Everyone wants to be an internet entrepreneur these days. But according to Pete Flint, the cofounder of real-estate website Trulia, the most successful businesses are built on something even more powerful than the internet.
Flint, and the other cofounders of venture capital firm NFX, are on the hunt for “network effects” — products that increase in value as more people use it. That’s what propelled Microsoft's Windows operating system to become the dominant computing platform, years before the internet was a factor. And more recently, it’s the secret to the success of giants like Facebook, Airbnb and Uber among others.
NFX recently closed a $150 million fund to invest in early-stage startups that fit the bill. The firm says it has identified 13 types of network effects, in industries ranging from synthetic biology to machine learning and blockchain.
Flint has become an increasingly active startup investor since 2014, when Zillow acquired Trulia for $3.5 billion. While many startups are quick to latch onto buzzwords, very few actually have network effects baked into the core of their product, NFX says.
The firm’s cofounders also include James Currier, a serial entrepreneur who has founded several startups dating back to the late 1990s website Tickle.com (which was acquired by Monster.com); Gigi Levy-Weiss, an Israel-based tech veteran and investor; and Stan Chudnovsky, who is also currently an exec at Facebook overseeing the Messenger product.
NFX is investing up to $250,000 in early-stage startups, in which it will provide up to six months of "structured, hands-on" accelerator-style support, and up to $5 million in funding for slightly more mature companies. The firm has made three investments so far, though the companies are in stealth.
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