The silicon valley entrepreneur and venture capital investor Mike Maples came up with the term thunder lizard in the late ’90s to describe hyper-exceptional startups.
It’s a Godzilla metaphor – and the basic ideas is that thunder lizards come from radioactive atomic eggs – and startups like that, which have radioactivity at their core, are going to grow into big beasts.
They may start small, but they eat their competition and then soon after they attack the incumbents and end up disrupting the existing cosy ecosystem.
So, what is it that makes a thunder lizard?
Mike’s view is that there are two laws that will keep the tech industry (and now every industry is a tech industry) on it’s toes.
The first is Moore’s Law. This says that computing performance doubles every 18 months while the price stays fixed.
This is an insanely powerful law. What is means that any company – whether it’s Ford, or IBM or Google that is an incumbent right now cannot rest easy.
That’s because a new firm, starting without the existing investments and equipment of an incumbent, will be able to breach the incumbent’s advantage, given enough time.
For example, although Microsoft was dominant in desktop operating systems, it couldn’t stop Google dominating search.
The second law is Metcalfe’s Law, which says that the value of a network is the square of the number of nodes.
In other words, as the network gets larger and larger, the number of connections between its members gets larger and the amount of connections and activity increase exponentially.
So, Metcalfe’s Law effectively says that the largest network with the most activity will pull ahead and dominate everything else in its category.
Which is what has happened with facebook and LinkedIn. As social media networks they dominate their markets.
These two exponential laws create a tension and dynamism in the tech industry.
Moore’s Law says that given enough time any company can be disrupted. Metcalfe’s Law says that given enough time a company can have a moat that can’t be breached.
Thunder lizards operate in this space.
But… it’s hard to identify them in advance. In an ecosystem of 10,000 to 20,000 companies, around 10 will capture 97% of the value.
With that kind of distribution, it’s not possible to create a statistical analysis, or analyze cohorts or use maths to create an optimal portfolio.
So, Mike says, his style is to invest in people and projects that have “super high potential energy” and he urges innovators to only do things that have a chance to be legendary – because being mediocre takes just as much work.