I remember a little under 20 years ago sitting with a mentor of mine discussing business and ideas to generate cash. Little had I known at this time that I would be a VC 20 years later.
I cared even less though about technology. The business idea was to buy a certain plot of land and put up a parking garage. The idea occurred because we had together driven around looking for parking and couldn’t find anything.
Yet we did see this plot of land with nothing on it, prime real estate near a shopping centre and no parking garages open to the public within miles. The country was coming out of it’s communist slumber and people were buying cars like mad.
Plus stores were going up everywhere in that part of town. Fast forward 20 years and go to that spot. There’s a parking garage right where we wanted to build one. Nope, I didn’t finance it. F&%K!!!!!!
Let me tell you another little secret. I couldn’t care less about technology. It doesn’t give me much of a “thrill” like a developer may get when seeing spectacular code. Nor do I get a hard-on when I see the iPhone or Mac like an industrial designer may. A great e-commerce website? Nice but whatever, it’s a website. What gets me all giggly is an opportunity to make money.
When I realised what Groupon’s whole “spiel” was and realised they were printing money, I was turned on. When I saw Facebook usage exploding and realised how many people log on to their platform every day, I saw dollar signs everywhere. When I basically go everywhere and see a friggin’ iPhone, Mac or iPad in hands young and old, regardless of geography, with stores from San Francisco to Moscow, I start wanting a piece of the pie.
Yet, in our world of venture capital, tech start-ups, Silicon Valley and the internet, we often forget that there is money to be made in so many ways. Technology is just a tool. It’s an enabler for ideas. Gadgets are just channels to get your idea into someone’s hands. It makes life easier but it’s not what generates the cash. There are businessess in real estate, media, finance, hospitality and so forth. So much of this never overlaps with technology and venture capital. Yet, creative ideas are to be had all over the map.
Take a look at AirBnB. Is there rocket science behind the idea? Nope, it’s very basic technology connected with a great idea coming out of the hospitality segment. Sure, Google on the other hand has tons of computing power and algorithms behind it and this makes them so powerful. There’s also amazing engineering inside an iPhone or Mac and here you need the “tech part” as much as you need the idea. Yet, I can continue with an endless list of successful Web 2.0 companies like AirBnB and you’ll search long and hard for the whiz-bang tech. It’s your perspective which you often have to change instead of innovating only on the technology front. Sometimes the best mousetrap doesn’t win.
So yes, you can build great companies with a technology advantage, giving you a significant lead. Yet, I often tell entrepreneurs to think less. Don’t try so hard when it comes to launching your business. Don’t add technology. Take it away. Make it easy. Launch as quickly as possible with something and test it in the market. James Altucher has a great post on this today, which I highly recommend reading if you got this far.
Further, don’t build companies which you believe are optimised to raise venture capital. I’ve already written that it often makes sense to avoid raising money as long as possible or completely. If you’re making money hand over fist, the investors will come to you. Try to do things where you have to invest as little as possible to get things off the ground. It’s hard enough to take that first step to launching your own business, cutting the ties to the world of employment. Why risk putting so much at stake? Technology always costs money, even if you get it on the cheap. Good ideas can often be monetized initially without technology involved of if they don’t include it at all. Plus, if you’re scrappy and think around problems instead of going head-on, you may surprise yourself.
Hence, if you have an idea to do something and think first, “will I be able to get this financed”, you’re on the wrong path. Figure out how to get it going, fast and generate cash. Someone else may already be putting up that parking garage before you get there. I’m still kicking myself for that one.