52 Bicycles

Peter Rip lets rip on the importance of focus in improving valuations:

So how do you double your valuation? Pick one application; serve one type of customer and be in that business. Show how you can conquer a specific set of competitors by virtue of the technology, but don’t be in the technology business. If you can persuade your investors that the first beachhead is attainable and interesting, you will get credit for subsequent applications and the big, horizontal play. Tell a story that shows you understand who your customer is, how to get to them, and why they will buy or use your product/service. Show how powerful the technology and team are, but stay on message about the focus. Let us imagine the Future.

• Don’t enable – solve
• Don’t provide context – provide conclusions
• Don’t ask customers to build – ask them to use

Technology is raw material. Create finished goods.

I agree with his sentiment, though I always came at it from a bootstrapper’s perspective - customer-need focus as critical to getting sales, which in turn fund the business. Kudos to Rip for making the point that this applies to venture-funded enterprises as well.

I partially blame the VCs for the lack of focus, because they talk about how they look for the big idea, the world-changer, the billion dollar market. And indeed it is in the end-stage of the project, when it is in “tornado” mode, thatn there is a likely, large liquidity option.

But it is the entrepreneur who must resist the temptation of this end-stage and instead focus on the early stage - how is this going to be a viable business before it hits the end of the game. And it is tempting to think about how one is going to get “big” fast, growth (even more dangerous when measured by non-paying users, rather than revenue, let alone profits) is what gets one in the news - the America-Destroyer is always talking up hypergrowth stories of these startups.

(I am thinking that “Social Network” is increasingly a dodge - a way to put the onus on creating value on the user, rather than delivering value. Reminds me of a classic definition of consultant.)

Build something useful. Deliver value. Get paid for it. Funded or bootstrapped, it’s all about building a business.

This entry was posted on Tuesday, December 19th, 2006 at 6:05 pm and is filed under Technology Business. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed. Reddit This