Platforms and Technology Cottage Industries

Back in 2004, when researching The New Road to Riches for Business 2.0, I had a chance to meet Eric Hahn, a seasoned entrepreneur and investor, who had sold Lookout Software to Microsoft. He said a lot of smart things, but one bit of wisdom he imparted has become firmly implanted in my memory.

Hahn says there are countless opportunities to come up with similar small-scale, highly targeted technologies—what he calls “nano-type projects.” “E-mail, instant messaging, voice over Internet—there’s just a zillion things that can be created to improve that stuff,” he says.

He was so right, and it has been over two years since I wrote that article, and there are no signs of this trend of nano-innovations isn’t abating. As I explained earlier in a piece for The Wall Street Journal, it is the platform, stupid. While that piece looked at the world from the eyes of the platform dons, the argument still holds.

Look at MySpace, which has incubated an entire widget ecosystem, and spawned many companies based entirely on that platform. (Not sure if the dollars-and-cents management at FIM will understand this argument now that the one who did is gone.)

Brady Forrest points out that like MySpace, Google, and Microsoft, the over-hyped Second Life and World of Warcraft are platforms that can foster the technology version of cottage industries. His post is inspired perhaps by the investment in Shawn Fanning’s new company. He is right – gold farming is a cottage industry of sorts.

WoW of Warcraft has 7.5 millions members. That is large enough to support other companies. That is already happening for in game services such as player leveling and gold farming, but what about other more Web 2.0-ish type services?

The thesis for cottage industry type operations is hard to argue. In the past, we had a few platforms for lone coders who had financial limitations to scale their businesses. No more: we have many more platforms, and ultra cheap resources for lone coders (or two) to scale their operations, thanks to Amazon’s web services efforts.

Amazon Web Services (ignore my own personal rantings for a minute) is one of the more important developments of 2006, and will prove to be one of the most disruptive (for start ups and VCs) in our industry. If you want to get a good grasp on this, then go ahead and read Kevin Maney’s article in USA Today. It is as clear and coherent road map to the future. (Of course there will be potholes, big ones, but the road is pretty clear.) Like Amazon, has joined the party.

“You’re going to be able to have virtual start-ups, virtual entrepreneurship,” says Marc Benioff, CEO of, which is betting on a vision similar to Amazon’s. “It will be the next wave.”