Don’t mine short- term opportunities; Create the future

A short story about the pursuit of putting dents in the universe

In 2006 Ev Williams wrote a blog post titled “The Birth of Obvious Corp.” — he had just started a new venture with a few people from Odeo, his previous company. He funded this new company himself and acquired Odeo despite having been sucked into working there and unhappy with how it had played out. Fortunately for him, (and one could argue, the world) he used the lessons from where things went wrong and concluded that the established approach to company building in the space he was working in was wrong.

He looked at companies in the ‘internet business’ and realised that there were either large companies who would do product releases every once in a while or there were startups who would work to be acquired by larger companies. The changes in the industry gave him reason to believe that there was an opportunity to create a new model.

The aim was to look for hits and “when justified by growth, resource needs, and desire of the team, we will spin off growing properties to form their own entities”. He made clear that he wasn’t against acquisition or investment, but not at the early stage, not before they were ready to scale. Lastly Ev finished his post with a section titled ‘The new deal’, which I don’t want to summarise:

“Lastly, for me, I just wanted to create a company that would be as much fun and as fulfilling as possible. Fun in work to me means a lot of freedom, and tonnes of creativity, working with people I respect and like, and pursuing ideas that are just crazy enough to work. I don’t want to have to worry about getting buy-in from executives or a board, raising money, worrying about investor’s perceptions, or cashing out.

It may be stupid. It may be naive. It may be selfish and undisciplined. And, frankly, it may not work. All I know is I’m more excited about work than I’ve been in a long time. And from excitement and bold moves, great things often happen.”

If you don’t know the story already, the first ‘hit’ that came out of Obvious Corp was Twitter. They had actually been working on Twitter at the previous company and it was part of the acquisition, but he was convinced that if the previous model had been maintained, nothing great would come of it. Now I’m pretty sure even Ev didn’t see the first product they worked on becoming a unicorn, but I don’t think I need to argue that it was one.

This wasn’t the first time an entrepreneur had decided to set up a company that would work on different ideas. However, it is one of the earliest and certainly one of the most successful examples of the model being done in the ‘internet business’. What Ev had realised was that the cost of running experiments was relatively low and the rewards quite large.

He had spent the time understanding the complexity of his industry and knew the key components that made a successful business, he had access to all the resources needed to build a great company, all that was missing was a great idea/product that resonated with end users. So he set up a research lab to learn and run experiments till they hit on an idea that works.

Max Levchin is famous for being one of the co-founders of Paypal. In 2011 he started an ‘umbrella project’ for his ‘data-focused undertakings’. His core thesis was to research and look for opportunities that are made possible by the recent explosion of data;

“This takes the form of seed and early stage investing, rapid prototyping of internally-generated ideas, getting together with the brightest minds in the many industries that will benefit from the data explosion, looking for (and at) interesting data sets and sources, and just geeking out on data.”

Since it’s founding, HVF has spun out two companies, Affirm and Glow. Both have gone on to raise millions and are showing positive signs that they will become sustainable companies that add value to the world and make a pretty penny for their founders. Now, Max didn’t come out of Paypal and found this company immediately. He actually went on to found a gaming company called ‘Slide’, which he started in 2005 and sold to Google in 2010 for $228 million after receiving $78 million in investment. When asked about how he felt about Slide, he expressed regret about the time his team and he had invested in a company that he didn’t find inspiring and largely built because he wanted to get another success under his belt after PayPal.

The way most businesses are set up generally follows the idea that a founder has a spark of inspiration, which they take forward and build into a great company with unwavering vision. They raise money as soon as they see interest from users/customers and then push to scale, often raising multiple rounds along the way.

However, the internet business is quite different to most other industries. One does not have to invest years before it becomes clear if an idea is scalable — prototypes can be built cheaply for early validation and distribution is also significantly less expensive than in other industries. It’s also a hits business, where the winning companies will collect an almost unreasonable chunk of the market. So, working on the wrong thing is actually quite limiting.

Kevin Rose, famous for founding Digg has spent years building and selling technology companies. Recently as he served as a venture partner at Google Ventures — he seems to also have come to a similar conclusion to the entrepreneurs mentioned.

In 2015 he left his position at Google Ventures to focus on his new app development lab — North Technologies. He raised $5 million and is now spending time building products and getting them out to market as fast as possible. He realised that “the scaling piece is a solved problem” — so is keeping the team very small, investing in idea exploration and letting users dictate what they like, what they do not, and what they would like changed.

Four months in and North Technologies had already taken 2 products to the market and plans to launch more in the coming year. They’re not being overly precious about each idea. Instead, they are taking the ideas they have based on their understanding of certain spaces, their ability to build products relatively fast/cheaply and using it to run experiments in search of that magic that occurs when your vision for a product/solution matches what the market wants and things kick-off.

North Technologies is still in it’s early days, but it’s going to be extremely interesting to watch their progress as they launch new products and try to scale them.

*Update: Kevin Rose has joint forces with and become the CEO of Hodinkee after having built and grown Watchville. They raised $3.6 million round to fund the future development and growth of Watchville. The fact that Rose was able to both understand and build a large enough foothold in a new market in such a short period, to be to be a viable partner for one of the largest online watch media companies demonstrates the potential speed the innovation lab model enables. Having said that, it would have been interesting to see what they outcome would have been if they had continued to play with highly experimental ideas long term.

Many years ago when Facebook, Twitter, LinkedIn, were started — most people didn’t really understand how or if these companies would work. The rules of the game had changed so dramatically when it came to technology startups in the Web 2.0 age — users, were not only passive customers anymore, their use was making products more valuable, giving away software suddenly became acceptable as a strategy for acquiring users — the focus of a company no longer seemed to be on making money — everyone just wanted to have users.

This was a great period of mass technology, marketing, and business model innovation. Soon after came the rise of smartphones and that threw everyone through another loop whilst simultaneously opening a host of new opportunities and created new ways of working that few understood.

It’s now been 10 years since Facebook was launched and 8 years since Dropbox allowed us to finally dispose of the dongles we all carried around. We now have veterans in our industry — people who have been through the thick of it and understood how the pieces fit together.

Garrett Camp is a great example — having started StumbleUpon and co-founded Uber, he set up Expa to leverage the techniques that help create successful companies. Their focus being on the very early stage; “Rather than providing services for companies after they have achieved traction, Expa will guide founders from inception towards product-market fit.”

These experienced entrepreneurs appreciate the complexity and required luck for building a unicorn, but have worked out many of the key components required to run experiments fast, and then economically scale product and sales/marketing sides of a company once they find something that resonates with the market.

There are many indicators that the compounding effect of connections, knowledge, skill, and many other pieces that come together to build great businesses are very real and enable those who persist to repeatedly produce successful companies.

Peter Thiel, in his book Zero to One has been very clear on his view when it comes to the ability of entrepreneurs to repeatedly create successful companies that push humanity forward (technology innovation rather than globalisation) by creating something that hadn’t existed before. A small piece for his chapter focusing on the idea that building great companies is not just a lottery ticket;

“Anyone who has held an iDevice or a smoothly machined MacBook has felt the result of Steve Job’s obsession with visual and experiential perfection. But the most important lesson to learn from Jobs has nothing to do with aesthetics. The greatest thing Jobs designed was his business. Apple imagined and executed definite multi-year plans to create new products and distribute them effectively. Forget ‘minimum viable products’ — ever since he started Apple in 1976, Jobs saw that you can change the world through careful planning, not by listening to focus groups feedback or copying others’ successes.”

It would be poor form not to mention betaworks because it’s held up as the innovation lab entrepreneurs/investors want to replicate. betaworks is a startup studio that both invests very early stage into companies and builds products in-house. The list of products they’ve built is quite extensive, with great successes being Chartbeat, Bitly, and Tweetdeck.

They focus all their efforts on network-focused, consumer-facing media businesses. This very clear thesis and focus is down to them believing that if they know their space and users well enough then they will be best placed to innovate in the space and create products that leverage online networks, new trends and/or technology innovations to create consumer-focused media businesses.

The key thing is that we live in a time where innovation is happening at such a fast pace and creators are being rewarded with more riches than they could ever need. Those who have been there and done it do have access to a number of advantages such as access to capital, but unicorns are not made at the scaling point.

Unicorns tend to be born from a foundational idea. So unicorn hunters are out hunting for these ideas. They are risking a lot of money to try to make these unicorns come to life. They believe that if they experiment with a market problem/opportunity and get something to stick — they can then scale that up and get unmatched returns.

This is why we started Maker Labs. We believe that unicorn hunting is where one should focus efforts. To embark on this hunt requires the ability to keep experimenting with ideas that may seem impossible or even crazy at first. It’s through these experiments and a consistent pursuit to learn and avoid repeating mistakes that we hope to gain insights that put us on the trail of a unicorn.

Time and money will be wasted on our hunt, and people will wonder why were messing around and not focusing. We are hunting — when we catch one — the hunt will be put on hold and we will ride the unicorn till it’s been trained.

Then we will be off hunting again :)

Most people do it with a foundation of money, but we knew after our first failure (educational experience…) that we didn’t want to commit too early and we didn’t want to do something small/safer. So we had no other choice than to work the way we did — we never planned to build a research lab and we don’t pride ourselves on being a research lab — we are company creators and builders first and foremost.

The research lab model, however, has enabled us to get to an outcome that is in line with our ambitions. We’re able to use our hard earned skills to help entrepreneurs and companies innovate while continuing to take swings at ideas that are true technology innovation ourselves.

Having talked through our approach, I would like to make clear that we considering being a sector specialist to be the best source of great ideas — having experiences and insights that few other people in the world have about a problem/opportunity in a space.

If you’re in this position then you need to go through the validation process as fast as possible and focus on testing all the ideas you have around solutions that can capture the market. If your insights on the problem/opportunity are correct then with the right approach to product development and sales/marketing — you’ll have a business that you can start scaling.

We meet entrepreneurs like this all the time and they are our favourite clients — their insider knowledge combined with our technology innovation expertise allows us to move fast and build things.

However, if you’re like us and have spent your recent history focusing on becoming great at technology product development and digital sales/marketing — then we’ve found that the idea validation process becomes a lot more complex.

This is due to the need to spend the early stages of your company building on understanding a market and your target users/customers as deeply as a sector specialist in the shortest time possible. This step must be done before even trying to start understanding whether any solution you can make would be useful to them.

We at Maker Labs are currently focusing on a product that is based on a problem we have experienced ourselves quite extensively and, as a result, believe we have the insights on how to build a future where a lot of the pain around the problem can be taken away. We’ll be updating you in the not so distant future on what that is, but in the meantime; watch this space.

Start small. Dream BIG.

Hope you found our story and strategy interesting!

We @makerlabshq spend our days helping entrepreneurs test, design, and build their product innovation ideas faster. We work very closely with them to learn as much as possible as early as possible.

If you think we may be able to help you with an idea, drop us a message: hello@makerlabs.co.uk