Aug 24, 2015
Don’t Invest in Today’s Market Size
Often I am asked “Why are you investing in bitcoin and VR? Those markets don’t exist.”
You mean they do not exist YET.
“You need a market that’s going to be big in 10 years. Most investors are obsessed with the market size today, and they don’t think at all about how the market is going to evolve.” — Sam Altman, President of Y Combinator
Many investors look at what startups could be big TODAY. But it takes 5–10 years for a startup to reach what many think of as success in terms of users and revenues. So with that fact in mind you need to predict (hopefully with accuracy) what markets will be big in those time frames. Tomorrow’s market will look much different than today.
There is also the obvious problem here — what if the market never actually happens? This systemic risk is what we at Boost VC are willing to bet on. There are many potential sectors to invest in. We make the majority of our decisions based on two factors.
1. Are some of the smartest people in the world working with the technology as hobbies?
“What the smartest people do on the weekend is what everyone else will do during the week in ten years” — Chris Dixon, Partner at Andreessen Horowitz
2. Is there a small passionate community that can imagine what the future will look like?
Places like ZapChain.com show the massive engagement and love for early technologies amongst a small user base (the largest two being bitcoin and virtual reality)
We make bets on smart people. People have done well betting on these early signs of a market in the past. We can look back at the infancy of the internet and remember the many dismissals.
Another important thing to consider is TIMING. Being too early is never a good thing and just because a technology or sector gets some hype it does not mean you need to jump in. In the 90's many people were convinced VR was about to take off. In 2011 the price of bitcoin surged, then collapsed and nearly died.
Today I was sent the latest Gartner’s hype cycle for emerging tech and it was great to see both VR and bitcoin (cryptocurrency) on there — both saying the ‘plateau of productivity’ (when the market is ready) is 5–10 years.
There are 20 or so markets which seem like great spaces to be investing and I am excited to see which ones mature over the coming years. The fun thing about these sectors are they don’t just create modified versions of existing solutions (ie putting outdated companies online), they are creating entirely new industries and ways of life. When the smartest people in the world are working on crazy ideas in their spare time and the timing seems right… Be there and along for the ride.
