The most luxurious Swiss watches are the ones with numerous functions, known as “complications.” If you have a few hundred thousand dollars to splurge, you can acquire a gold watch that does far more than give you date and time information and moves you way up the bling hierarchy. Or, you can buy an Apple watch for a few hundred dollars and have infinitely more complications that you can configure yourself. Even Apple offers somewhat blingy versions for a bit more money, but the upgrades are only cosmetic. Our technology developers by and large have mastered the science of making things more complicated than most of us can comprehend or use and have far outpaced the traditional Swiss watchmakers.
A friend sent me his $80 share of a fine dining experience via Zelle, which I had not previously installed. Venmo has been my preferred means of moving money among friends and family, but I realize its limitations and risks. Adding Zelle to my arsenal led to a couple of hours with my friendly megabank installing first a new digital wallet (of which I already have several) and then getting all the right boxes checked in a variety of hidden menus. The customer service person on the phone did a good job interpreting the help software that was guiding her through this process, but there was no way anybody could follow a logical path to self-install Zelle on my bank’s mobile apps. We succeeded on getting it all working, whereupon I immediately received two $80 transfers. That gave me a chance to practice an $80 send to keep me all square with my buddy. The only artifact of this adventure is having to look at three new digital wallet accounts on my main banking screen in order to keep track of the $25 opening deposit required. Maybe the bank has some grand plan for this wallet, but it’s certainly not obvious. One really has to want Zelle to go through this installation confusion; I guess $80 pending for me qualified as “really wanting.”
You’ve all had your own technology conundrums; there’s no news in that. However, I’m at any one time working with at least a dozen tech companies to help them raise money. Even if I’m just making email introductions, I first like to look at decks and do enough due diligence to determine that the plan and the ask are roughly in the middle of the fairway and will likely match with several of the hundreds of investors – angels to VC’s to PE’s — with whom we regularly communicate. I wrote in a recent post a more thorough analysis of maneuvering your company into the upper right quadrant of fundraising potential. I mentioned then the advantage of simplicity, and in this essay I will expound on that.
There’s nothing wrong with pursuing an elaborate business model based on a really ambitious idea. I have several of those in my queue right now. They are all well beyond being possible to bootstrap, and they generally require a pretty hefty raise to get a product to market. Those pre-revenue dollars are the hardest to find, but they’re out there for the right team with a convincing analysis of the potential market. One notable progress report at the time of this writing is a recent $100M Series C for an Austin-based AI company SparkCognition with currently about $10M in revenue, founded in 2013, and a total of around $163M invested including the C. This one may be attempting to lap Watson in its market. You can be certain it was launched with a big goal, secured the funding to chase that goal, and is now pushing the boundaries of AI at an industrial scale with significant corporate partners. One would have to be an advanced AI expert to fully appreciate this company’s offerings, but it is easy to boil its mission down to something simple like: “We’re crushing it in the AI marketplace.” It’s advancing science and creating incredible proprietary IP.
Compare that to plans that have considerable merit but involve changing an industry more with processes and marketing and are technology enabled but not pushing the frontiers. Some of them can become Unicorns as well, but they require more ingenious fundraising when they have many moving parts, multiple sources of revenue, involve the simultaneous evolution of critical relationships and networks, and are not so dependent on technology development. Uber and Lyft might match these descriptions in a broad sense. You can see now that they are public that their reported numbers have to start matching the dreams, and their strengths have to be supreme operational and managerial skills. Startups of this nature are perhaps more easily funded in the Valley where enough money can be assembled to overpower all obstacles. If you want to pursue one of these in Atlanta, you may have less chance of an overwhelming capital advantage and have to rely on your team’s leadership skills and a very clever plan to bring it all together to a happy launch and ultimately a happy exit. Just do your best to keep it explainable to the average technology investor in a sentence or two. And, don’t give short shrift to the hard work of customer discovery and the power of “authentic demand.” You may have to prove your customer assumptions early on in your startup process and find the shortest path to legitimate traction. (Pardon the overuse of that term.)
I have often said that my startups have rarely ended up executing the original business plan. Something better has always interfered. The concept of Peachtree Software wasn’t even possible when we first began selling Altairs. Microsoft BASIC was the province of MITS and not available across a variety of 8080 computers. All that changed when MITS sold to Pertec and voided its exclusive license to the language. Gates and Allen were then free to take over the market, and we application developers got to ride along. Opportunity knocked. That wasn’t a customer driven pivot that we commonly see today, but a pivot based on a radical change in the technology environment. At that time, nobody ever even talked about “pivots” with respect to startups. We were collectively inventing a new industry. Some of the companies I am advising today have arisen from similar opportunistic actions. Certain product lines have unexpectedly taken off, and companies have reorganized around changing priorities. Sometimes they even split into multiple entities to clarify who’s focused on what and to give each a very clearly delineated story line. That can all be good, but one has to be careful about who’s watching out for the early shareholders, particularly if there are intercompany management responsibilities, shared core services, revenue booked from transfers between entities, new investors in one unit but not all, or other activities that cloud who’s responsible for the returns to the founding investors. The same brilliant minds that can invent complicated technologies can also invent equally complicated companies. That didn’t work for GE in the long run, and it rarely works for early stage ventures either. Eventually all your investors have some voice in the company, and if you haven’t diagrammed it out very clearly, they may balk when you ask for a vote or another financial commitment.
Finally, there’s no need to overcomplicate your company or your plan by virtue of what may be your natural instinct to tinker with things. Technologists like to try new ideas all the time, to experiment, to test, to improve what doesn’t need improving, to engage in “feature creep,” and to keep everyone guessing as to what’s next on their roadmaps. There’s a natural tendency to overthink. Startup CEO’s are called upon to keep the lid on these natural traits and to simplify wherever possible. If not all your employees understand the business direction and product plan, it will be darn difficult to explain those to customers and investors that will be your lifeblood. Learn how to tell time on your Apple watch, and dither over the next 500 features later. Learn to let good things happen for you and your business by concentrating on simplicity.
At this point I’ll pause and Zelle one of my children $80 just to amortize my training and setup time with that cutting-edge banking service.