“The Social Network” — Can Brazil Build the Next Facebook?
In addition to dramatizing the birth of Facebook, The Social Network illustrated the difference between the Silicon Valley mindset and the Brazilian mindset.
The movie’s basic conflict, and thus its drama, derived from the fight between Mark Zuckerberg and his Brazilian friend and business partner, Eduardo Saverin. Saverin insisted on monetizing Facebook quickly; he had invested $19,000 and urgently wanted to recoup that investment (in part because he felt pressure from his family). Zuckerberg ignored the revenue model and instead focused on growing the Facebook network.
Saverin was not wrong – his position was rational, highly defensible and reflected good business judgment – but Zuckerberg was right.
I believe that the perspective of Saverin is common in Brazil (and in most places outside of Silicon Valley) and is one reason why it will be hard to build the next Google, YouTube, Facebook, etc. here. We can do it and it will happen, eventually, but it will be tough. It will be tough because, when the next Google/YouTube/Facebook grows in Brazil, its potential may be squandered by premature insistence on revenue.
I know that sounds a bit crazy — don't companies want revenue? Yes, of course, but not at the expense of scaling the business early in its lifecycle. Facebook won because 1) it waited to generate revenue until it had achieved huge scale and 2) its investors supported that strategy. (Peter Thiel funded Facebook even before its business model was certain – the ad model may seem obvious now but, at the time, the ad model for startups had been highly discredited by the dotcom bust.)
We, investors and entrepreneurs, need to consider the Zuckerberg/Thiel mindset if we want to build the next Facebook in Brazil.
Just to be clear: I am not dismissing revenue — I want it, I look for it, I love it in portfolio companies. The biggest venture returns in history, however, have come from companies whose revenue model was, at time of investment, highly uncertain or even non-existent. Furthermore, at critical times in those companies’ lifecycle, investors and entrepreneurs doubled down on growth, rather than insisting on profitability.
