Jeff: What do you think of fast followers, i.e. clones like Living Social?
Entrepreneurs and VC's often debate whether it is better to have First Mover Advantage or to be a Fast Follower. The reality is that the answer depends on the industry characteristics and the team's ability to execute. In situations where scale is critical (network effect, cost factors, etc), being a First Mover can be advantageous. However, the team has to execute extremely well as any major flaws will be jumped on by a Fast Follower. For example, with FeedBurner, Dick Costolo, Eric Lunt and team hit the market hard and fast, locking up nearly all of the major publishers' RSS feed syndication business. They built a fantastic platform, sold it hard, iterated quickly as needed and left no room for others (like Pheedo) to come in. Another thing to look for regarding First Mover is high switching costs. Once you have them, it is hard to migrate off of it.
On the other hand, many of the most successful companies have been fast followers (or simply followers). Google was the 22nd or so search engine. However, they learned from the mistakes of the previous solutions and customer dissatisfaction. In using Alta Vista and other engines, often your results would appear on the third or fourth page. Google's would appear on page 1. So, in cases where either existing solutions are failing to meet customer needs (extremely large markets where there will be 2-3 winners) or where scale effects are not core, being a Fast Follower is often a great solution. Additionally, being the #2 player can be very profitable as the first player often goes public, leaving strategic acquirers having to pay up for the #2 player. We experienced this with TicketsNow when we sold to Ticketmaster for $300m.
In summary, as with all things in entrepreneurship…it depends.
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