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Attention infrastructure vs fundamental businesses  

Great post by Garry Tan, cofounder of Posterous and now designer-in-residence at YCombinator, about the difference between infrastructure businesses and fundamental businesses.

Attention infrastructure businesses like Facebook, Google, Twitter et al:

  • require significant capital infusion;
  • are high-risk, high-reward;
  • tend to be created by technologists.

Fundamental businesses:

  • earn money immediately;
  • are less risky upfront;
  • can still go huge.

This turns out to be a valuable framework for identifying viable Internet startup ideas. Are you building something that could become infrastructure? Or are you building a fundamental value-generating business that uses the infrastructure? Both are amazing business models, but have radically different risk profiles. But as Apple has reminded us today -- it's good to be king.

Worth closing with a perhaps obvious point: frameworks are just (sometimes very useful) ways to analyse things. Reality is often more complex.

More from the library:
The Fool on the Hill, with commentary
Why pitches fail
Why VCs lie