Sunday, August 5, 2007

Innovation Economy Column (and Video): Davids Competing with Goliaths

Today's Innovation Economy column in the Globe looks at two mapping start-ups based in Massachusetts, EveryScape and Povo. EveryScape is working to create photo-realistic, three-dimensional maps of the world, and Povo is an interesting amalgam of Google Maps, Wikipedia, and Yelp, with a neighborly twist.

One idea I wanted to explore was how small companies like these can, if they're successful, either become acquisition targets for the big guys (in this case, Google, Microsoft, and Yahoo) or find themselves competing head-to-head.

I had a short chat with MIT instructor/VC/analyst Howard Anderson on that topic that was quite enlightening -- but which didn't make it into the finished column. Some notes from conversation that are below the video clip, which takes you along for a ride in EveryScape's mapping-mobile.

(For a more basic explanation of what EveryScape aims to do, check out this New England Cable News clip.)

Anderson had some great perspective on the relationship between start-ups and big companies:

    - Start-ups often awaken giants to the potential of a market. If the start-up doesn't move fast, "you get rolled over," Anderson says. "There is a pregnant period of time when you have to become the de facto standard. If not, and only the lunatic fringe likes your product," then you don't matter as a competitor (or potential acquisition) to the big players.

    - "It's easy to compete against the big guy. They're always a little muscle-bound. They take a long time to recognize a new market. What you really have to worry about are the other small companies in the same space. I used to love backing companies that competed against AT&T and IBM. But when you had eight [start-up] companies, so much alike that their mothers couldn't tell them apart, then you never got traction."

    - In meetings with big companies about potential partnerships, start-ups can often be induced by the power differential ("They're Google, who the hell are we?") to say a little too much about what they're doing. "You should talk about your vision, but if you're foolish enough to tell them everything, and show the innards of your product, then you can save them a great amount of time," Anderson says.

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