Fred Wilson: Good products are not enough

Absrtact: Fred Wilson is co-founder of the venture capital firm, Union Square Ventures, the Silicon Valley's top VC, which is recognized as one of the most influential figures in New York's investment community. His investment list includes Twitter, TUMBLR, Foursquare, Bug Labs, and Zynga.

Fred Wilson, co-founder of the venture capital firm Union Square Ventures, is recognized as one of the most influential figures in New York's investment community. His investment list includes big names such as Twitter, Tumblr, Foursquare, Bug Labs and Zynga. Meanwhile, the personal blog AVC created by Wilson attracts hundreds of thousands of readers a month. In a recent article, Fred Wilson shared an interesting experience in his investment history.

A few years ago, when Union Square Ventures was not founded, Wilson invested in a start-up company called Tacoda, one of the first companies to enter the directional advertising industry. Tacoda's founder, Dave Morgan, who was once the founder of Real Media at the advertising service company, has a vision of the market's strong demand for targeted advertising, which can be made more purposeful by collecting and analyzing user behavior data. So there is Tacoda.

Tacoda's products soon received market acceptance, any site can be 1 to 20,000 dollars per month to purchase the price of Tacoda provided by the SAAS (software services). Wilson recalls that they had successfully signed a few big orders, but things quickly got bogged down--customers were unsure whether the trendy product would actually improve their site's revenue, and Tacoda's software became increasingly difficult to sell. After half a year of hard work, Wilson's investment partner points out at a company meeting: "Everyone on the team is working hard, but nothing." ”

Unlike today's familiar advertising business models, Tacoda's product was just a technical shell, and the customer site needed to sell its own ads after the SAAS was purchased. When the directional advertising function increases the amount of clicks that the client website advertises, the customer's website can get more revenue from its own advertiser. As Wilson concludes, no one knows if this thing really works.

In the midst of adversity, Wilson's team transformed the mindset by Tacoda and advertisers, and then put the ads on each website. After the gain, Tacoda and the website share the profit. "We started to send money to clients, not from their pockets. Soon, Tacoda succeeded.

2007, AOL will buy the Tacoda at 275 million dollars. Wilson believes that the investment in Tacoda directly spawned his current VC company Union Square Ventures. For this period of history he concludes: Good products are not enough, but also have a good business model.