Patrick O’Shaughnessy has a podcast called “Invest Like the Best,” which I have seen mentioned on this board in the past. On the episode released today, he interviews Keith Rabois, who is now a venture capital investor, but who has also held senior positions at Paypal, LinkedIn, and Square.
Patrick pointed out that a lot of young companies get questions like, “Why are you doing this? Amazon’s just going to squash you.” He asked Keith if this actually happens.
Keith responded: “Yeah, I think it almost never happens. I’ve asked this question (and I never get a satisfactory answer, which probably suggests the answer) which is: Is there any high growth start up, and I can quantify what that means, but any start up that hit escape velocity, that a large competitor has ever, basically beat? And you have to struggle really hard through the history of the last 30 years to find examples, and so the fact that you have to struggle that hard to find examples suggests the answer, that that’s often true. It’s worth being consciously aware of, when an incumbent has unusual leverage, and understanding why your counter-leverage might offset that or not, so I think being paranoid is smart. But more typically, a focused, talented team with an ownership mentality and incentive alignment will out-execute a very large entity that on paper looks very threatening.”
Patrick: “Yeah, it’s a really interesting idea, and an encouraging one for smaller teams for sure.”
Keith: “Oh absolutely, I mean, this is the excitement behind silicon valley. We’re not all crazy.”
It’s interesting…we worry a lot about competition, but perhaps sustained revenue growth speaks for itself. I don’t think customers are stupid. Perhaps they’re spending their dollars with our companies because they need their products to succeed.
Just thought that was an interesting take.