My Monitor110 experience was chock-full of rich learning. Great. But now what? Accept the fact that I am good as an investor but suck as an entrepreneur? Stick to being a “junior VC” and give up starting and kick-starting businesses forever?
I think not. Am I the right guy to be a tech company CEO? Hell, no. I’m a Wall Street/deal pro/quant guy, more equipped to run a large trading business than a small start-up. But that said, I’ve still got the ideas, passion and fire to be a start-up guy, and have taken enough lumps and learned enough lessons that I think I can be better the second, third and fourth time around. So here is what I’ve been up to and why I think I’ve learned a thing or two over the past four years.
Problem #1: Trying to control too much of the value stack. At Monitor110 we were shooting for the moon, from massive data harvesting to NLP, from real-time matching to sentiment analysis. We bit off a lot. Too much, in retrospect. Any one of those problems is challenging by itself, but we tried to swallow them all in an attempt to develop a truly disruptive service. But one thing I’ve learned is that disruption does not need to cost lots and lots of money. What I am doing now is trying to isolate specific elements of the value stack, focusing like hell on those, and leveraging existing tools and technologies to take care of the rest. It could be licensing someone else’s proprietary IP or using the fruits of the open source community on which to build an powerful service. Whichever, I am now taking a radically scaled down approach to creating value, one where I am far more confident of the value of the idea and its ability to be executed without spending millions.
Problem #2: Innovating in a vacuum. The three ideas I am working on/incubating now are being tried and tested with clients – real, live clients – and being iterated upon in real time. No fear of rejection. No concerns about looking stupid. Who cares? I don’t any more. I am still selling some stuff to Wall Street, designing ideas for the most challenging and demanding clients on the planet. But I am hungry for input and insight, putting clever stuff in their hands in order to elicit a response. Deliver value, get value back. The value being delivered might not exactly be what clients want, but they’ll tell me that. And we’ll do better next time. Much better. The innovation cycle has been compressed from months to days. This is the way it should work, I think.
Problem #3: Too much money. Suffice it to say, I am keeping money tight with my start-ups. One idea I am solely funding out of my own pocket. And believe me, I don’t throw cash around. Another company a few guys are kicking in less than $85k. The third the entrepreneurs have been working on for two years and funding out of their own pockets and through consulting, just now poking their heads up to raise $1 million against a pipeline many times this amount. This kind of financial discipline is keeping everyone focused on generating revenues, securing traction, proving the business models in short order. There is an edginess and urgency that didn’t exist when I once had $11 million in the bank. There is hunger. There is fear. There is raw intensity. And it is all good. It’s amazing how creative people can be when a safety net simply isn’t there.
So one idea I am working on is a stealth trading start-up (no website, sorry). Models and analytics targeting the quantitative trading community. The cumulative learning of myself and some of my colleagues from playing at the intersection of unstructured data and computational finance. We are completely focused on delivering alpha that is orthogonal to our client’s existing investment activities. Period. Everything else is being handled through licensing agreements, strategic partnerships and the use of open source technologies. Unique data sets, storage, processing power and search are all being dealt with in this manner. We are 100% focused on our clients, making them money and integrating with their investment process. Full stop. We are close to selecting our initial group of cornerstone clients, those with whom our franchise will be built. Huge IP. Modest cash outlay. Massive upside for both ourselves and our clients. I like this approach. Wish I had though of it before.
Another idea I’m working on with good friends is StockTwits. The Twitter phenomenon (where my friend Fred is an investor) has created a community that is ripe for idea generation and monetization. It just so happens that lots of people who chat about stocks do so on Twitter. We have already built a sizable of community of folks who put a $ sign in front of tickers in order to be picked up by the StockTwits service, joining a community of thinkers who share ideas about stocks and topics that are hot right now, not in an hour, a day or a week. The service is incredibly lightweight, modular and primed for adding features and functionality that spring from the minds of the founders as well as ideas generated by our vibrant and vocal community. This is all happening with a remarkably small amount of dollars and a large amount of creativity, ingenuity and leveraging the work of super smart people who have contributed to the open source movement. The approach being taken here could not be more opposite of that we took at Monitor110. Lesson learned.
Finally, I am working on a deal in the search space. I will talk more about it later, but it directly benefits from the commoditization of search and the need to make data shareable and more useful across organisations. Again, built on top of open source with the potential for major disruption. And it doesn’t require the dollars invested in classic, high-profile search solutions. The IP is focused around usability and security, two guiding principles of large IT organisations everywhere.
These three new efforts just feel right. Who knows; maybe they won’t work as I hope. But maybe they will. In any case, I think our likelihood of success is higher (and the downside lower) because of the some of the stuff I learned by failing. Who says you can’t teach an old dog new tricks?
Roger Ehrenberg is a
who now runs
, his personal investment vehicle. IA Capital’s investments include Silicon Alley Media, SAI’s parent company. He blogs at
, where this post was originally published.
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