29 Dec The Value of Speed and Agility
Of all the qualities and skills entrepreneurs need to bring to a startup to be successful, we at TAC have always valued speed, agility, and execution at the very top of the list. We constantly strive to show our entrepreneurs the advantages of executing at a very fast clip.
Good startups create a feeling of urgency among their employees. It’s all about aligning the team around a market opportunity. A culture of urgency can energize the employees and inspire in them a clear focus on innovation and execution.
Reid Hoffmann, the co-founder of LinkedIn, stated in his 10 rules of entrepreneurship, “Pay attention to your culture and your hires from the very beginning,” and as such, we at TAC invest solely in outstanding founding teams. However, immediately after the investment has closed we begin working with the founding team to help them find the right people for their startup to grow. Great teams are what bring startups to success; not the market, not the technology, and not the product.
Speed and agility are so important because they enable us to succeed against headwinds:
Speed to Overcome Mistakes
All startups make mistakes. It’s inevitable. Making errors in judgment, misreading changing market conditions, and misunderstanding erratic consumer behaviors are a given in our world, and are in fact becoming more and more prevalent. Even giant companies make mistakes. What distinguishes established companies from startups is that established companies take years or even decades to recover, if at all, from their mistakes (for example, take the US and European car industry: it took them years to adjust to the new Asian paradigm of low-cost, high-quality cars). With a pervasive company culture of execution speed – from the CEO to the most junior member of the team – startups will enter and exit mistakes faster than competitors and incumbents ever could. One of the main advantages of a startup is that a startup is allowed to try something, fail, then get up and try something new, all within the span of weeks. Forfeiting this right and advantage would in fact be the biggest mistake a startup could make.
Speed to Outpace Incumbents and Competitors
What the world economy has been struggling with these last 7-9 years is growth. A derivation of growth in the startup world is velocity, or speed of growth. Obviously, startups grow quicker than established incumbents. Actually, many incumbents don’t grow at all (IBM, HP, etc.). One of the main drivers for the M&A activity in the tech industry is the desire of larger companies to acquire products and enter markets with high growth. Velocity in market penetration and velocity in sales growth are the one advantage startups have.
Furthermore, venture capital, by its very definition, is risk capital deployed to seek high-risk, high-growth companies. It therefore makes no sense for a startup to trade speed of growth for execution perfection or market tail-end acquisition. We at TAC believe that it is more important to be in 10 markets with only a 25% market share than to be in 5 markets with a 50% market share. Acquirers want to see a startup team’s ability to expand into more and more markets, caring less about the ability to penetrate each market fully, because the ability to expand is something the acquirers can bring to the equation post-acquisition.