After seeing hundreds and hundreds of startup pitches, we have noticed an interesting underlying trend. As we are listening to startup founders pitching, we have categorized them into two buckets. Tech people with little to no business background, or business people with limited or no tech background. In both cases, it poses a dilemma for us as investors. Most startups we have seen are heavy on one side vs. the other. So here is what we have learned, both from good investment decisions and some bad ones.
When tech people, inventors, “Techies” or “Mad Scientists” as some of us call them, start a business, they are focusing on the technology more than paying attention to the business side, they operate from the fundamental set of beliefs that ‘if you build it they will come’. So as long as the technology is good it will sell itself. They will most often sacrifice the company (the business) for the sake of a “Perfect” product.
News flash: Nothing sells itself, it is a misunderstanding of business basics One on One. You will need to drive it and to drive it hard, and you will have to sell it every second, every minute of every day non-stop, if you REALLY want success, that is.
When a business person starts a tech company, they are focusing heavily on the business side and misjudging the tech side. They operate from the fundamental set of beliefs that you can do anything you want with technology and there are no limitations. So as long as they have a solid business case they will find the technology to deliver. They will most likely sacrifice the product for the sake of the business.
News flash: There is a big difference between building tech for speed vs. building it for scale.
In both cases, it puts the investors in an interesting dilemma. In both scenarios it can be very expensive: to take the time for the “Techie” to learn the business and for the Businessperson to learn the tech. Many times we will pass on an opportunity, not because we do not believe in the tech or the business for that matter. Many startups will not see the light of day just because there is a lack of balance between tech and business.
As an investor, I am one who is coming from a solid business orientation and background, invested 10 plus years in learning technology, and is still constantly all the time, and intentionally spending time learning. I am not an expert by any stretch of the imagination, I probably know a lot more than the average business person, yet I am getting very dangerous day by day (LOL).
What an investor is looking for is a solid investable startup that has a balance between the two domains. If you are a “techie”, find a co-founder with a solid business background. And, if you are a business founder, find a co-founder with a tech background. Not an advisor or a part-time board member, find a co-founder with a significant stake in the business. Our strong recommendation, to say the least, is to get it done before you start pitching and looking for money, otherwise, the probable almost certain outcome will be, that you will not be successful in raising capital.