MySpace was bought by Fox (NYSE: NWS) last year for $580mm. Youtube was recently bought by Google (NASD: GOOG) for $1.6bn. Plenty of Fish is pulling $5-10mm per year in topline with a guy, his gf and a couple of servers in their basement. eBay (NASD: EBAY) plods along without having done anything new in half a dozen years, basically living off it, while Friendster had it, and then failed to detonate it at the right time. None of these entities offer anything that can't be or hasn't been replicated by dozens of pretenders and assorted Indians in Bangalore.
What is the key ingredient these successes have which the failures strewn on the road behind them lack? Critical mass.
The best way to make money in today's world bar none would be to become a supplier of critical mass. Companies thrive on reaching the point at which they have such a base of customers that use their services that their services become an order of magnitude more valuable to every marginal customer than their competitors' services which lack critical mass. So why not supply this input which is so crucial to success?
- Fact: Most ideas hinge upon "getting critical mass." For most business models this is achieved in the 18th month of projections, or the Null Set month of reality. This ensures that demand would be high.
- Fact: Critical mass is cheap to manufacture, requiring only one critical mass machine based on a shifting flywheel design, no associated ongoing capex, no labor, no operating costs. This insures that the cost would be low.
- Fact: Critical mass is an intangible if not entirely asbtract concept. This ensures that achievable supply may be infinite (or non-existent).
Recommendation: Supplying critical mass is an extremely attractive business due to the high demand (no substitutes, mission critical input), low fixed costs, and marginal costs of zero. The key to becoming an effective supplier of critical mass is getting large enough that everyone will go to you as a supplier of critical mass. We expect that after building your own critical mass machine or using the design we depict above, this would happen roughly 18 months into the life of your startup firm.