I recently caught up with some wonderful winemaker friends. As you might expect, we talked about wine. But somewhere in the conversation I realized we could just as easily have been talking about technology companies. They talked about the love of their craft. About the principles of good farming. About clean winemaking. About knowing the land, paying attention to the details, and resisting the temptation to manipulate the product too much in pursuit of consistency or scale.
And then they said something that really stuck with me: you can build a great business without having to build a huge business. In fact, sometimes the pursuit of scale can undermine the very thing that made the product special in the first place. That feels particularly relevant to technology right now. When did scale become the main goal out of the gate?
For much of the past decade, the technology and venture ecosystem has treated scale almost as an end in and of itself. Grow faster. Raise more. Capture the market. Expand the TAM. Add another product. Enter another geography. Get to $100 million of revenue. Then $1 billion. Valuation of $100 billion, oh wait, now $1 trillion.
There are good reasons for that mindset. Software has historically had extraordinary economics: high gross margins, low incremental distribution costs and the potential for enormous operating leverage. When you find something that works, scaling it can create tremendous value. You raise lots of money, and so do the VCs, so it has to be huge outcome given the ever increase fund sizes to make returns for their investors. But somewhere along the way, I wonder if we began confusing scale with quality, and ultimately, value.
My winemaker friends certainly don’t. For them, the questions are different. Is the fruit good? Are we taking care of the soil? Are we making something distinctive? Will people seek it out? Can we charge enough for it to sustain the people who make it? Can we build a business that lasts? Those strike me as pretty good questions for technology companies too.
Craft matters
The best winemakers have an intimacy with their product that is difficult to replicate at industrial scale. They know their vineyards, the soil, the aspect, etc. They understand what happened during the growing season. They make countless small decisions that ultimately show up in the bottle. Great technology companies have their own version of craft and they understand their customers exceptionally well. They obsess over product and features. They know which problems matter and which ones don’t. They make deliberate choices about what not to build. And they develop a culture around solving a particular problem better than almost anyone else.
AI makes this question even more interesting. As the cost of creating software falls and the ability to reproduce features increases, simply having more features may become less valuable. If everyone has access to similar models, similar tools and increasingly similar capabilities, differentiation has to come from somewhere else. Domain knowledge, proprietary data, customer intimacy, workflow, distribution, trust, brand, and taste. In other words: terroir.
Scale can sometime dilute
There is another lesson from wine that is particularly interesting. As wineries become very large, they often have to optimize for different things: consistency, volume, distribution and broad appeal. None of those things are inherently bad. They can produce very successful businesses. But sometimes something can also get lost and the wine can start tasting more like everything else.
Technology companies face a similar risk. As organizations grow, products accumulate features. Customer segments broaden. Layers of management appear. Sales teams need more things to sell. Product roadmaps become exercises in satisfying many constituencies. The beautifully simple solution built for a very specific customer can gradually become a platform designed for everyone. And sometimes, in trying to become indispensable to everyone, a company becomes truly distinctive to no one.
What is great enough?
Venture capital complicates this conversation because our business model rewards outliers. We need companies capable of generating very large outcomes. That isn’t going away. But I do think the current environment is giving founders and investors an opportunity to reconsider what success looks like. Not every technology company needs to define a new category. Not every founder needs to raise hundreds of millions of dollars. And not every good business needs to pursue growth at the expense of unit economics, culture, product quality or customer intimacy. There is something compelling about a company that knows exactly what it is.
A company with a product customers genuinely love, attractive economics, a defensible position and a team that takes pride in what it builds can be an extraordinary business. And, perhaps paradoxically, sometimes that discipline is precisely what eventually allows a company to become very large and valuable.
Build something worth making
I left my conversation with my winemaker friends thinking about something we don’t talk about nearly enough in technology: pride of craft.
Wine has an obvious romance to it, and technology less so! But the underlying idea isn’t that different. Know your raw materials. Understand your customer. Respect the fundamentals. Don’t over-process the product. Develop your own point of view. Build something distinctive. Charge appropriately for the value you create. And don’t assume that producing more automatically means producing something better.
Some wineries want to make millions of bottles. Others want to make 5,000 exceptional cases from a piece of land they understand intimately and build a wonderful, enduring business around it. There is room for both. Perhaps there should be in technology, too. And perhaps while on the path of building something well, you actually build something exceptional, scaled and valuable.
Or maybe I’m just looking at the world through my rosé-coloured glassesJ
