Business has become too data driven
I know this headline is going to get a chuckle around my office. A couple of weeks ago I was interviewed and the journalist started with “I believe you’re the metrics and data driven guy here”. I don’t think that’s the case, but perception is reality, so this opinion is likely to seem as a reversal on my part.
A couple of years ago, I commented that founders had become amazingly sophisticated on the topic of fund raising — from term sheet negotiation, pitch decks, ‘showing traction’ (or, telling VCs what they want to hear), valuation and cap table management. My comment was not meant as a compliment — it’s great that entrepreneurs are more knowledgeable here — but at what cost?
Focussing, really focussing, on the core business is THE (not ‘a’) requirement for startup success. Becoming an expert at fundraising, hopefully a rare event, should not be necessary. I think the tech world proselytizes funding rounds to such a degree that founders view raising money as a primary mission and a milestone to achieve.
Companies rarely fail because they didn’t raise money, they fail because they didn’t build something people wanted.
Now I’m starting to think that distraction of ‘Founders as Financing Experts’ was just Phase 1. The next big distraction — Phase 2 — is ‘Founders as Tacticians and Metrics Machines’.
It seems like every article, conference speaker, and podcast about Internet and SaaS business today is about either the tactics and how to tweak them, or tracking and then deciphering the right set of metrics.
You hear these questions all the time — “what is your CAC and Payback Period?”, “how do you incentivize Customer Success Reps on Retention and Upsell?” , “what are you using to track MQL to SQL conversion and quality?”. I’ll stop there — the list is long.
What you don’t hear enough of is — “what are you going to be #1 at?”, “what position are you going to OCCUPY in your customer’s mind?”, “how are you going to create value for your customer?”, “what is your pricing strategy?”, “what do you do as a leader to make sure everyone knows and represents the companies vision of the company?”.
Here’s the plain reality —tactics are an optimization. A business isn’t going to fail because it had poor tactics. A business will fail if it has a misfit product and no one wants to use it or pay for it (like Juicero or Beepi). Conversely, a business with a great product will do just fine with average tactics (Tesla doesn’t even have marketing, let alone tactics.). I’m not saying tactics don’t matter and to ignore them — building a successful, enduring, business means having both. But it’s 80/20 (probably being generous on the latter) — the fundamentals of building something useful, and telling customers why it’s useful, is the 80%; the tactics (and metrics that drive them) will move the needle another 20%.
Founders and CEOs need to make sure they are focussed on coming up with, iterating — and executing — the vision, strategy, positioning, and most crucially — making sure everyone in the company intrinsically understands each one and their role in bringing the company to market. Otherwise you’ll end up working hard to stand-still, competing on ‘most dollars raised’ and probably running out of money while still on the fundraising (vs. business building) treadmill.