metronomic meets Will Smith
Although only in my early 40’s I am finding that I am increasingly becoming ‘old school’. Not because I am changing my ways or becoming more conservative, more just that I am not buying in to the ‘quick and easy’ approach to company building that is somewhat fashionable and as a result I am being left behind.
My problem is that I like my foundations and I won’t give them up.
All the companies/entrepreneurs we work with meet the standard venture checklist:
Disruptive idea – check
Large market potential – check
Good management teams – check
Efficient operating models – check
Yet I add one to the list that is ‘non-standard’
Desire to build the foundations before building the skyscraper – check
I know it seems common-sense and, as a result, a slightly banal blog. However I am surprised by the number of times I see business plans where the company is either operating on the basis of ‘if we build the technology they will come’ or ‘lets roll-out super feature sets before we have proven there is a demand for our basic product’.
Fundamentally the problem with both these strategies is that they can be highly cash-consumptive prior to any commercial validation.
You could describe it as:
product > product > product > product > commercial (or per the Will Smith lyrics – tick > tick > tick > tick > boom)
I think it needs to be a little more metronomic:
product > commercial > product > commercial > product
You can’t avoid but start with the product (obviously) but the commercial swing needs to be there early.
Building product in splendid isolation is (relatively) easy. I won’t high-five a team that claims that with their most recent funding round the principal milestone achieved was ‘building more product’ – as a shareholder in a tech company I kind of expect you to be able to build product. What I want to know is that you are building product in response to demand.
Tech + small signs of commercial success = capital efficiency = happy investors = improving valuations
Tech + tech = cash consumptive = malcontent investors = static valuations
Old school it may be, but I like strong foundations. It is the smallest of commercial achievements that can make the difference.