I was reminded yet again the other night why it is that I have a hard time investing in consumer products companies (and content companies for that matter). I was watching a TV show called "Last Comic Standing" with my brother. The show is yet another reality program in which a group of people live together and at the end of each episode vote out a member of the group. Only this time there's a twist. In this show, the group of people are all comics and the person voted off by the other comics has the opportunity to challenge someone else in the group to a laugh off -- both comics do a standup act and whoever is voted funniest by the audience gets to stay. My brother and I were very amused by one of the guys and we were certain he would be staying on the show. But it turned out that 80% -- yes, 80% -- of the audience disagreed with us. It reminded me of this last Survivor when the really annoying, lazy girl got all but one of the votes and won. How could this be?
As they say, there's no accounting for taste. Which is why I don't try to. If there isn't data to back up a company's assertion that customers are going to love the product, I am going to have a very hard time taking on that market risk. Even if I personally love the product and would be quick to buy it, VCs over the years have learned the hard way that they are not a good proxy for any mass market (just as I am not a good proxy for the mass market for comics or Survivors). Enterprise infrastructure is a lot easier to get a handle on. You can call up the current and potential customers and ask them what they think. But how do you call up a thousand randomly selected consumers and ask them what they think -- and how can you get comfortable that they are representative, telling the truth, etc. While I know that there are VCs out there who are willing to invest in consumer devices, video game developers, retail store chains, etc. based upon instinct, I am not among them. I need to have some evidence of adoption from which I can extrapolate, so I don't pick the wrong comic.