I was at a conference a few years back, listening to a panel of venture capitalists, and I heard it again. That phrase that makes me cringe every time: “Data is the new oil.” I get what they’re trying to say. They’re trying to sound smart, to capture the value of information in a neat little soundbite. But it’s a lazy and, frankly, wrong analogy.
I’ve built and sold two tech companies. The first, MovieLaLa, was acquired by Gfycat, which was later bought by Snap. The second, RemoteTeam, was acquired by Gusto, a $10 billion company. I’ve also been an angel investor in over 200 companies, including some of the biggest names in AI like Anthropic, OpenAI, and Scale AI. I’ve seen what it takes to build a company that gets the attention of the giants. And I can tell you this: they’re not buying your data. They’re buying your network.
The “Data is the New Oil” Fallacy
Let’s get one thing straight. Data is a commodity. It’s not a scarce resource like oil. In fact, it’s the opposite. Data is abundant, and it’s getting easier and cheaper to collect every day. You can scrape it, you can buy it, you can even generate it with AI. If your only competitive advantage is the data you’ve collected, you don’t have a competitive advantage.
Think about it. How many times have you seen a new app that has access to the same public information as its competitors? The data is the same. The difference is what they do with it. The “data is the new oil” crowd misses the point entirely. They’re so focused on hoarding data that they forget about the most important part: the people who create it and use it.
The Power of Data Network Effects
So, if data isn’t the new oil, what is? The real defensible advantage, the thing that will make Google, Apple, or Microsoft sit up and take notice, is a data network effect. It’s a simple concept, but it’s incredibly powerful.
A data network effect is a virtuous cycle. The more users you have, the more data they generate. That data is then used to improve the product, which in turn attracts more users. It’s a self-perpetuating machine that gets more valuable with every new user.
Think about Waze. When you use Waze, you’re not just a consumer of information, you’re a producer. You’re providing real-time data on traffic conditions, accidents, and police traps. That data makes the app better for everyone else. The more people who use Waze, the more accurate and up-to-date the information becomes, which makes it even more attractive to new users. That’s a data network effect in action.
How to Build a Data Network Effect
This is the part that most founders get wrong. They focus on building a cool product, but they don’t think about how to build a network around it. Here’s my advice on how to do it right:
- Start with a “single-player” mode. Your product needs to be useful even for the very first user. Don’t rely on the network effect to create the initial value. The network effect should be a multiplier, not the foundation.
- Identify the right data to collect. Don’t just collect data for the sake of it. Be strategic. What data will actually improve your product? What data will create a better experience for your users? Focus on quality, not quantity.
- Build a feedback loop. This is the most important step. You need to have a system in place to feed the data back into the product to make it better. This could be through machine learning, personalization, or simply by surfacing the data in a useful way.
- Scale the network. Once you have a product that is valuable to a single user and a system for improving it with data, it’s time to scale. This is where you focus on user acquisition and growth. The bigger the network, the stronger the network effect.
Real-World Examples from My Career
I’ve applied this framework to my own companies with great success.
At MovieLaLa, we built a social network for movie lovers. Users could rate movies, create watchlists, and follow their friends’ activity. But the real magic was in the data network effect. The more movies a user rated, the better our recommendations became. We could predict what movies they would like with surprising accuracy. This created a personalized experience that kept users coming back. And the more users we had, the more data we had, which made our recommendations even better. We weren’t just a movie database; we were a movie discovery engine powered by a community of fans.
With RemoteTeam, we built a platform to help companies manage their remote employees. We collected data on everything from salaries and benefits to productivity and engagement. This data was incredibly valuable to our customers. They could see how their company compared to others in their industry and make data-driven decisions about how to manage their remote workforce. But the real power was in the network effect. The more companies that used our platform, the more data we had, which made our benchmarks and insights even more valuable. We became the go-to resource for data on remote work, which made us an attractive acquisition target for a company like Gusto that was looking to expand its services for remote teams.
Why This Matters for Getting Acquired
So, how does all of this relate to getting acquired by Google, Apple, or Microsoft? It’s simple. These companies aren’t looking to buy a product. They’re looking to buy a sustainable competitive advantage. A strong data network effect is one of the most powerful moats you can build.
When a company like Google looks at a potential acquisition, they’re not just looking at your revenue or your user numbers. They’re looking at your defensibility. How hard would it be for them to replicate what you’ve built? If your only advantage is your data, they can probably replicate it pretty easily. But if you’ve built a strong data network effect, that’s a different story. They can’t just copy your code or buy your data. They have to build their own network, which takes time and a lot of effort.
Stop Chasing Fool’s Gold
So, the next time you hear someone say “data is the new oil,” I want you to remember this conversation. Data is not the new oil. It’s the new sand. It’s everywhere. The real value is in what you build with it.
Stop chasing the fool’s gold of data hoarding. Start building a data network effect. That’s how you build a company that lasts. And that’s how you build a company that gets the attention of the giants.
Frequently Asked Questions
What are the most common mistakes when geting acquired by google, apple, or microsoft.?
The biggest mistake I see is overcomplicating things early on. Start with the simplest version that works, get real feedback, and iterate from there. Another common trap is copying what worked for someone else without understanding the context behind their decisions.
What tools do I need to get started?
Start with the basics. You don't need expensive software or fancy tools. A spreadsheet, a note-taking app, and direct access to your customers will get you further than any enterprise platform. Add tools only when you hit a specific bottleneck.
How long does it take to get acquired by google, apple, or microsoft.?
The timeline varies depending on your starting point and resources. For most founders, expect 2-4 weeks for initial setup and 2-3 months to see meaningful results. I've seen teams move faster when they focus on one thing at a time rather than trying to do everything at once.
How do I measure success with this approach?
Pick one or two metrics that directly tie to your goal and track them weekly. Vanity metrics like page views or follower counts rarely matter. Focus on metrics that reflect real engagement or revenue impact.