Union Square Ventures’ investment thesis of large networks of engaged users has been well-known for quite a while.

Still, I came across a great clip from a recent interview of Albert Wenger with William Mougayar on the reasoning behind this investment thesis. It starts with first principles about the Internet, and then leads into networks of networks and the power of these networks.

Check it out starting at 10m46s.

An excerpt is below:

Our investment thesis has always evolved, not in reaction to what is happening externally, but to our evolving understanding of what works on the internet. And we very much to try analyze that from first principles. So when we look at the Internet, we see a technology that has some very interesting characteristics.

1. Its global.

2. Its instantaneous.

3. Its free, at the margin anyhow, you don’t think of the extra picture you uploaded or the extra email you sent.

4. Its connected through virtue of a social graph that exists.

5. And because of the phones we carry with us, its ubiquitous. Its always with you.

And those 5 characteristics of the Internet are different from any other technology thats come before it. Anything else we’ve had really did not come close, usually not even on a single one of those dimensions, let alone all five.

What we do is we spent a lot of our time think: now that we have this, what does this make possible that wasn’t previously possible. So we are very much trying to find things where your not using the Internet to be 20% cheaper or 10% faster. But we are using it to do something that really couldn’t have been done before.

Lots of good food for thought here. Anyone who is building for the Internet should make sure to back out and think about how their product fits with these characteristics of the Internet.

And it gets better beyond just this excerpt. I highly suggest listening to the rest of the discussion, and if you have time, the whole interview.

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P.S. This is post number #55 in a 100 day blogging challenge. See you tomorrow!

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