“Building on someone else’s platform is a good idea, if you have your eyes wide open,” investor Fred Wilson told a packed room of entrepreneurs on Monday night at an Internet Week event in New York City. He was answering a question about whether or not it’s a good idea for startups to build on another company’s platform, and we caught his response in the video above.
Wilson knows a lot about this subject. He sits on Twitter’s board and a year ago wrote a blog post warning startups in the Twitter ecosystem ti stop “filling holes.” Twitter then proceeded to fill those holes itself by buying or building various clients and other services, and is still filling them to this day (its new pictures feature is a case in point).
While this issue has created a lot of angst in the developer community, Wilson is very straightforward about it. “You should expect eventually the platforms you are building on to do something against your interest. One day you may wake up and discover that platform is competing with you, and that sucks.” He encourages his own portfolio companies to avoid being in that situation, and to create direct relationships with their customers. Ironically, the one exception that proves this rule, Zynga with Facebook, is also one of Wilson’s investments. Watch the video, he gives some good advice to startups on how to use other platforms to their benefit without becoming dependent on them.
Another topic off discussion that night was startup valuations, which we captured in the video below. Wilson is still not saying the “bubble” word, but notes, “It’s not the most attractive time to be making investments.” Chris Dixon of Founder Collective and David Lee of SV Angel agree, but they are all still investing. The danger, they warn, is that entrepreneurs might take money at too high a valuation now and a few years down the road face a down-round if they don’t meet investors’ outsized expectations.
But Wilson notes that as investors they are benefiting from the high valuations because all the startups they invested in a few years ago are now worth that much more. He disagrees with Michael’s ffirst Blubble post in which he points out that VCs are talking up the bubble in order to talk down valuations because “it is not in our interest to talk down valuations.” It is, however, “just irresponsible.”
If you enjoy these videos, you can also hear what these three investors have to say about the uselessness of software patents.