Everyone wants to be first, and the Internet is no exception. You hear it in the latest buzz phrase inundating Silicon Valley as numerous Internet startups tout their "first mover advantage." In fact, most of these "first movers" are Johnny-come-lately, me-too, wannabees at best and would be better off just admitting it.

Despite its funding frenzy, the Bay Area's burgeoning venture capital community knows the difference between really new and "me-too," and has come to the conclusion that the latter is not all that bad. I listened to an all star panel of VCs debate the issue of being second to market at a recent Churchill Club meeting in Palo Alto.

"I would argue the first mover advantage is largely illusory," says Steve Jurvetson, of Draper, Fisher Jurvetson. "A company may say they are the only one doing something, but we usually assume there are at least twenty others doing a similar thing."

Jurvetson gives the example of the now ubiquitous Hotmail which wasn't the first company to offer free email. "Juno was first and had a $20 million ad budget so it was a daunting challenge," recalls Jurvetson. He admits that investors tend to invest in me-too companies because they have a degree of comfort that they're investing in an established market. "We're more impressed to know there are competitors," agrees Neil Weintraut of 21st Century Intenret Venture Partners

While that may sound lemming like, the computer industry is littered with companies that were first to market and lost the race big time - remember the Osborne portable computer or the Gavilan notebook? There's no dishonor in being second. If you saw the Superbowl ad for Netzero you might think it's the first free ISP -- way wrong! Ask most people who created auctions on the Internet, and they'll probably say Ebay - wrong again.

"History imposes first mover advantage honors," notes Roger McNamee of Integral Capital Partners. "If you asked who was the first computer game software company a lot of people might say Electronic Arts because they're still standing, but EA was about the 41st game software company to get funding."

Companies don't necessarily need a unique idea or service to succeed, according to McNamee, but a unique business model. Almost every proposal he sees these days is "B2B" to which he asks rhetorically, "What the hell is that? Just say what it is the customer gets."
 

WE'RE NUMBER TWO. WE'RE NUMBER TWO

So is it really okay to be second, third, forth (or later) to market? Not in the long run. The goal of all companies should be to lead and to lead by innovating. "Second sucks," says Weintraut of 21st Century Internet Venture Partners. He gives the example of barnesandnoble.com which Weintraut claims has tried - so far unsuccessfully - to compete with Amazon.com by mimicking everything the online book behemoth does.

You say you're a "first mover"? Ask me if I care? Should I? Weintraut recalls meeting with five people "in a crappy office" two years ago that were "about two-thousandth to market." Today that company, hotjobs.com, has a market cap of $700 million without every once claiming a first mover advantage. Not bad.

Another chink in first mover claims is the increasingly global nature of the Internet. Being first in Silicon Valley or even the U.S. is no small feat, but can you be sure you beat the rest of the world?
 

Source: David Needle, Forbes.com