Great post by Garry Tan, cofounder of Posterous and now designer-in-residence at YCombinator, about the difference between infrastructure businesses and fundamental businesses.
Attention infrastructure businesses like Facebook, Google, Twitter et al:
- require significant capital infusion;
- are high-risk, high-reward;
- tend to be created by technologists.
Fundamental businesses:
- earn money immediately;
- are less risky upfront;
- can still go huge.
This turns out to be a valuable framework for identifying viable Internet startup ideas. Are you building something that could become infrastructure? Or are you building a fundamental value-generating business that uses the infrastructure? Both are amazing business models, but have radically different risk profiles. But as Apple has reminded us today -- it's good to be king.
Worth closing with a perhaps obvious point: frameworks are just (sometimes very useful) ways to analyse things. Reality is often more complex.
Vinod Khosla