Your tech dream will fail without the 3Ts

It is no secret that our world is evolving faster, technology is accelerating and change has become the only constant. Five to ten year plans have become obsolete as we simply cannot see that far into the fog of globalized innovation. Three year plans are often modified every year because of some new breakthrough or customer need. 

I get asked by young, hungry entrepreneurs a lot on how to succeed and the answer is always an easy answer for me... don’t sleep, don’t give up and never ever take failure for more than it is, a course correction. But more importantly, there are three things I always look for in a project. These three things must disrupt, redefine, and remodel the niche an entrepreneur wants to innovate in or my experience has proven they will fail. 

These three things are the base of finding the right investors, advisors and more importantly, building the exit strategy as a genetically embedded strategic element of the vision. 

Technology 

There are no secrets here. Ground breaking technology usually fails unless there is an overwhelming amount of available capital to support the 5-7 necessary failures to generate success. Being on the bleeding edge is intellectually stimulating but cash-flow intensive and requires a lot of work to recruit and evangelize early adopters.

Therefore, if the technology itself is too cutting edge and not heavily capitalized will struggle from a commercial point of view as well as strategic one.

The bleeding edge does not generate growth.

The goal is to have a technology that:

a. Reduces cost and creates market price erosion. When a new, disruptive and cheaper technology can do the same thing as senior, established compagnies, there is tremendous value created. A start-up that can dictate price erosion will grow and be highly valued. 

b. Accelerates productivity by doing things faster or more automated or both. Clients will buy tangible and quantitative efficiency over long established relationships. The goal of a start-up is to have at least a 10x ROI model over the current mature solutions so that the overwhelming efficiency and effectiveness overshadow the resistance to change.

c. Relieve a niche pain that no one has wanted to invest in. Innovation has benefits and drawbacks. New problems are emerging every day because of technology. These new problems are opportunities to create value-add technology. The problem must be real, quantifiable and painful. The higher the pain, the easier the sale. A start-up has to learn to ask more questions than offer immature products as customers will readily tell you what is hurting their business.

To create value, you must have a product that adds real value. It must relieve a precise pain, accelerate or automate. It must be so much cheaper that a prospective client will consider you at all costs. This indisputable value will generate sales, disrupt the marketspace and attract the attention needed to grow and displace.

Traction

We have all heard the stories about the companies who built great tech and sold for a billion dollars with no clients. There is a fairytale story once a year. But in the real world, unicorns are workhorses.

In the real world... unicorns are workhorses.

To disrupt and to displace you must have traction. Traction is not marketing, it is sales. This is the hard part that most start-ups fail at. Why?

Sales is math. 

This is a hard pill for most entrepreneurs to swallow. Sales is simply math. Nothing more, nothing less. Entrepreneurs usually suck at sales. Sales is a very simple process where for example: 100 leads becomes 60 prospects which becomes 20 quotes for 1 sale. It is a conversion ratio from dream to reality. All other sales arguments of qualitative nature are subordinated to the math. Therefore the sales model and math must be established to ensure metrics are hit to gain traction. 

Once the math is working for you you must now attack what I call "the sales cycle killer." Traction requires a laser precise model for feedback to remove friction. Friction is anything that slows down your sales cycle and reduces momentum and customer interest. Be on the lookout real soon for an article specifically on friction. Friction can be as a simple as shipping costs or anything that is creating hesitation in the decision to buy. Friction will at best, slow down your cycle but at its worst will lose you sales without you even noticing.

Without traction your business is worth much less to an investor, an acquirer or a strategic partner. Your technology may cover all the bases for success but if you have no traction, you are just another emerging product in a sea of potential threats for the big 5. You have no real story to tell.

Threat

Most industries have a big 3 or a big 5. They are the industry mammoths that dictate policy, procedure and politics. They have slow moving innovation trains, long sales cycles and low customer listening skills. They have done their work and have grown to terminal velocity.

You pay attention to what you are afraid of. 

They pay no attention to what they do not fear. How do you create enough disruption to become a threat How do you disrupt or displace these wooly giants? How do you get them to invest or acquire you?

Very simple really.... you exploit their biggest weaknesses.

Once again, innovation is a great concept but it does not pay the bills or the investor returns. Innovation in a start-up must solve an quantifiable problem, create a path for a frictionless sale and remove food from the mouth of the mammoths. If not, survival is usually short-term.

Just imagine the stressful decision for a prospective client to choose your small, unknown company with something that is potentially interesting and exciting. They must take a very courageous decision to choose you over a long established and trusted relationship with one of the big 5. 

Your threat is your success... not your product or innovation. Your threat is your value proposition. It may be your pricing, your integration, your operations model or all three. If you can precisely define your threat to the wooly giants in a quantitative fashion, your chances to succeed are greatly increased.

Your threat is a frictionless business model.

The Last Word

You have an idea. Is it really an idea or is it a problem that you have solved. If it is an idea... it comes with 100% risk. If it is solving a problem, you can gather data, business cases and quantifiable proof to support your plan. Solving a clear, current problem offers a value proposition that you can quantify. 

I often say to start-ups... deploy your vision when you are profitable as dreams don’t move boxes or drive downloads. Once you have solved a problem that is a subset of your vision, you gain traction. Once you have traction you become a threat.

To finance your vision you need tech, traction and to be a threat.

When you are a threat... investors appear out of the fog, strategic partners knock on the door and acquirers start to scratch and sniff.

Now, the real fun starts. You now are in the driver’s seat to make them feel the full breadth of your vision and to create a legacy to have a real impact on your industry. 

Never forget, to finance your vision you need tech, traction and to be a threat.

That is what tech dreams are made of.