19th September 2018
So this is the first blog in my series revisiting old material that I wrote from the investment/advisory side of the table prior to getting a ‘real job’ as a CEO. My goal is to try and compare and contrast perspectives with the passage of time and roles.
In Metronomic meets Will Smith (a full extract of which is appended below) I was mulling over the number of pure tech led businesses I met and the mentality/folly of continually developing the product prior to actually making any sales.
In this instance I actually hold pretty firm on my core view that you need to build a product that people actually want to buy. There is no point in building an AI enabled widget on the blockchain with whizzy features if people actually don’t need, want or like the basic widget. The blockchain/whizzy/AI elements are a distraction from the core and make you feel better but could be a complete waste of cash/time if you can’t sell your basic widget.
Balancing Technical and Commercial Development
I do firmly believe that you need to oscillate carefully between commercial and technical developments to build what people want and not, fundamentally, what you think people want or what sounds glamorous.
We endeavour to do this at Cyclr. Some of our best feature developments have come through client ideas.
The caveat to all this is that I have learned the importance of roadmapping the future and understanding what you might build in the years and months to come. Customers really do care about how your product is going to evolve, as do internal stakeholders and stakeholders. You have to scope out the vision in its broadest sense and to encourage intellectual innovation as to where you might head and what you might do.
I still don’t think you should ever actually build the intellectual innovation without some form of fundamental basic proof of product:market fit and client need, but I can see the excitement that the vision engenders across the business. This aspect was missing from my original blog. I have been introduced to the concept of a publicly published roadmap. I am not quite there yet but am being slowly persuaded of the merits of this.
When we fundraise for Cyclr I fundamentally focus on the commercial traction we have rather than the technical traction – or at least in the first meeting. It is the commercial traction that signals we have technical traction, whereas technical traction is not necessarily a signal that you have commercial traction. It seems to be these real life signals that excite the majority of VCs. So this focus on commercial traction has served us well. Fingers crossed it continues to do so…………
Original blog in full:
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 that I am not buying in to the ‘quick and easy’ approach to company building that is somewhat fashionable. 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.