Definition of white space investment

Inventors can make great entrepreneurs, but this is not necessarily the case. For every James Dyson, turning a bagless vacuum cleaner into a multinational business, there is a Johannes Gutenberg, the pioneering 15th-century printer who changed the world of communication forever but died in poverty.

This does not stop angel investors and venture capitalist firms trawling the planet for original ideas. The venture capitalists of Silicon Valley have a phrase for this type of investment: “white space”. Backing completely new ideas may be risky, but the rewards are significantly greater, the VCs argue. Well, that is the theory.

 

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Experience shows that the best investments are often made in copycats. Facebook did not invent social networking, Apple did not invent the smartphone, the PC or the tablet computer, and search engines were around a long time before Google. The trick these businesses pulled off was to do better something that was already available.

White space investments may be exciting, but it is better to back a business whose space is filled with paying customers. Imitation is not just the sincerest form of flattery, it is often the best way to create a business that will make money. [1]

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