Monthly Archives: January 2012

Don’t run after money ! Really ?

“[My aspiration is] to change the world,” said Dennis Crowley, cofounder of Foursquare.  “If this turns out to be an amazingly big business at the same time, well, that’s an added bonus.”  This is hardly what you would expect to hear from a founder who raised $20 million in a Series A from all stars including Andreessen Horowitz.  Aren’t these guys supposed to be razor focused on monetization?  In a quixotic way, many founders of revolutionary internet companies begin with visions that have no component on monetization.  How can we explain this irony: some of the “best” and “most innovative” internet companies–and therefore those with the highest valuations–are often founded by visionaries who are supposedly indifferent to–you might even say disinterested in–monetization.

Consider Crowley, a dreamer who was fascinated by the idea of bringing a gaming layer to the physical world.  Indeed he even wrote his NYU thesis on the subject.  And it was this nearly-academic curiosity that shaped his vision for the company.  “We just want to get all these things built… and to put as many pieces in place as possible.  After we do that, then we’ll try to monetize,” he explained.  “And if we can’t monetize, at least we will have pushed the world forward a little.  We taught people about check-ins.  We taught them about location services and about life as a game,” he offered.  For Crowley, monetization is literally an afterthought.  It is secondary in sequence and importance to product and impact.  To understand Crowley and founders like him, it is critical to understand his personal motivations.  He values teaching society about a concept.  He values helping people build better relationships.  And he values pioneering sociological concepts that enable future companies to realize his vision.  His passion reminds me of Ronald Reagan’s line: “It is amazing how much you can get done if you don’t care who gets the credit.”

Yet this attitude–indifference to ownership and IP, a disinterest in monetization–would seem a poor fit for the model of venture-backed s-corps that nearly all of these companies pursue.  How do we make sense of the essentially communitarian, visionary disposition of innovative founders in the context of venture-backed companies with billion dollar valuations?  Would Martin Luther King have built a megachurch and charged for attendance?  Would Karl Marx have required a subscription for his podcast?  Would Mother Teresa have billed $500 an hour for a hospital visit?  Probably not.

Mr. Chris Cox, VP of Product for facebook, helped answer this question.  He said that in certain ways facebook should be a non-profit.  Facebook’s mission–“to give people the power to share and make the world more open and connected”–sounds like it could be the mission of the Reporters Without Borders or the Berkman Center.  So why not run facebook as a nonprofit?  They ran into a little problem: in order to realize the mission, they needed a few hundred of the smartest engineers, pedabytes of data storage, and world class infrastructure.  And to have this, they needed money.  And lots of it.

The essential tension is this: in order to realize revolutionary impact from innovative new technology products–even ones with social, communitarian purposes–the business must have a way to monetize so that it can finance the development, roll out, and support of the product.  Thus for facebook, monetization became a tactic to help realize the vision of the product–monetization was not an end in itself.

We might even go as far as to say that the success of revolutionary internet companies is partly explained by the absence of monetization strategies at their founding.  Monetization ought to emerge—but only as a supporting mechanism to realizing the vision.