Korva is a scroll of the internet’s best ideas.
Buy distribution, build tech later
The early AI coding bet
The bet began with early AI coding tools like Cognition's Devin. The prevailing narrative was that tools like these would eliminate the need for enterprise software, which ran against two decades of selling to middle America. Making software development easier was clear. The mistake was thinking real-world businesses would stop wanting to pay someone to build and help with technology, whether it's called software, AI, or agents, especially someone they trust.
Cheaper builds, more spending
A grocer would rather spend scarce time and resources selling groceries than building technology. If research and development costs trend down, which is still to be seen, companies in a competitive market won't simply keep the margin. They will spend more to win the next point of distribution.
Buying distribution first
So the scarce asset that will hold its value is distribution, which means sales and marketing. The founder doesn't think that is visible yet but suspects it will be. The plan: buy the distribution, then build technology on top for customers who already trust you.
Why does cheap software shift value elsewhere?
Joel Spolsky described commoditizing the complement in a 2002 essay: when one part of a product's ecosystem gets cheap, demand and profit move to the neighboring part. If building software becomes cheap, the scarce piece is access to customers who already trust the seller. Spolsky was writing about companies that fund open-source work to cheapen a complement to their own products. He co-founded Fog Creek Software and later Stack Overflow.
Why would cheaper software mean more spending?
In 1865 economist William Stanley Jevons observed that more efficient steam engines had led Britain to burn more coal overall. Cheaper use of a resource opens new uses, and total demand can rise. The idea is called the Jevons paradox. He published the observation in The Coal Question.
How do software roll-ups work?
A software roll-up buys many small software companies in specific industries and keeps them running. Constellation Software, founded in Toronto in 1995 by Mark Leonard, built a large business this way. Its subsidiaries each serve a narrow field, such as municipal services or hospitality, and are generally held for the long term. Constellation's shares trade on the Toronto Stock Exchange.
More from Joys of Compounding
