Last Mover Advantage – With Guy Gamzu, startup class 4

This week at our weekly startup course we went through  Startup Course 2013 Class 4, we had a unique opportunity to look  into the mind of an angel, Guy Gamzu. Guy was the lead angel investor in eToro and is on the board at eToro, he is one of the top angel investors in Israel, and has been a mentor for me while building eToro. Guy is fascinated with people, from the early stages of eToro he has helped us identify what we need  to do and who we need to recruit. We started discussing what it takes to create and set up a successful company.

The class started the debate with… “People often talk about ‘first mover advantage.’ But focusing on that may be problematic; you might move first then fade away

We went through the slides everyone prepared about the Last Mover Advantage, the idea was simple, everyone read the notes, and present one slide that captures their insights from the course, its interesting to see how everyone captures the ideas of the course.

The concept os the last mover advantage is the danger there is that you simply aren’t around to succeed, even if you do end up creating value. Rather than being the first mover it is arguably more important and significant to be the last mover. You have to be durable…‘you must study the endgame before anything else.” Sustainability within a company is key to maintaining its durability. There are three simple steps in creating a truly valuable company:

1) Find, create discover a new  market.

2) Monopolise the market

3) Expand the monopoly over time.

Moving first isn’t always an advantage. Think about poker. If you’re the last to bet, you have the most information. The endgame is where the most decisive moves are made.

So, then the class started to wonder, is it often the last mover that wins the market in the long-term?

Is Microsoft the last operating system?

Was Google the last search engine?

What about MySpace?

We went over the examples of Facebook, LinkedIn, Google, Zynga, Groupon and Ebay and discussed their first mover advantage Vs their last mover advantage.

The trick seems to be, to enter the market late enough to avoid being crushed by future competitors, but not too late where the market is now closed to new entries. A balancing act that is easily perceived in retrospect, but is a challenge when considering what market to enter and when to enter.

In order to own the market, to move from being the first mover to the last mover, one must build a brand in order to build a monopoly. Take Apple for example, in the 80s they had innovative products but they only established a brand in the late 1990s and are now probably the greatest tech company today; owning an entire value chain in software, hardware and locking in hundreds of millions of customers through their own ecosystem. Apple’s brand has allowed for greater opportunity to make money on services and goods that were previously unprofitable.

True intelligence is to enter the  market after the future competitors have showed their cards, but not so late when the market is already monopolized and therefore  impossible to compete in. Timing is everything…

We ended the class with Q&A together with Guy Gamzu, most of the class questions were around the same theme :

How do you choose which startups to invest in ?

How do you choose which areas to invest in ?

Guy told the class that for him there are no specific rules, its all about the people and how HE connects to the idea.

He  concluded with these significant anecdotes, “”The last mover advantage motivates us not to take current success for granted” and that 2 axes form the basis of a company: (1) Volume- “how many people is this idea/product relevant for?’ and( 2) Value- “how valuable is this solution?” Two crucial coordinates in producing a durable successful company…

The video of the course will be published by demand 🙂

Up Next:

Fucking Valuations- Out With the Old in With the New... Startups course class 3

Fucking Valuations- Out With the Old in With the New... Startups course class 3