Platitudes are a dangerous way to build a company.
What passes today as start-up wisdom can be attractive, even seductive to new entrepreneurs. We have witnessed the creation of a sub-industry of how-to advice on creating the next tech blockbuster. Don’t get me wrong: A lot of what’s written or spoken about is incredibly valuable, but, out of context, of it can be dead wrong, even dangerous.
The Winning Viable Product (WVP)
I am a fan of the Lean Startup approach. If you are creating a consumer app in a new category, the idea of minimum viable product (MVP) is an ideal way to get something out, test it, and then either move forward with conviction or fail fast. If you are going to take on a large technology or Internet company on their home turf, then you should be thinking about the winning viable product (WVP), the one that will give you a multi-year lead over incumbents.
Make no mistake, if you are just a bit better than the incumbent, you will likely flame out early. Try messing with a giant’s profit sanctuary: A market leader will fight, discount and outright stretch the truth about pending capabilities while they hustle to catch up. Moreover, their installed base will usually wait for them if the gap and obvious benefits are not wide enough. Switching costs are one the most powerful forces in the tech universe.
If you want to take a market away from a multi-billion dollar player, to paraphrase former Chairman of the Joint Chiefs of Staff Colin Powell, enter a conflict with clear intent and overwhelming force. Since you cannot manifest this early on with market reach — sales, marketing, deep customer relationships, etc., — then your product must make the decision a no-brainer for customers. WVPs are your weapons of mass disruption.
It’s a sprint, not a marathon
When a shift in the market occurs, the “execution machine” must be in high gear if you want to translate early mover advantage into something sustainable. Prior execution machines such as Data Domain gained disproportionate benefits,particularly in the first few years of creating a new market, by pushing the pedal closer to the metal as sales took off. You could argue this underlies the early (and continued) success of Salesforce.com, Facebook, FireEye, and even Snapchat (yes, I said Snapchat!).
This means your product both must hit its target market with force and then you have to hit the afterburners to get to as many paying customers as possible. Build your company, product, and go-to-market like you are a participant in the Hunger Games. This takes a lot of confidence not only of product fit, but market readiness. Moreover, if your company will take some time to monetize, then you need a big war chest. This is why we are seeing larger A and B rounds.
It’s OK to go home with a different date
There is nothing smarter than being cheek-to-jowl with your early customers. Do your job well, and you will have them for life. Building a company, though, is not about going to the prom.
Sometimes your initial customer group is actually a poor fit for your product strategy (e.g., you were thinking about a vertical insertion in retail and healthcare is a more attractive segment). You have to get past an emotional conflict, like a teenager leaving the dance with a different date. An entrepreneur must not fall into the trap of Shakespeare’s Othello: “one that loved not wisely, but too well”.
It’s a zero-sum game
Some companies build their strategies around being in the “herd,” one of five to 10 players in a market with a hope of getting acquired. That is a failed path for your company and your investors. Most value accrues to top one or two market share players.
As Will Farrell’s infamous racecar driver character, Ricky Bobby, kept repeating: “If you’re not first, you’re last.”
Alan S. Cohen is the Chief Commercial Officer of Illumio and a technology veteran working on his fourth startup. Cisco and VMware acquired his past two companies, Airespace and Nicira, respectively, for $450 million and $1.26 billion. He serves as an advisor and board member to several technology companies.