As I have been investing in companies and startups primarily in the Software cohort, it is time to clarify the investment thesis. I am big believer that as long as the startup focuses on the value and scaling, and is making sufficient progress towards those two major goals the startup is doing the right thing. I usually get questions from most of the startup founder that I work with how can we grow faster, should we hire a growth hacker and so on and so forth. I am not big into jargon or taxonomy, as long as it is in plain english and every stakeholder involved understands the meaning why waste time on fads?
My belief is that Software itself is a commodity more so like a tool, think a hammer, the real value in any startup is in the Data, Design and Network that it is connected to and how many hops it can do. Let me clarify with examples, when we invested in CLARA the investment thesis was that communities are forming around a number of interests and people with the same interests would like to connect, meetup and discuss online. Nothing new in that but what we focused on was the idea that what everyone says in those water holes is important and how can we make that easier to understand, take action and simply the community management function. Because every person in the online community is a node and every node is value and especially what each node writes about is valuable. We executed on that idea to a point where we are doing it better than those software companies that enabled online communities to interact. The value of CLARA was in the data that we sucked out of online forums, analyzed it, presented it in a format a community manager or anyone could see the sentiments, troubles and discussion topics in a beautiful dashboard. I think we aggregated the Data, Design and Network into a solution which was better than anything else in the market. CLARA was not the first Community Analytics company but we did it better than most out there. That was the value Jive Software saw in CLARA and acquired them last year.
Example #2 Buuteeq, the value that Priceline saw in Buuteeq was all the Mom and Pop hotels that never had a presence on the web, suddenly starting to have a presence, but none of those hotels would ever use Priceline or Expedia or Travelocity because it is too much to pay a % of their revenue to the aggregator sites. What that hotel cohort wanted was a simple yet powerful and beautiful web presence that enabled them to leverage Social Media, SEO and all things that online travel sites promised to deliver. The Buuteeq team did an excellent job of on-boarding over 7000 hotels onto the Buuteeq platform. Yes, you guessed it right Priceline obviously saw value in getting those listings and aggregating their hold.
So what is the lesson to be learnt for a startup? if you are building a company, focus on the where your value is, is it the number of listings of Summer Houses, like Bungalo.com? then the value comes when the rate of increasing the listing goes up exponentially. What strategies should you employ to increase the listings? If your website is a marketplace of tourism related products like say Guidetoiceland.is (they have a new website, check it out… it is awesome! disclaimer: I am an advisor and investor in that team), the value of Guidetoiceland.is goes up with the number of vendors using that platform. It is growing at a really fast pace and the team is doing a kickass job of executing. Really proud of their achievements so far.
Focus on the data, design and the network you are building in your startup, watch the rate of growth of all of them, there in lies your problem and solution. The more nodes you have connecting to you, more valuable you become. It is easy to measure and show. I strongly believe in the notion that Startups = Growth, made popular by Paul Graham of Y Combinator and now there is more data put out by Mattermark on the startups that they track. Here is a blog post with the title “Startup Success Indicators“.
