Going to a Berkshire Hathaway Shareholder Meeting has been on my bucket list ever since I read Lowenstein’s Buffett years ago. My wonderful wife gave me the trip to Omaha this year for my 40th birthday. Yes, she thinks I’m a geek.

Here are seven reasons everyone in the Silicon Valley should go at least once:

• You are exposed to very different types of people. The meeting attracts more than 40,000 people to Omaha from all over America and the World. What you learn about different types of people will be helpful to your job in the Silicon Valley.
• Omaha is not the Silicon Valley. A great way to build perspective and empathy is to see different places. Omaha has lots of big and little things that will surprise you.
• The event is itself is electrifying. From getting up early to the massive line at the door it feels like a mega sports event or concert. Yes, you can get the content online but you can’t get the energy to internalize the knowledge as viscerally.
• The variety of BH companies is remarkable. If seeing the breadth of companies and business models doesn’t blow your mind I don’t know what will. A fantastic reminder that there are more great deals to be done than capital or time available. It is worth calling out that several BH companies’ products are not good for individual human health which is a whole different post.
• Warren and Charlie are incredibly hale and hearty. Their quick wit, remarkable consistency, and self-awareness are incredibly inspiring. Frankly, seeing them in person made me want to check their driver’s licenses to ensure they were really 87 and 94 years old!
• Charlie has a special way with words. I have never heard someone so pithy, insightful, and hilarious as Charlie Munger. Hearing the crowd reactions makes his oneliners all the more enjoyable. #ZFG
• The meeting is the tip of the iceberg. While the meeting is the main event there are many other great things to do like running the Sunday 5K, visiting the Strategic Air Command Museum, and eating some amazing steak.

On top of all of the above great reasons to go, you will also get some amazing insights that will push your own thinking. Here are my top 3:

1. Investing in Apple was not a tech investment to Warren. He built conviction based on the value of the brand, consumer satisfaction with Apple products, and the capabilities of the management team (including capital allocation).
2. US and China are deeply interdependent. He convincingly explained why there might be short-term foolish behavior but long-term stability. His perspective also helped me realize that I am underinvested in China (investment ideas welcomed).
3. A clear rationale for being a bitcoin bear. Admittedly, Warren and Charlie are being disparaging to the point of sanctimoniousness. I found their perspective that cryptocurrencies are a non-productive asset as great food for thought. It is wonderfully consistent with their rationale on not investing in gold and the value investing framework they use.

My only regret from the weekend was not getting a selfie with Warren or Charlie!

“Every founder is presented with opportunities that seem great. That are “company making.” That are once in a lifetime. That are too good to let pass.. ”

– Micah Baldwin’s Medium Post

Bigco’s regularly offer Startups partnership opportunities that seem too good to let pass.  Let’s unpack a few of the bigger reasons Startups without strong product market fit shouldn’t waste time on these Strategic BD* opportunities:

• Startups don’t have anything strategic to trade. Before startups have significant product market fit the most valuable thing they can offer partners is outsourced development or beta testing
• Big companies don’t move quickly. A classic deal maker phrase is “time kills deals” and I promise you this is true
• Startups need distribution and money, not event-based co-marketing. Bigcos don’t contractually commit to distribution or money because they know their priorities may change. Read’s Micah’s blog post again with this idea in mind. 
• Big companies have lots of people who need something to do. One of the most fun things for them to do is to talk to Startups because they get paid no matter what happens.

BTW, the first point above effectively kills true Startup to Startup BD. Nothing I or your Board says will keep you from investing time in BD with bigger companies.  Try to minimize the time spent on it and unless there is a contract to be signed don’t waste board time discussing potential BD deals.

Bottom line: Don’t waste your time on strategic BD until you have strong product market fit!  

*Strategic BD is not sales because it is not incentivized by a quarterly, or even yearly, quotas. This leads quota carrying sales guys to often quip, “BD is sales without a quota”.  

Last week I had the pleasure of moderating a panel with some amazing VR entrepreneursat Chetan Sharma’s amazing annual conference including VReal’s Todd Hooper, Baobob’s Maureen Fan, and PlutoVr’s Forest Gibson   As you can see above, Chetan picks the worst location for the event but we made it work.  As part of the event I contributed the essay below which I wanted to share more broadly for discussion with all awesome people that are coming together for Oculus Connect this week!

We are nearing the tipping point of mass market virtual reality (VR). It has taken a bit longer to get here, with the delay stemming from the cost of first generation hardware and manufacturing capacity. However, that’s changing. Earlier this year Mobile VR platforms like the Samsung Gear reports more than one million monthly active users and Google Cardboard reports that VR apps are being downloaded more than 25 million times. Google’s Daydream should quickly enable hundreds of millions of phones to power great VR experiences. I’m excited to see what Oculus shares at Connect to continue this momentum.

Over the next few years, tens of millions of folks will have Vive / Oculus / Playstation VR at home or in their offices, as well as a Gear VR next to their beds. Beyond the total number of users, we should see meaningful amounts of time spent “inside” of VR as it captures more people’s attention. In fact, the question I am most often asked is: What are the killer apps beyond games and entertainment content? This is a strong indication that everyone is now searching for the next set of killer VR apps.

Venture-backed high growth companies are often successful because they bet on new platform shifts ahead of incumbents. Recent examples include Salesforce and Whatsapp. An increasing number of smart, curious entrepreneurs are investing substantial time exploring VR opportunities. Some promising applications areas I keep hear them outside of Games and Entertainment verticals include:

• User-Generated Content – New mediums require new ways of telling and discovering compelling stories. There is heavy investment from incumbent media companies both in-house and via strategic investments. If you look back in time at web and mobile platform innovations, a key area of value creation were user-generated content platforms, YouTube and Facebook, that paired easy creation (or upload) with audience networks. Google’s acquisition of Tiltbrush pre-empted the first clear opportunity in this category There are many great teams thinking about this category.

• Communication – Every new medium has created a massive new communication company. In the 1990s, Hotmail created web-based free consumer email. In the 2000s, Skype created a free global telecommunication platform, and later, WhatsApp & Facebook Messenger created the industry’s largest free text messaging networks. History indicates being a nimble startup focused on communication is a great

• Workplace Collaboration – Companies, especially ones focused on knowledge workers, are willing to pay a premium to enable greater employee productivity. For example, engineers often use a whiteboard to collaborate, but when the team isn’t physically collocated, it doesn’t work. VR enables shared whiteboard experiences that could increase productivity by light years.

• Training and Education – My single favorite VR impact story is how a surgeon used Google Cardboard to prepare for a complex, pediatric operation that had never been performed before. Dr. Redmond Burke used a 3D model of the infant’s heart to “view” how it was situated in her chest cavity to plan out the surgery, and he saved the baby’s life. Whether it is practicing a hobby, improving a vocational skill, or preparing for a high stakes operation, VR can help.

• Considered Purchase Tools – Just as the internet radically changed how consumers turned from physical stores to ecommerce, VR can drive a massive shift in purchasing behavior. Audi’s Virtual Showroom offers shoppers with an innovative way to visualize every detail of a car in VR before they customize their car and place an order. It’s an amazing buying experience.

Of course, these ideas are just a few of the possibilities. Risk-taking entrepreneurs are rapidly exploring many more killer application ideas which I’m excited to learn about!

I’ve taken the red pill and am a VR believer. Shared some of what I’ve learned so far on TechCrunch: http://techcrunch.com/2015/12/15/getting-real-about-virtual-reality/.

Re posting the article here too:

Hacking together a VR experience* to see firsthand what’s involved, revealed just how close we are to something great, but there are five areas that need to fall into place for VR to become a technology we all use daily.

The medium needs to be defined

As I started to think about the kind of immersive experience to create, I realized that I didn’t even know how to think about the right way to tell a story in VR. For instance, how long should the “story” be? What would be considered important?

As an engineer, I rarely considered something like the best point of view for the camera. With VR, that’s a critical part of the experience.

Creating something for VR is less of a technical problem than it is a creative and visual challenge. Additionally, the ability to create 3D models for VR stories is going to be one of the most highly sought after skills in the world in the next 10 years. As a reference point, think how different our current era is from the early days of the Internet, when we used things like FTP and Gopher. That’s the stage where we are with VR.

VR interaction needs to be improved

VR has immersive visuals and great VR content has incredible sound design. But even though your body feels like it’s somewhere else, how are we supposed to interact with that world? And how is the VR world supposed to interact with us and provide feedback?

Using a mouse, keyboard, or game pad to navigate the virtual world makes for a terrible user experience. It completely severs the connection between your mind and (virtual) body. Beyond basic input so much more has to be solved with regard to tactile input and output, full body motion, the sense of smell, and temperature.

The list goes on and on for the things that must get fixed to avoid breaking the VR experience.

The fear factor must pass

Although people accept that we’re in the early stages of the VR era, some folks are warning about unhealthy escapism that will remove us further from reality to the point where we are dangerously disconnected from the real word.

I get it, but aren’t we already there? Go to the mall and you’ll see people of all ages and backgrounds, with their heads down staring at their phones. Do they know what’s going on around them? Doubtful. Then again, the human species often doesn’t understand the consequences of what it invents until decades later.

When the fear factor kicks in, just consider this: We’re only a decade into the mobile phone age and it probably will take another 25 years to know what we really did to ourselves.

Portability needs to become the norm

My friend Chris Fralik is entirely right when he explains why mobile will win the VR race. The mobile phone represents the easiest and fastest VR platform.

I’m not just talking about using smartphones to demo VR, but also as the best way to get the largest number of people to use VR daily.  I am impatient for Moore’s law to eliminate the need to be tethered to a desktop computer.

The barrier of entry has to be eliminated

Investors ought to pay close attention. The big breakout for VR isn’t here yet, but we’re getting close. By the end of 2016, estimates are that more than 10 million people will be using VR. If startups can build rich experiences that users can access through their phones, the numbers will soar faster than anyone can predict.

I’m hopeful that the market will get a boost from major manufacturers like Apple or Samsung including a Cardboard-like viewer with every smartphone they sell, and more cardboard viewer giveaways occur.

There’s obviously a lot of work ahead before we get to the VR promised land, and after that to AR nirvana, but the promise is undeniable.

Imagine the possibilities once humans are freed from the confines of physical space and can connect with anyone anywhere in the world. After all, there’s a good reason why Mark Zuckerberg paid $2 billion to buy Oculus.

*I hope to repeat this exercise for AR in 2016, as platforms were not yet ready.

A few folks have emailed requesting this so I wanted to post Launch Scale talk I gave a few weeks back. I hear official videos are coming soon so will update this with that link when they are published.  Enjoy!

It’s a proud moment to see Mast Mobile launch today. Mast is a mobile communication platform that makes employees more productive and saves businesses time and money by replacing the need for desktop phones. It does this all by being built into the core mobile carrier network, yeah, the cell phone towers themselves, so it can work with any mobile device including iPhones, Android, and anything else you can throw at it.

I co-founded Mast prior to joining DFJ, and today my role is as the non-executive Chairman of the Board. Mast Mobile got off the ground because of an amazing group of co-founders: David Messenger and Peter Lurie, both with prior experience from Virgin Mobile, Sprint, American Express, as well as one of the best technology leaders I’ve ever had a chance to work with, David Dawson formerly from Microsoft.  They are the dream leaders for this business and it has been a joy to watch them build Mast over the last few years.

How did this all come together?

In 2013 I had my first conversation with David Messenger, and it was clear to me that he was built in a lab to take the nascent ideas behind Mast, build upon it with his unique insights, and lead it into a huge company one day.  A bit about David: He was the #2 guy at Virgin Mobile, and helped take them public. He also went on to run Sprint’s pre-paid mobile group after they acquired Virgin Mobile. Next, David went to American Express to lead the newly formed enterprise mobile and online business. We turned that first lunch conversation into a three-month collaboration that made it clear to both of us that David was the only person in the world that could be the heart, soul, and CEO of Mast Mobile.

So what the hell did we talk about?

I shared the painful experience I had working with the big four mobile carriers (Verizon, AT&T, Sprint, and T-Mobile) while evangelizing Android internally at Facebook. Since everyone had iPhones, I started by just trying to get everyone to carry a second Android phone hoping they’d use it and thus start to understand what was possible on the platform. I found that the fast way to get someone a second working Android phone was to buy the phones at the local Verizon or AT&T retail stores. Of course the finance team had fits at my expense reports, but the alternative would often take a few weeks. I needed to move fast and was fine breaking things.

However, it was quickly obvious no one was using his or her Android phones. I needed to sort out a better plan with our IT team to get both a variety of Android phones on demand, as well as a simple way for people to port their primary phone number onto Android phones. From this exercise I learned more about how terrible it was to get phones and phone lines provisioned with the big four carriers. It turned out the best way to get things to happen was to actually call someone at each wireless carrier’s corporate sales team for any new phone, phone line, or phone number port.  Imagine if the only way to get a new email address for an employee was to call Google or Microsoft to provision one? Cray cray!

Eventually things got sorted out well enough that it wasn’t my biggest concern anymore. But the experience left a strong impression. I made a mental note to angel invest in any startup that would fix the quagmire of wireless carriers servicing corporations. I never found one.

Fast-forward eighteen months to when I was thinking what to do after Facebook.  My experience building on Android left me frustrated with the iOS platform constraints since I knew it was critical that whatever I built worked on both platforms. I was especially fascinated with what could be done with call and text message data, since the majority of communication was shifting to mobile devices (damn, should have started WhatsApp). Researching what was possible was how the concept of a Mobile Virtual Network Operator (MVNO) came onto my radar.

MVNOs lease access to the radio access networks (the cell towers) of wireless carriers like Verizon. If you could get an MVNO deal in place, you could access every call and text made by one of your subscribers, regardless of whether they used iOS, Android, or even a shoe phone. Amazingly, this meant there was a whole platform layer underneath smartphone OSes waiting to be used! That is, if you were willing to run an MVNO.

There was the rub. Almost every MVNO ever started had been a commercial disaster. Billions of dollars had been lost which left deep, ugly scar tissue on almost everyone associated with them. By digging in to why they failed, I discovered a simple truth: you can’t out outsell the AT&Ts of the world as an MVNO reselling the same commodity product to the same customers.

But you can compete with carriers by putting software in the middle of their core network to enable new differentiated products. Thus Mast would never be in the business of selling minutes but instead selling software applications that are uniquely integrated into mobile networks. With enough customers it would be a new technology platform with an entirely new business model that can give away access!

My experience at Facebook made it clear that the big four mobile carriers didn’t care about business customers. Even as businesses were increasingly dependent on mobile service for employee productivity.  Leaders at fast growing startups validated this over a series of direct interviews. They were universally frustrated with the experience, quality, and costs of the big four mobile carriers.

David wholeheartedly agreed after I shared this over our lunch. We became convinced that the perfect storm had come together to build a company by closely collaborating to interview more customers, recruit our awesome co-founders Peter & David, and raise our first outside capital in 2013. Today, the entire Mast Mobile team is launching something truly differentiated after years of hard work.  I’m incredibly lucky to be a small part of the Mast story!

This week I’ll be on stage at Mobile Future Forward to talk about the “New Waves of Innovation” given the Connected Intelligence era we are entering. While I’m excited about engaging in this important conversation, I wanted to share an observation I’m having as I prepare for the conference. Control over software distribution has never been so tightly restricted in the history of commercial computing. This is deeply troubling for a number of reasons, but I am hopeful for a change in this trend.

If we take a step back to the early 1980s, we can recall a wave of commercial computing where Microsoft possessed an incredible position of power over software distribution. However, Microsoft did not have unilateral control given the architecture of the time – client applications with no network connectivity. This meant that physical retail, direct sales, and bundling partnerships were all viable healthy distribution channels for software providers. In fact, the physical retail channel was incredibly effective and thus a competitive merchandizing driven channel that is an interesting footnote in the context of today’s App Stores.

Jumping into the 1990s, software distribution was forever changed with the emergence of network connectivity. With the benefit of hindsight, vertically integrated networks, such as Prodigy and AOL, were short blips that did not have much impact on software distribution (though again, another interesting footnote in the context of App Stores.) Instead, the web’s open connected nature shifted software distribution online for consumer software. Netscape, WinAmp and Skype are good examples of upstart software products that benefited from online distribution without centralized control. It is worth mentioning that businesses still primarily bought software via direct sales or retail channels. Yet, I think that can be attributed to pricing (fine-grained control) & file sizes (download times given bandwidth constraints.)

In the 2000s, software distribution changed with the move to Cloud-based applications that do not have downloaded components. When this occurred, the catalog of software, and software-enabled content (blogs et al) exploded beyond human comprehension. I would say that this was by far the biggest inflection point of software distribution as the challenge shifted from getting bits to customers, to getting customers to be aware of the bits. Thus online advertising, viral marketing, and inside sales superseded the historical distribution channels of the 1980s and 1990s. As a result, new types of control emerged in the form of black box algorithms that were under unilateral authority of a single entity. For the first time, someone could effectively “banish” an application from the world by hiding its existence. Luckily no one player had a perfect monopoly on online attention, so this was more of a theoretical risk (except when not).

More recently, software distribution has been defined by App Stores that are vertically integrated into technology platforms, and so closed ecosystems have emerged. For the first time ever a single entity had the ability to banish an app as well as a perfect monopoly over distribution. We’ve entered a world where Apple, Google, and Facebook have perfect, or near perfect monopolies of closed ecosystems, each with over a billion users. While these ecosystems contain different distribution characteristics brought forward from past eras it is obscene as to how much unilateral control their owners can exert. What is really troubling is that there are no checks and balances in place. Especially given that these closed ecosystems are only growing in size, as four billion people get online for the first time in the next few years.

As I’ve internalized these observations, I’ve shifted my focus to see what could change the control dynamics structurally. As a VC, I see that the most obvious approach would be to invest in a challenger to one of these players, but that doesn’t change the dynamics. It merely changes who is in control (for example, Xiaomi.) I am wary of attempts to commoditize similarly situated ecosystems since seeing it fail so spectacularly first hand with Facebook’s HTML5 strategy though I will watch Microsoft’s new attempts. And of course there might be regulation put in place by various governments.

However, as a technologist I’ve realized there is one very interesting approach available – to leverage Android’s inherent technical openness to remove central control. Fascinatingly, this has already happened in China where Google does not have control of the Chinese Android Ecosystem. Regardless of the mechanism, or how it is triggered, I am hopeful we are approaching a point of change. I’d love to find startups that are thinking about facilitating the change through their business strategy or envision the change as an unfair advantage to building a big company.

It was no coincidence that I shared the framework I use to evaluate new platforms at the same time as the Apple Watch was announced last month. My intent was to set the wheels in motion and ask the question that product teams, CEOs and VCs are now facing on the eve of its availability: What version of the Apple Watch should I get? Should we prioritize building an Apple Watch app?

My informed answer is yes.

How did I get informed? First was through holding the Apple Watch and experimenting with the UX in a private demo. I was further influenced by discussing a friend’s perspective after he wore the Watch daily for a few weeks, and hearing how it changed his behavior in a short time. Apple is going to sell a lot of watches and people are going to enjoy using them.

Let’s revisit my platform analysis framework question by question to show why I think prioritizing the Apple Watch platform is a good bet:

1. Technology enablement – Can something be done that wasn’t possible or easy to do before? 

The Apple Watch enables app developers to do many things that have not been possible before such as:

• New user interface design surface area via Glances, Apps & Notifications
• New user input devices via Force Touch and Digital Crown
• New user feedback methods via the Taptic Engine
• New fitness related sensors and data such as a user’s heart rate
• New communication methods such as sketch, tap, and 3D emoji

Of course the unanswerable question is what “job needs to be done” with these new capabilities.  The most obvious is rethinking notification experiences for current iOS applications from the ground up. But here’s the truth: we can’t predict the most valuable use cases. We can only predict, as was the case with the iPhone and iPad, that developers will invent great stuff like Uber, Whatsapp, and Roll. It will be exciting to see how developers use the Apple Watch technology building blocks to craft new experiences that weren’t possible before.

 2. Distribution – How does the platform help you gain new users and engage existing users?

The Apple Watch is garnering the strongest cross promotion of any new hardware product line that I have seen.  Further compounding Apple’s own cross promotion of the Watch is the collective media, pundit, and technology interest that will result in even more exposure for early apps.  Thus, breakout apps on the Apple Watch should benefit from the “rich getting richer” flywheel for this early time of the Apple Watch’s lifespan. Based on the high number of people pre-ordering the Apple Watch, this new channel will be constrained only by supply and not demand.

Further, it is worth understanding how the Apple Watch captures a user’s daily attention is tied to the notion of distribution. This is a valuable asset given it is one of the few “fixed resources” in a digital world.  There will likely be a vigorous debate about how much and how fast the Apple Watch can capture attention.  However, my expectation is that it will be a healthy amount within the first year of launch in aggregate and on a per Watch basis.  Thus the developers that can grab as much of this new attention surface area will create meaningful enterprise value.

A somewhat crass but perhaps more apt assessment of the tactical distribution value is that Apple Watch has a new advertising unit for any iOS developer and it is called WatchKit. The cost per install or registered user is unclear, however, the cost per impression is going to be the cheapest on iOS bar none.

3. Business model – Does the platform provider have a clear business model that you can align with to sustainably share in the value created?

This one is easy.  Apple makes lots of money by selling hardware at ridiculously good margins.  Developers of software apps for mainstream consumer scenarios are incredibly well aligned with their business model because, as a platform provider, Apple needs developers to build killer apps to help sell their hardware.

Any developer looking for an outsized growth opportunity should be prioritizing an Apple Watch app right now.  It’s a rare and unique opportunity where success will be determined by those building early great apps in a valuable vertical.  Of course, capitalism and market dynamics mean that few developers who will get this right early will capture the lion’s share of value.

I can’t wait to see what gets built.

Today I’m thrilled to announce my fourth investment, Twin Prime, is launching.  I vividly remember first hearing about Twin Prime from my friend Semil Shah. Shortly thereafter I asked one of Twin Prime’s early investors, Rohit Sharma, out to coffee to learn more.  Over coffee with Rohit, I found out that one of my old friends, Om Malik, led Twin Prime’s seed round. Here I was, already very excited about Twin Prime before I even persuaded founders Kartik Chandrayana and Satish Raghunath to meet with me.

As the founders explained their insights on last mile mobile acceleration I knew I wanted to be part of their extended team. I could tell they both possess the key characteristics DFJ looks for in entrepreneurs. First and foremost, Kartik and Satish are those special types of founders that combine domain expertise (both have PhD’s in Computer Networking from RPI), deep professional networks (they worked at Cisco and Juniper), and passion to build an iconic company (bringing great company builders around them such as Anand Rajaraman and Venky Harinarayan at Miliwave Labs as well as Rajiv Khemani at Moment Ventures in addition to Om & Rohit). Secondly, and just as important, they had a brilliant insight around mobile data acceleration that improves the mobile experience for consumers, businesses and network owners. I intuitively knew everyone who had a mobile device would eventually benefit from Kartik and Satish’s approach.  

Okay, okay I also really liked the name Twin Prime. 🙂

As a former Product Manager for Mobile at Facebook, I experienced what happens to product and business metrics when performance lags – they go the wrong way!  More viscerally, as an end user, I am frustrated by intermittently slow mobile apps in a way I’d never felt on my laptop.  As I reflected on the fact that a vast majority of Internet consumption was shifting to mobile devices with wireless data connections, I knew there was a huge opportunity for Twin Prime.  I’ll spare everyone the geeky details and focus on the most important thing to know: 

Twin Prime makes mobile apps fast.  Everywhere.  

If you have a mobile app try Twin Prime and thank me later. 

In anticipation of the Apple Watch launch, many are considering whether to make a bet on the new platform. Will it be another Apple home run product with significant new platform opportunity, or not? This is part one of a two part series with my take on that question.

Over the years I’ve been using a framework to evaluate new platforms based on my observations from working at Facebook and Microsoft, two companies responsible for creating, managing, and at times, mismanaging great platforms. The framework involves three factors and associated questions:

1. Technology enablement – Can something be done that wasn’t possible or easy to do before?
2. Distribution – How does the platform help you gain new users and engage existing users?
3. Business model – Does the platform provider have a clear business model that you can align with to sustainably share in the value created?

 Technology Enablement

Technology enablement has been the historic core focus of companies building software platforms. Microsoft’s DOS and Windows are two examples of platform design driven by technologists on both the build and the buy sides. Historically, APIs, tools, documentation and compatibility were the focus of the platform owner because that is what technologists cared about. As computing became more mainstream, technology enablement shifted to table stakes for creating a valuable platform. This was further accelerated when open source platforms such as Linux, MySQL, and others extracted no value for using their technology. Adding GPS to smartphones, to give you my favorite example of technology enablement, has spawned multiple new killer applications, like Waze and Uber, that weren’t previously possible.

Distribution

For technologists this was often the least obvious factor to evaluate, but as any entrepreneur will tell you, “they will NOT come if you build it”. Over time as distribution (nee Marketing) has primarily moved to digital channels, ownership of customers has shifted to the platform owners instead of traditional intermediaries like retailers, wholesalers, etc. Prior to this disintermediation, platform owners offered co-marketing, referrals, default placement and financial incentives as the key forms of distribution given the complex value chain. After this disintermediation, Facebook and Apple took these concepts to new levels of scale with Newsfeed, Notifications, and the App Store, as central features within their platforms. Generalizing beyond these examples infers that platforms with direct customer relationships can offer structural distribution, such as access to friend lists and address books, or they can offer surrounding distribution such as merchandising in an app store.

Business Model

One of the biggest risks for app developers is that the underlying platform will subsume their app’s functionality into the core platform. Newer platforms, such as LinkedIn and Twitter, introduced another version of this risk with their shifting policies around acceptable platform use cases which can largely be attributed to misalignment of business models (e.g., viral messaging spam causing user churn or building a competitive product that uses the platform’s proprietary data). Apple has shown the wisdom of designing a business model into the architecture of a new platform. By mandating use of the in-app payment solution with a fixed revenue share and clearly defining use cases that were off limits they created a sustainable app economy worth tens of billions of dollars. If a platform owner isn’t thoughtful about aligning its business model with developers, it’s possible for tremendous value to be quickly created and destroyed as developers abandon platforms quickly.

I’m extremely eager to learn more about how Apple has designed the Watch platform for application developers. However, until the March 9th event occurs, betting on the Apple Watch is a speculative investment for most. Given Apple’s overall iOS ecosystem across iPhones, iPads and soon the Watch, it makes sense for current iOS application developers to take the risk of investing in the Apple Watch platform because of the overall iOS distribution incentives Apple controls. Once I have a chance to understand what is announced I’ll likely follow up with an assessment using the framework I outlined above.

I’d like to thank Paul Davison, Roy Bahat & John Battelle for reading an early draft of this post.