If I had a dollar for every time I heard a start-up founder say “I want to change the world”, I would have to hire many semi-trailers to take the coins to the bank.
What people in start-ups often mean when they say they want to change the world is that they want to revolutionise it.
They often say imagine a world without poverty, without homelessness and without want. Then I hear their idea and it often doesn’t match up.
They simply want to replace the current despot/system with themselves.
Their revolution is not a revolution of ideas, but a recycling of the people in the system. They simply want to be the ones on top.
They want the billion-dollar firm and they want to be the ones in control.
Ideas from such start-ups include getting better interest rates, creating a marketplace, digitising processes, automating things and so on.
They are evolutionary start-ups and they want to evolve the current process, the current method.
People often mention Uber as having ‘revolutionised’ the taxi industry. Uber did no such thing. It may have helped the industry to evolve, but a revolution it was not.
Uber is simply displacing smaller taxi companies to become a larger one. They are going from owning cars to getting people loans and putting the liability on them.
Transformation often requires new thought. It’s not necessarily a revolution in the grand scheme of things. It’s probably an evolution, but a revolution internally, it absolutely is.
Therein lies the secret, a true revolution starts from within, first as naught but a thought, but it prepares you for the greatness to come.
Recent research undertaken for the Australian Transformation and Turnaround Association (AusTTA) found a quarter (25 per cent) of 30 respondents said they were ‘uncertain’ about how to deal with the challenges of digital disruption.
This suggests that there is still a large part of industry that needs to come to grips it.
In contrast, another quarter correctly identified that the true focus of digital disruption should be on how to better serve their customers, with technology being the enabler to realise this.
A further quarter saw spending money as the solution, either acquiring a start-up, buying a disruptor or creating a disruptive subsidiary.
Those taking this approach should be aware that, generally, creating a disruptive start-up needs to be clearly separated from the owner’s main business if it is to have a chance of success and consumer engagement.
To be most effective, a disruptor needs a clear ‘social purpose’ that addresses a community issue.
One bit of technology that will bring about a revolution is blockchain.
Businesses are struggling to find a use case for it because they are thinking in evolutionary terms.
They want to keep their business models intact, and their business models are built around the value of command and control central systems, but how do you monetise something where a process is not dependent on touching your system at all?
I don’t have the answer and I wonder if that is even the right question.
To start-up founders, I would only request an acknowledgement that if you have businesses that you are obviously building so you can be the next billion-dollar company. Stop lying to yourself that you are doing it to change the world.
You are doing no such thing. You simply want to be the despot at the top of the food chain.
That acknowledgement will mean that if you really want to change the world, you’ll start to transform your business from the inside out.
I see many start-ups on a weekly basis, sometimes on behalf of accelerators/seed investors/institutional investors, and sometimes where start-ups are looking for feedback.
Everyone, of course, is looking to pick a winner. It’s a risk and that is an accepted fact, but everyone tries to minimise the risk by looking at factors such as:
- Market size;
- User feedback;
- Business/financial and marketing plan;
- Selection bias and gut instinct of investors; and
- The number one thing – the team.
What I’ve come to recognise is that it's easy to be fooled by all the above metrics.
The start-up might have a fantastic team, a great product (they might be able to give you a demo of a beta), great testimonials, a fantastic plan making them a gazillion dollars in just six months and a genuine solid understanding of growth hacking.
By being ‘fooled’, I don’t mean that they pull the wool over anyone’s eyes.
They might legitimately have a good beta product, a good plan and highly qualified people with the right backgrounds. However, the only thing that matters, in my opinion, is progress.
All too often I come across teams that have the most amazing presentations, immaculate documentation, a good product and what appears to be a totally committed team. What I have come to realise is that you should never make assumptions about their ability to execute.
My simple protocol when interviewing teams for accelerator or investment is that I tell them that I want to see them again in four weeks, and what I will be looking at is the progress they have made in the various parts of their business, only in the four weeks from today.
Now, you might think, that seems rather simple. They make an effort for four weeks and they have tricked me. But you’d be surprised.
In the four weeks, most people come back and start talking about stuff they did a year ago. I bring the discussion back to only talk about the previous four weeks.
I’d say 90 per cent of start-ups start to fumble, stumble and make excuses or describe things they did that even they knew were not valuable to the business.
I look for the progress they have made in their product, their marketing plan, their users, and I look for their approach to issues and their finding innovative ways.
My recommendation is that you should never say no or yes to accepting start-ups or investing in them after the first meeting.
The most woeful presenters might surprise you (and act on feedback you might give before the second meeting), and the most polished ones might turn out to be just only that, polished presenters with good documents, but no capability of execution.
Just that metric alone – progress – speaks volumes about the individuals in the team, their capabilities, their attitudes and their ability to execute.
You get great insight into their thinking and can be a much better judge of the compatibility between the entrepreneurs and you.
In return, the obligation you should hold yourself to towards them is a quick decision, for we should be held to the same standard.
If within two weeks we cannot do any further due diligence required on the start-up, then I think we should question our ability to execute and be good investors.
In the meantime, if you are evaluating a start-up as an angel investor (or even if you are an entrepreneur evaluating your own start-up), the only metric worth watching is progress.
Simran Gambhir is a founding member of The Australian Transformation and Turnaround Association, founder of Ganemo Group and chief technology officer at Stone & Chalk.