrastructure (most recently Heroku which rode the popularity of Ruby on Rails to a >$200M exit)*.
This is a timeless insight that applies, perhaps to an even greater extent, today.
I am thinking of ways to build “digital pickaxes” that can make money on today’s eccentric “trends.”
Interest in blockchain, augmented reality, cryptocurrencies, and others has only continued to grow up and to the right.
How can we capitalize on and support these spaces?
Originally published at gonen.blog.