Ford Motors dominated the auto market in the early 20th century with a
single car model, the Model T. At the time, customers were seeking
low-cost, functional cars, and were satisfied by an extremely
standardized product (Ford famously quipped that “customers can choose
it in any color, as long as it’s black”). But as technology improved and
serious competitors emerged, customers began wanting cars that were
tailored to their specific needs and desires. The basis of competition
shifted from price and basic functionality to ”style, power, and prestige“.
General Motors surpassed Ford by capitalizing on this desire for
segmentation. They created Cadillacs for wealthy older folks, Pontiacs
for hipsters, and so on.
Today, the venture financing industry is going through a similar segmentation process. Venture capital has only existed in its modern form for about 35 years. In the early days there were relatively few VCs. Entrepreneurs were happy simply getting money and general business guidance. Today, there is a surplus of venture capital and entrepreneurs have become increasingly savvy “shoppers.” As a result, competition amongst venture financiers has increased and their “customers” (entrepreneurs) have flocked to more specialized “products.”
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Author: Chris Dixon
