A VC in Vacationland

I have the greatest respect for Fred Wilson at Union Square Ventures.  I read his Blog postings daily.  He and his partners are fond of publishing erudite VC Blogs on "The VC Cliche of the Week".  Their postings often violate the promise I made to my readers in my initial Blog in early 2006.  For those who do not wish to double click on the link, the short story is that I was going to avoid business school textbook advice, which in my mind, provided little use to the true entrepreneur.

Thus, my first anti-cliche–"you are in the hands of the gods".  Many VC’s would like you to think that there is some magic formula to a startup, which, if you can only figure it out yields success.  They generally won’t tell you what they think the formula is for your market space( although I provide some insights into the formula in an earlier Blog, The Secret Sauce of Success) and will advise you at a high level as best they can, but let’s admit it–if a better funded, very competitive solution comes along which has a faster take up in the market, you and your company are truly "in the hands of the gods".  What these means is that the VC’s may begin to lose interest in your business model and redirect their efforts to other portfolio companies. Oh, they will attend your board meetings and answer your calls, but their minds are elsewhere, leaving you with no true patrons but the gods.

I am not going to tell you how to get out of this pickle.  The point is not to get there is in the first place. Here are some suggestions:

• Yesterday’s Technology Platform:  A common mistake I see is software written using outdated technology business models.  If your market competitors are single tenancy and/or ASP’s, think SaaS. Focus on where the customers are moving and position your platform ahead of the curve. If you need good channel partners to sell your product, consider MS .net or SAP netweaver environments.
• Customers as Your Product Designers: Invest significant time in working with key customers on designing product features and functionality. If you don’t, your smarter competitors will and beat you to the punch.
• Analysts as Market Makers: You and your technology don’t make markets, industry analysts do. You may have a really whiz bang technology, but unless the analysts agree, you can easily be supplanted in the marketplace by companies with inferior technologies, but who have worked with the analysts to define the new space–and had you left out of their "magic quadrant".  Make sure the analysts know about what you are up to and do a good job explaining it to their clients.

Being in the hands of the gods is not a good thing under any circumstances.  Better to remain in the hands of your angels and VC’s by keeping your company correctly positioned for success in the long term.