Venture capitalists and other tech entrepreneurs are looking to change the way they deliver technology and other goods to customers, and they’re already starting to do it with the help of venture capital.
In an interview with Fortune, venture capitalist and cofounder of e-commerce giant Shopify Jason Fried, former CEO of social news platform Medium Ryan O’Brien, and Facebook COO Sheryl Sandberg discussed the industry’s shift toward making money through technology.
“There are a lot of people out there who have really built up a huge business, but they’ve also been really careful about where they put it,” Fried said.
“So they have been trying to put it where there’s not as much competition, but at the same time they’re trying to protect their own capital.”
Fried, who founded Shopify in 2012, said the tech industry is changing as much for the better as it is for the worse.
He noted that some VC firms are trying to find ways to better align with the needs of their customers while others are trying more aggressively to sell their wares to consumers.
“Some VC firms have realized that they’re more likely to make money by building a product than by building an entire company,” Fried explained.
“I’m sure they’re making the right investments, but the money’s going to come in the form of acquisition costs.”
That’s where venture capital comes in.
The technology industry’s new model of business is taking a page from the VC playbook of selling a service to a customer that can then turn it into a revenue stream.
Fried said he was aware of the potential of VCs trying to use their funding to do exactly that.
“It was never about us or what we do,” Fried told Fortune.
“But I can tell you there’s definitely been some interest.
It’s definitely a new business model, and I think it’s going through the changes.”
Fried noted that the VCs who have invested in the new models have been “quite successful,” but he said it’s too early to tell if they’ve found the right business models.
“They’ve been pretty successful, but I’m not sure they’ve made the right investment,” Fried added.
“We have a couple of VC firms that have said they would like to invest in something that is really disruptive.
“And the way we’re going to figure that out, is we’re working with the partners, we’re partnering with the customers and we’re investing in the teams and the product development.” “
That’s why we are going to be looking at what’s working, what’s not working and trying to figure out how to best partner with that,” Fried continued.
“And the way we’re going to figure that out, is we’re working with the partners, we’re partnering with the customers and we’re investing in the teams and the product development.”
A few years ago, Fried said it would have been difficult to make his company work with Facebook.
“At one point, we didn’t have a very good relationship with Facebook,” he said.
Fried noted Facebook has grown rapidly in recent years, and he said that “we’ve definitely been on the receiving end of a lot from Facebook.”
Facebook has had an outsized impact on the startup ecosystem in the last few years, Fried added, pointing to a number of factors.
One of the factors, Fried explained, was that Facebook “didn’t have any regulatory framework that was very clear about what was a VC and what wasn’t.”
In other words, the company’s “ownership structure was unclear,” he explained.
Facebook also had a strong track record of being “unfair to competitors,” he noted.
“Facebook has had a great track record in terms of not investing in companies that were competitors,” Fried noted.
And Facebook’s lack of regulatory oversight has also meant that “companies that were not doing well on the stock market were not going to invest or be able to invest.”
“So there were a lot, a lot more opportunities for people to get their money into the stock,” Fried concluded.
“The question is, what does that look like now?”
Facebook has long been a major player in the technology world, especially as the social network expands into other areas, like advertising and video.
Facebook currently has more than 30 million active users, and its average monthly user growth has been double the rest of the industry.
And the company is looking to monetize that audience with advertising.
The company recently announced a partnership with video company YouTube that could eventually bring its advertising revenue to 100 million users.
Facebook has also recently invested heavily in virtual reality.
“A lot of the VR space is in its infancy,” Fried predicted.
“Even in the next five years, you’re going go from a billion dollars a year in the video space to a million a year for the VR market.”