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Let me tell you about the smartest quote I’ve heard in the last year: “Content innovation grows audiences, and distribution innovation creates enterprise value.”
What does that mean? It’s tempting to think that the stuff we make, the products and content we spend our days delivering, is what makes a company valuable. There’s a reason that "content is king" has been a defining mantra of the past decade. Surely, if you make the coolest product, you’ll produce the most valuable company. But this isn’t as true as you might think. Long-term enterprise value—that is, building a big-ass business—is only possible by having a differentiated way of getting that great product to a customer. The channel through which users receive and access content matters most.
This argument comes from investor and former Benchmark Capital partner Mitch Lasky, and it’s been ping-ponging through my mind for months. Every financial document I read, every analysis I write, Lasky is in my head reminding me about why a company becomes valuable. It’s distribution, stupid.
Lasky is one of the greatest consumer investors of all time with a portfolio that includes Discord, Riot Games, and Snap. Much of his career was focused on video games, a submarket of the tech industry that I’ve found often precipitates broader trends. Nearly every consumer innovation you come in contact with, in one way or another, owes its lineage to some video game company’s innovation in content, pricing, or go-to-market strategy. Nvidia built graphics chips for video game rendering, Slack started as a video game chat system, and that 30 percent fee that Apple takes from developers partially stems from mid-1980s agreements between Nintendo and Pac-Man creator Namco.
Lasky teamed up with fellow investor Blake Robbins to host a podcast called GameCraft, which takes distribution innovation as its core idea and shows its efficacy at driving the last 40 years of gaming. This piece mostly draws from episode 14, “Distribution.”
His thesis was good enough that I think it can be applied to all bits companies: software, content, marketplaces—all of them mirror video games. If you want to know how to make your startup valuable, you should learn and apply the lessons of the video game industry.
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