Venture capitalists are facing a difficult situation, because their ventures can no longer lift on the growth of the market, the number of partners who invest in venture capital funds is limited and last, but not least their poor returns over the last decade. As a result the funds themselves are less likely to invest in early-stage ventures, not only because financial partners have a decreased appetite for risk, but also because venture capitalists may not be fully ready and able to rise to the challenges of developing and rolling out a groundbreaking market development for ventures. This has lead to the rise of Super Angels, that fill in the gap left by VC’s and take higher risks by accepting that more ventures will not be successful. The amount of money invested is also limited. As a result these ventures have to perform successfully in a shorter time span of around 3 years. So your chances to do it right have become limited more and more.
At the same time the complexity and speed of new ideas has grown exponentially over the last few years. Ideas enough, but which of them can be made commercially successful. Management of investments thus requires a new level of skills and expertise on active commercial development and monetization. Although most venture funds have the strategic capabilities to steer their ventures, they are not well equipped to change the market performance from inside the company. They focus on the idea, strategy, business model, processes and ROI. But isn’t there another, more sustainable road to increase the success rate of ventures and thereby decreasing the risks of investment? There is and it’s all about the speed of developing a critical customer base and proving they can earn real money with recurring revenues.
A lot of ventures come to the point where they want to expand their customer base and start intensifying their marketing and sales efforts. But the real question is: are they in the right market and what makes potential customers real customers? To answer this question they must really dig into what keeps customers awake, what disturbs them, what makes them happy. Most ventures can do this and there are numerous consultancies to assist with this step. But that’s only a start, then it gets difficult, because the team (and especially the founder / owner / entrepeneur) has to let go of old restraints, get out of their comfort zone, do things differently, stop doing what they used to do. And not discussing strategy after the first fallbacks, mistakes or other barriers. That will hurt.
Ventures have to learn and adjust, but keep track. Be aware of what’s happening and develop the capabilities and start activities that contribute to a successful roll-out. And remember: Google also started in a side column instead of the front page. Growth will come once you have gained the right insights, started to act on them and developed the market approach and organizational team with the capabilities needed. And bare in mind with everything you do what the core insights, attitude and management of the venture is.
It’s our belief and experience that this is the way to go beyond a good idea and a solid strategy. The heel of Achilles is in the skills and expertise not only to think of a strategy for commercial development and monetization, but also have the capabilities to execute this strategy from inside the venture and to improve it in iterative steps. This asks for, as an old Dutch saying states, a sheep with five legs. A person who understands the strategic route and the implications for the operational side, who can switch between day-to-day problemsolving and structural improvements, who can create the right DNA for the venture and operate alongside the founder. And execute fast, real fast. These talents are rare.
We’re talking about ‘playmakers’ who combine paradoxal capabilities like strategic thinking and operational execution, big corporate and venture experience, manager and entrepeneur, people oriented and functional (marketing) specialist. The personal and managerial skills, next to their thorough commercial experience, provided by ‘playmakers’ are crucial in creating a commercial market breakthrough and accelerating the successful roll-out.
These ‘playmakers’ are the people who can turn an innovation into a successful innovation. Because the quality of the idea isn’t the differentiator between the two. The quality of the market entry and roll-out is. That none of the ideas of the TV-show “The best Idea of The Netherlands” has been introduced on the market successfully illustrates this distinction. As does the difference between V2000 and Betamax (if you can remember!) with the former the technological superior and the latter the commercially most successful. So building breakthrough performing ventures asks for this special breed of people that can help ventures cross the chasm to sustainable growth.
VC’s should look for ways to find and incorporate these ‘playmakers’ to their teams. Just as McKinsey did by starting an operational unit for “delivering the value defined in the organization’s strategy”, VC’s also have to increase their execution power to raise the success rate of their ventures. This can be done by partnering up with these rare talents in execution and goes beyond creating a network of people around them. It asks for creative remuneration, giving ownership and stimulating entrepeneurship to cater to the needs of these talents. If not, VC’s will loose their war for talent. As other, smaller and bigger, companies are hunting for them as well. The good news? Hunting for success is a core capability of VC’s, isn’t it?
