I often use this analogy when speaking with clients as we’re evaluating new markets. If you think about it, every photo like this from the Gold Rush days has one thing in common… picks, shovels and tools. Someone was consistently getting rich and it wasn’t always the miners… a few did though, of course, and those that did, they hit it big! But the ones selling the tools? They set up shop and if they maintained a steady and reliable inventory for the miners, they were “golden”.
You can extend this idea to today’s investment opportunities or markets. There are those digging a figurative “hole in the ground” in the hopes of that one accurate bet and there are those providing the tools needed by those taking the big swings. The latter option involves identifying the “tools” all or most of the “miners” are requiring as they develop or pursue their ambitions. Today’s “enabling tools” may be in the form of components, machinery, services, systems, software, etc.
From an investment on technology perspective, one can bet on one or more “miners” with the hope that was the right bet – often, the VC approach. But how does one know which ones did their research and/or hired the geologist (experts) needed to increase their chances for success?
There is a third (hybrid) approach which involves making a big technology or product bet but selling services or innovative components needed by the other “miners” before that “mine” hits it big. To keep the mining example, this could be an innovative sluice box (separates the gold from the dirt) developed while trying to make the mining operation more efficient. The “miner” then begins marketing & selling this sluice box to other miners and has now created a secondary income and cash flow stream that in the long-term supports their big bet and long-term vision.
It’s interesting to think about today’s big technology bets, business plans and parallels in this way.
