When W. Chan and Renee Mauborgne published their landmark work that upends traditional thinking about strategy, one of the first principles of the strategy they identified, is how companies can reconstruct market boundaries to break from the competition and create blue oceans.
Reconstructing market boundaries addresses the search risk facing companies or investors when addressing the challenge of successfully identifying, out of the thousands of ideas out there, the ideas or companies that offer compelling blue ocean opportunities.
When companies look to break out of the accepted boundaries within which they operate and compete, they look across alternative industries, across strategic groups, across buyer groups, etc. to open new markets. Several masterful companies come to mind such as Microsoft, Amazon, and personalities such as Elon Musk who has created a persona spanning multiple industries. The problem for retail investors is that they only get to partake in these companies, usually after IPO stage, and after the enormous multiples have been achieved. Albeit a traded company being the safest bet for an investment portfolio, after resource investment & government bonds, etc. (a boring but necessary part of a safe portfolio). These offer security plus liquidity.
At the more exciting stage of investing, when it comes to early stage investing at the venture capital level, generally agnostic VCs invest in companies that have demonstrated traction either in revenues or number of users. They are typical of companies that cross multiple investment sectors with the distribution thesis in mind, often seeking (if they do not, they should) to ensure companies invested in seek synergies within their portfolios. Even then, most VC’s struggle with exit at high multiples for most of their portfolio, usually having to spin off the companies that do not offer the return they expect, and…it is the limited partners left carrying the lower ROIs without recognition of their risk level.
Pre-VC stage companies are an even higher risk investment profile, primarily due to it being such a poor data environment and the lack of liquidity. It is however the most, together with the revolution in crypto & blockchain projects, exciting stage of investing in companies that offer a glimpse into the future and the possibility for exponential returns.
What the decentralised finance industry (Defi) has demonstrated in a short time is that there is a massive market in the trillions of dollars for retail investors wanting to be involved in redefining the financial system – and it has central bankers running scared. What the crowdfunding space has demonstrated is that retail investors also want to be involved at an early stage in investing in companies that offer potential.
The Blue Ocean therefore on offer is to take the lessons of all the above and reconstruct the market boundaries by taking the sum of the individual parts and construct them into a greater whole. By creating a diversified portfolio of early-stage investments, identified by a decentralised network of retail experts and investors, and wrapping them into a defi project reduces risk while simultaneously creating liquidity on a defi exchange. The value that early-stage investors identified is then recognised immediately.
This is what we at Invluencer Ltd and i3D Arena are building – our Paradigm Shift.