Founders Always Ask

Founders Always Ask

Fundraising Playbook

3.14 Distribution trumps features

Don’t build a Betamax

David Graham's avatar
David Graham
Apr 26, 2026
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Not sure about your household, but choosing something on Netflix is a nightmare. Too much choice. Entertainment has become commoditised.

Got to say I miss visiting a video rental store. As a kid, Friday night was a treat. Got me thinking about the battle between VHS and Betamax. My family chose the wrong machine, turns out. Even though Betamax was the better technology.

VHS won the 1970s-80s format war against Betamax despite Betamax offering superior picture and sound quality. VHS’s open licensing allowed more manufacturers to produce cheaper, widely available machines, whereas Sony’s exclusive control over Beta restricted its market share.

The better product lost. Not because it was technically inferior - it wasn’t. It lost the distribution battle. More manufacturers, more affordable machines, more rental stores stocking VHS tapes. The inferior product won because it owned the channel.

Most founders are building Betamax. They are obsessed with making a better product. They are not QUESTIONING who controls the channel through which their customers discover and adopt new tools, and how they turn that to their advantage/

Founders always ask: “Should I be concentrating on features or distribution?”

Distribution. Every time. The better product loses to the better distribution channel in almost every market that matters.

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