Does Operational Experience Make You a Better Investor and Entrepreneur?
Published on April 8, 2019 by Clint Chao, Moment Ventures
They say that in order to be an effective VC, it’s important to have operational experience. I’m not sure if that’s entirely true, as Fred Wilson makes a strong argument that some of the industry’s most successful investors (including himself!) have zero operational experience and thrive because of it. But I certainly find great value in having it, as I often dig into my bag of in-the-trenches experiences at the companies I worked for earlier in my career while trying to help the entrepreneurs in our venture portfolio.
Is Your Operational Experience Relevant to Startups?
I suppose this largely depends on what kind of operational experience you bring to the table. Before becoming an investor, I grew up primarily as a startup sales executive and had the great (mis)fortune of being salesperson number one at C-Cube Microsystems, a 90’s startup with a mission to digitize all imaging and video applications, when everything was still analog. No one was begging to have this happen, but lots of companies were intrigued, and I got to sit in the pole position of starting up a customer and revenue engine that enabled us to bring a couple of unknown technologies called JPEG and MPEG to the world. In the early days, I was sifting the serious leads from the tire kickers, resulting in lots of dialing for design wins. Eventually, we started to get noticed.
One of my responsibilities was nurturing the relationship with a motivated little startup customer who had the bold vision to eliminate the need for cable networks by beaming TV signals over satellites, and they wanted to become a lighthouse customer for us as they critically needed our video components to make the system work. That company was DirecTV, and we knew their success meant a ton of industry validation for us, so we had to make sure we kept them happy. Of course, half the battle was managing our own side of the relationship as we were building our products with the customer right at our side. We went on to become the dominant provider of MPEG solutions in the industry, helping to launch other household name solutions like DVD, video conferencing and even digital ultrasound imaging, each with a different motivated customer pushing us along. I wouldn’t trade those experiences for anything, as we encounter startups every day who are aspiring to disrupt industries, and finding and managing early lighthouse customers is more art than science.
Meanwhile, my Moment Ventures partner Ammar used to head up corporate development and M&A for Cisco, one the most storied tech companies on the planet during the years when they acquired dozens of fast growing companies that serve as the backbone of much of its product portfolio today. Safe to say that in those days, if you were a communications startup, Cisco was the big dog, and he represented a possible massive exit for your company. His experience as a strategic buyer of companies gives terrific perspective to young entrepreneurs on the sell side that are often facing this experience for the first time.
Ammar’s keen sense for technology strategy in the eyes of a would-be acquirer and mine for influencing a company’s product pipeline with a lens on what your earliest customers need are just two of the things we try to bring to our portfolio companies every day. We love that we lived our early professional lives in the trenches, and do what we can to pass on this experience to our current and future entrepreneurs.
What About Tech Founders?
But how about tech startup founders, the true stars of the startup game? Do they need relevant operational experience to steward their companies into the waters of an industry that they are seeking to disrupt? Again, I think the answer will vary depending on what kind of experience, but if you ask us, we love it when founders bring that knowledge to the table. We think it really helps for them to know and appreciate the nuances about the behavior of constituents within an industry ecosystem, and be keen to the inner workings of an industry where perhaps many others aren’t.
The Future of Work and Transforming Behavior
One key aspect of our Future of Work investment thesis at Moment Ventures is to invest in B2B startups that use technology in a way to transform the behavior of workers and customers within a large industry vertical, such as construction, logistics, food, e-commerce, education and others. We seek people who have lived part of their lives in the trenches of an industry, and have become driven by a deep sense of why and how technology can create new efficiencies to the workflow of the space, which if successful, brings about transformative industry behavior. Many of the workers or customers in a specific industry have been doing things the same way for years, if not decades, so startups targeting these verticals face a steep climb as they attempt to change the behavior of an industry that is reticent to change altogether. But in looking for investment opportunities, we always get much more confidence when an entrepreneur has spent time in that industry and knows what makes its workers and customers tick.
Examples from the Trenches
Many of the entrepreneurs that we’ve invested in started their journey deep in the bowels of their target industry where they identified a fundamental inefficiency in the way work gets done:
- Swing Education’s founders came up with their idea for an online substitute teacher marketplace when CEO Mike Teng saw the substitute teacher shortage problem firsthand while running the IT operations of Rocketship, a charter school network founded in California. Mike and team set off to build a better way to enable schools to instantaneously fill a substitute teacher opening by connecting an entire pool of a region’s accredited sub teachers to a school so that fulfillment could be done in minutes rather than hours or days.
- On-demand warehouse founder Ben Eachus at Flowspace ran the logistics operation for The Honest Company and out of his personal frustration in managing the complexity to secure short term warehouse space, he set off to build a software solution to connect a nationwide network of available warehouses to make it brain-dead easy for e-commerce companies to dynamically shift inventory around the country in order to meet the industry’s new normal: the 1–2 day shipping expectations of e-commerce shoppers.
- Jane and Taber ran a space services company and was hired by a Google exec to break the world’s record for highest jump in history before launching stratollite pioneer WorldView to bring high altitude balloons to the stratosphere and the industry of earth exploration.
- ER doc Tim Peck spent 3 months living in a nursing home before launching his emergency tele-health startup Call9 to transform the 911 emergency experience for nursing home residents.
- By the time Andy Hodge created the world’s first car security camera at Owl Cameras, he was already a tried and true design and engineering veteran that brought category-defining products like Apple’s iPod, Microsoft’s Hololens and the Dropcam to millions of customers. That experience made it possible for every day consumers to protect one of their most prized possessions, including this famous NFL athlete, who caught someone in the act of breaking into his car.
Technology Alone is Not a Solution for Many Industries
One of the more concerning trends in recent years is when companies demonstrate the power and capabilities of their technologies as half-baked functions rather than solutions.
While it’s certainly entertaining to see videos of a robot climbing up a hill, a dinosaur hotel receptionist or any other YouTube videos depicting a grim, dystopian future based on technology running without people, oftentimes these demo videos do more harm than good, putting the fear in people that their jobs are at stake and technology will replace entire labor forces. At least the hotel dinosaur revolution was short-lived and has since faced extinction. Silicon Valley gets rightfully criticized for lacking the empathy and understanding of what it takes to ask an industry’s workers to change decades-long behaviors. We credit those entrepreneurs that have lived in the trenches to truly understand what it takes to cause an industry to transform, bringing along with it the opportunities for the workers in those industries to up their game.
Let’s Reimagine Work
If you are an entrepreneur living inside the trenches of an industry where you have identified an opportunity to use technology to transform how work gets done, hit us up, as we’d love to hear your story! Coupling your direct industry experience with the technology to bolster the efficiency of how work gets done enables us to reimagine ways that people can get work done in industries such as logistics, food, healthcare, oil & gas, education, e-commerce or even the technology industry itself. So please get in touch with us!