1Mby1M Virtual Accelerator AI Investor Forum: With Benjamin Narasin, Founder and General Partner at Tenacity Venture Capital (Part 4)

Sramana Mitra: So coming back to what you said about the data not being a long-term defensible mode, my follow-up question on that is, what is in your view and in the portfolio that you are developing in this field, what are you envisioning as a defensible mode?

Benjamin Narasin: So my thesis or hypothesis is that this will be very similar to the early days of the web.

When I started a web business in 1993, nobody knew how you would defend a web business. Anybody could start a website. Everything was one click away. I believe that first to market is possibly useful, but what is more important in my view is first to brand. I do believe that consumers and businesses tend to go with brands they know and trust. So once you are established as the brand, then I think you have a disproportionate chance of winning. I think it will be harder to have monopolistic like outcomes, but you gain traction from network effect, etc.

My data marketplace example, Scalepost, already has major content providers. If you’ve got Time Magazine, I don’t see any reason you shouldn’t be able to get any other major publisher. They will feel confident that you are doing things in the right way that is appropriate to a brand of that substance. Harvard Business Review is an even better example in some ways. So the brand gives the confidence that this is the company to do business with. If somebody comes along and offers to do it cheaper, but only has clients like Creative Loafing from Atlanta that gives out a free newspaper or a freebie like SF Weekly, it won’t be as appealing.

I’m not saying there isn’t room for a second player, but the more content they have, the more resources they have, the bigger and better their position becomes. Here’s a great example.

Back in the day, there were about 12 auction sites, including Microsoft, Netscape, and Amazon. There were people that believed those auction sites would be valuable across the board. But today, we’ve just eBay. While eBay was the second to market—following a company called Onsale—they were the first to build a recognizable brand. They gained traction and pulled ahead, eventually dominating the market. Sometimes you have these races where somebody pulls ahead a little, then they pull ahead a little bit more, and then they just take off and they’re so far ahead it doesn’t matter anymore.

When a single platform offers the most volume and resources, people naturally gravitate to it. Are you gonna go put your stuff on 12 auction sites when you can get all the volume out of one, then just do that one.

It’s like shopping—most people prefer to get everything at one store if possible. I do happen to go to multiple grocery stores because I’m a little neurotic about where I buy what, but generally speaking, if Whole Foods has everything you need, you don’t need to go to a second shop. It’s pretty rare these days to find an actual butcher shop. When I moved here, I couldn’t even find a fishmonger. The same applies to online markets; a dominant brand makes it simpler for everyone involved.

So I do think first to brand could be a very, very material part of this. Then I think there is some opportunity to be a semi-monopolistic player, which I think is possible for both Scalepost where you’re being the New York Stock Exchange of content rights and for SF Compute, where we were being the CBOE of futures and rights to derivatives on top of GPU power.

Everybody wins better if one group wins biggest. It creates effective markets, liquid markets. There might be room for two big players, like the NYSE and NASDAQ, but ultimately, dominance by one or two players leads to effective markets. But you only have the CBOE, by the way. I’m not aware of a second options exchange.

This segment is part 4 in the series : 1Mby1M Virtual Accelerator AI Investor Forum: With Benjamin Narasin, Founder and General Partner at Tenacity Venture Capital
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