This is the blog of Adam Kalsey. Unusual depth and complexity. Rich, full body with a hint of nutty earthiness.

End of defensibility

Union Square Ventures' Charlie O'Donnell was having trouble explaining how some of his investments had defensible businesses. It occurred to him that perhaps defensibility is a flawed concept.

What is a defensible business anyway? Last time I checked, we lived in a free country with a government that promotes competition and curbs monopolistic behavior. Any customer of a company can choose to stop being a customer at anytime, right? Now, perhaps switching costs are high, but I would argue that they are capped to the degree that customers would be unwilling to sign up for a product whose switching costs were so high that, in the event of poor performance, they could not afford to leave.

And even if you think you have a good defense, are you defending the business, or the technology?

We saw a lot of late stage VC deals whose "barrier to entry" was that they were the only ones who had a certain technology. However, we started to realize .. that pure technology advantage was a fleeting notion. Maybe you were, in fact, the only ones with a technology, but that doesn’t mean you were the only ones with the solution. In other words, there are always many ways to skin a cat.

A while back I talked to a patent attorney who pointed out that a great many ideas are patentable, but those patents are likely to be useless in a business. You patent the technology, and then someone comes along and solves the same problem in a different way.

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