Networks and Enterprises

A prominent trend of the internet era is the tech-enabled network.  Starting with forums in the early days to Facebook today, networks are arguably the web’s “killer app.”  The most recent incarnation of this is the current crop of marketplaces and networks designed to directly facilitate transactions and social interactions (e.g., Facebook, Uber, Twitter, Etsy, Lending Club, and many others).  These networks ease transactions and connections that were previously either near impossible or highly inefficient, improve transparency in opaque industries, and generate significant consumer surplus and enterprise value as a result.  I believe we’re now seeing the network model applied not to the core transactional experience, but to enabling and enriching them.

After aggregating participants, much of the focus for network businesses has been focused on reducing friction for consumers and users (and rightfully so).  The revolution in product and interaction design over the past 5 years has done much to improve user engagement and streamline transactions.  Software and e-commerce sites have become easier to use, which, alongside technological advances and new services (e.g., AWS) , has allowed software to penetrate historically resistant end markets.   I’m excited by this shift as both an investor and consumer, and think it has far from played out completely.

But there are other obstacles outside of the usage and transaction flow that derail purchases and inhibit selling activities (e.g., prospecting, nurturing, merchandising).  For potential enterprise customers, the education required to get all stakeholders on board and the lack of relevant decision-making data (e.g., customer satisfaction) are non-trivial roadblocks that swing decisions.  Vendors still expend significant effort prospecting for leads, creating and distributing marketing content for demand gen, and distributing product information to their channel partners.  Because nearly every purchase is influenced by factors outside of the transaction flow, these costs (both tangible and opportunity) represent real lost revenue.

Over the past few months, I’ve seen more and more entrepreneurs identify interesting network models to aggregate people, services, and information to supply these gaps and create value for both sides.  In addition, these solutions tend to combine many of the benefits of traditional networks (asset light, long-term defensibility, etc.) with the revenue potential of enterprise facing companies.  I’m increasingly excited about the power of networks to make the transaction experience a smoother one – looking forward to seeing big businesses built in the space.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s