Time to Innovate!

Henry Vogel, Co-Founder & Managing Partner at DVx Ventures

There has never been a better time to innovate and build breakthrough businesses than today.

At first blush, you may think we’re suffering from some novel Coronavirus-induced delusion. The world is suffering from a global pandemic that has caused a health crisis affecting millions, economic shutdowns creating unprecedented unemployment and reduced take home pay for tens of millions, and business carnage in almost every industry. Many companies, both large and small, and including some once-high-flying innovators, are on the brink of insolvency or taking drastic actions just to survive. And across America, we’re experiencing profound community upheaval from decades of on-going racism, police abuse and socio-economic plight.

These epic events are not only remarkable because of the depth and intensity of their impact on our daily lives. Their impact is even more acute on our physical, economic and emotional well-being, our psyches and our souls because they’re all happening on a global scale and simultaneously. It’s like we’ve been struck by the Spanish Flu of 1918, the Great Depression of the 1930s and the race riots of the 1960s all at the same moment and in the span of just a few months.

But crises often provide the launchpad for meaningful change, and some of the most innovative and durable businesses have been created during these times. For example, the 2008 great recession spawned the birth and initial funding for many of today’s unicorns. It’s been true for previous shocks and other non-technology companies, too. The Great Depression of the 1930s saw the rise of many of the top companies and global brands for the past century including Disney, GM, IBM, Kraft and many others.

While a crisis is nothing we would ever wish for, it can provide catalysts and create opportunities for innovation which help spur breakthrough business building.

There are three main reasons for this: solving major frictions, the ability to innovate at warp speed, and the opportunity to access the best resources. These three principles are also at the core of our unique approach at DVx Ventures.

1. Solve Major Frictions — Crises lay bare many shortcomings of current solutions. At DVx, we focus on building insanely great products and services that solve big pain points, address unmet needs and delight latent desires for millions of people
2. Innovate at Warp Speed — When routines are disrupted by fundamental changes, people are more open to try new things and form new habits. We see this as an opportunity to build new businesses at warp speed.
3. Access to the Best Resources — The costs of starting a new business are lower during downturns. More importantly — and with the right talent magnet like the DVx platform — attracting top teams of world-class experts dramatically increases the probability of success for new companies.

1) Solve Major Frictions

For the past three decades, I’ve led and been part of teams that have successfully launched and rapidly scaled many new, disruptive businesses across sectors and geographies. Many of these have been early-stage startups. More recently, I’ve helped many large enterprises design, launch and scale new corporate ventures which have also introduced innovative products, services and business models to both their existing customers and new consumers in adjacent markets.

The common pattern and most important ingredient to the success of these new businesses is that they all solve material frictions impacting large numbers of people.

Consumer frictions fall into three categories:

• Pain Points. These are big deficiencies with existing products and services which force customers to do things less easily, more expensively or with less satisfaction. Put simply, they cause pain for the consumer. These pain points are visible when observing customers using a given product and trying to accomplish their goals. But, you need to know how to look for them. For example, organizing emails in your inbox and storing them in folders so you could later access them used to be a time-consuming, anxiety provoking and difficult chore for many millions of people. Google solved this massive pain point and upended an enormous market for personal productivity tools with Gmail.
• Unmet Needs. Even when there are no pain points to observe, there are often solutions consumers are looking for to make their lives easier or more efficient. If you know how to ask the right questions, you can learn these insights from consumers. For example, millions of consumers used to be constrained by how many songs they could easily access and listen to while on the go — in their car on a cassette, on a portable boombox at the beach or a walkman on a run. Being able to buy individual songs (vs. being forced to buy an entire album) and having access to thousands of songs and playlists in your pocket was simply impossible. Apple’s iPod player and iTunes store solved these unmet needs and revolutionized the music industry and consumer electronics market.
• Latent Desires. Sometimes, pain points aren’t observable and consumers can’t easily articulate their unmet needs clearly. But, they still have many latent desires which surface when they’re presented with a new invention. Henry Ford famously said something to the effect of, “if you asked horse and buggy consumers what they wanted, they would have told you faster horses.” People couldn’t imagine ‘horseless carriages.’ But, when they saw their first car, they were blown away! And, the introduction of automobiles went beyond just moving us from point A to point B; it began decades of innovations and a love affair with car culture that continues to this day.

All three types of frictions become more apparent in the light of social and economic disruptions. And, we intensely focus on trying to urgently solve them. As the proverb goes, necessity is indeed the mother of invention. When there’s a clear need and strong will, people find a way.

Market dislocations and disruptive events also encourage people to ‘shine a light’ on other areas to expose and solve even broader frictions. The 2008 great recession revealed the significant shortcomings in our mortgage financing system — and the entire residential and commercial housing market which relied upon it. The financial crisis also exposed many other areas where information was asymmetric, incentives around risk/reward were misaligned, data was siloed, transparency was lacking, and simplicity and understanding were missing. These same frictions proved to be very common in many other sectors and industries which spawned innovations in wholly new ways leveraging cloud computing and gig economy marketplaces, just to name two examples which could aptly be used to categorize many of the large and successful companies which were started near the end of 2008 and into 2009.

The magnitude of pain caused by the COVID-19 virus today is acute, quite literally. This crisis is also exposing frictions across the entire healthcare system. To name just a few, squads of pioneers across the globe are working to …

• Invent reliable tests, prophylactics, vaccines and therapeutics to help prevent infection and cure this invisible killer
• Quickly boost our supply of personal protective equipment
• Develop creative manufacturing solutions to build and retrofit ventilators
• Come up with smart ways to improve the scale and trustworthiness of contact tracing while maintaining individual privacy

Beyond just finding a vaccine and cure for the COVID-19 killer, this crisis is also providing a catalyst for entrepreneurs to uncover and solve frictions across our entire healthcare system and in many other areas, too.

We call this effect Ripple Wave Innovation.

Crises create the impetus for innovators to see frictions and ask “What if” questions to develop new solutions and capture many new opportunities. We expect to see a wave of pioneers discover, refine and adopt many new solutions.

For example, we see a wave of pioneers working to leverage these tools to discover, refine and deploy new solutions for disease and wellness management including: virtual treatment administration and remote monitoring, patient biometric data capture, at-home testing solutions, labor efficiency and automation solutions like Physician Assistant protocols and AI-enabled diagnostic tools, trusted and private contact testing and tracing, personal custody of electronic medical records, and many other infrastructure requirements to implement these new solutions securely, simply and confidentially (e.g., cyber security platforms, price transparency solutions, virtual collaboration and visualization tools, etc.).

This crisis moment will also help innovate and develop solutions to address broader opportunities in other industries and across society to make these solutions more accessible to more people. The same improvements in VOIP and video conferencing helping tele-medicine and remote patient monitoring are also being leveraged to address other needs including remote-first work-from-home, online distance learning, collaborative virtual conferencing and networking, remote and on-person live video monitoring, and immersive virtual reality entertainment and socialization to name just a few. And, we’re not only seeing innovation make these tools better, but also innovation to provide them to all the communities that need them and to use them for social and equal justice.

We think it’s fair to say that not only how we get healthcare, but how we live our daily lives, communicate, learn, work, collaborate, police and socialize more broadly will never be the same. We hope and believe it will be much better.

Later this summer, DVx will introduce Curbee, a new mobile car maintenance and repair service whose goal is to reinvent car care to build trust and inspire love of ownership. In a time when we all have increased expectations for contactless and convenient services, Curbee will deliver on this ‘new normal’ and provide peace of mind with curbside car care from the comfort of your home — and when we return to work — your office.

2) Innovate at Warp Speed

As these frictions are met head on and solved, people start to use and experience new solutions. And, as they do so, new behaviors and habits are formed.

It’s well known that changing habitual behaviors is very difficult. Even when there are material frictions and great new solutions to solve them, most people are very hesitant to try new things. That said, changes in behavior — and the formation of new habits and related product/service/brand relationships — are often started when pre-existing routines are disrupted by fundamental changes in our lives. It’s for this reason that marketers often target consumers going through key life events to gain trial for their products and services — teenagers leaving home, young adults starting to cohabitate, new parents starting families, older adults downsizing after their children have left the nest, even older adults heading to retirement, and many other people when either upscaling or downsizing due to various personal, social and economic changes in their lives (e.g., getting divorced, being laid off, moving, …). In all these types of life events, there is some dislocation of existing habits which make people aware of new needs, more willing to try new things and change behaviors.

Crises brought upon by external shocks like many people are experiencing today — separated from friends and family, lost incomes and facing much greater stress and uncertainty about their future than ever before — affect consumers on a massive scale. We’re seeing people hungry for, in fact demanding, change.

This newfound willingness to try new things presents a perfect opportunity for pioneers to invent new solutions to change the status quo and solve material frictions. It’s a time for entrepreneurs to create breakthrough businesses that address people’s demand for change and introduce new innovative solutions

Take for example Moderna’s mRNA-1237 vaccine. This promising new class of vaccine is being created by a portfolio company of Flagship Pioneering, one of the inspirations for DVx Ventures, that also believes innovation is a repeatable process that can be taught and executed systematically by teams of world class experts and entrepreneurs.

While far from proven yet, Moderna’s innovations are happening at warp speed. When the COVID-19 virus first appeared and the magnitude of the global pandemic became apparent in late 2019, the Moderna team began exploring how their mRNA technology and approach to entrepreneuring could develop and produce a vaccine. As soon as more information became available, they mobilized.

• January 11: Chinese scientists release the genomic sequence of the virus online
• January 13 (48 hours from sequence selection): Moderna and the US National Institute of Health (NIH) team finalize the sequence for mRNA-1237, the first vaccine design
• February 7 (25 days): first clinical batch produced and analytical tests begin
• March 4 (51 days): US Food & Drug Administration (FDA) allows phase 1 clinical trials
• March 16 (63 days): Phase I clinical trial led by NIH begins and first participant is dosed
• May 1 (109 days): Moderna and Lonza announce partnership to manufacture mRNA-1273 with goal of producing first batch by July 2020 and up to 1 billion doses per year
• May 7 (115 days): FDA allows phase 2 clinical trials, expected to begin laster in May
• May 18 (126 days): Moderna announces positive interim phase 1 data
• May 31 (139 days): Moderna doses its first phase 2 participants in each age cohort
• June. 11 (150 days): Moderna and NIH finalize protocol for phase 3 human trials, including feedback from FDA; study to begin later this summer

There are several reasons why Moderna can innovate so quickly. First, speed is a hallmark of Flagship’s systematic method, disciplined approach, practiced process and experienced teams. Second, their technology is inherently faster because mRNA vaccines use the sequence of the virus, instead of the virus itself. As a result, Moderna doesn’t have to test in people upfront and can do the basic science, develop clinical trials and manufacture, test and iterate a vaccine much more quickly. Third, the intense sense of urgency around this crisis fostered partnerships across scientific communities and with federal, state and local government agencies who helped break down bureaucratic barriers and provided significant support. And fourth, the disproportionate amount of funding, focus, resources and energy devoted to solving this problem clearly helped.

3) Access to the Best Resources

No doubt, starting and scaling a business during an economic downturn introduces many challenges and requires persistence, agility, and discipline to succeed. Not least of these challenges is being able to raise capital when overall markets are down and investors are trading off making new investments versus deploying capital to help struggling portfolio companies.

Crises also presents several opportunities when compared to doing the same during a go-go hype cycle. teams get battle tested and trained to have the grit, frugality and ingenuity to overcome any obstacle. Often, top talent also become more available to startups. And, building teams from the ground up allow companies to create more diverse teams that reflect people and perspectives from all communities.

In addition, lower costs make it easier to stretch runways and provide time to iterate in search of product-market and go-to-market fit for new solutions. There have been secular trends reducing the costs of starting a new business for the past 30+ years. This is especially true for technology companies where costs have declined along with the decrease in the overall cost of computing. Moreover, new Software-as-a-Service solutions, open source software libraries and third party APIs have also made it easier, faster and simpler to develop and test new technology solutions. Also, access to local gig economy workers and global marketplaces for knowledge workers (e.g., engineers, designers, etc.) have made accessing talent easier and less expensive for startups. And, new shared resource solutions like co-working real estate or remote-working virtual solutions have also reduced fixed overhead costs. IN this way, economic crises act as accelerants and make all of these productivity-enhancing solutions even better and more affordable.

Crises like we’re living through today also provide one other great accelerant for new business creation: they make top talent more available and accessible … for the right talent magnets. For example, even with the plethora of great talent living in Silicon Valley over the past 50+ years, one of the hardest things to do and single biggest constraint on startup success, has been the ability to recruit, motivate and retain top talent. And, with the inexorable rising cost of living here, salaries, perks and ‘prima donna cultures’ have all risen, too. This has combined to increase the cost and reduce the productivity of teams available to startups.

The response to the COVID-19 shelter-in-place quarantines across the world has opened up the question on location and how the freedom of remote work can benefit not only the individual, but also organizations. Companies can better reach a more diverse pool of top talent than just in high-cost talent centers. Knowledge workers and companies alike are unconstrained to tap into this dynamic and create economic benefits for more people, especially those in under-represented groups. Not only are there productivity gains from removing commuting times and savings in recruiting, real estate and other fixed costs, but companies are able to open the door to more people from more diverse geographies, race and socio-economic groups.

Innovation at DVx Ventures

In this context, and for all the reason above, we can’t think of a better time to launch DVx Ventures.

Our mission at DVx is to build a company that launches and scales a portfolio of game-changing businesses that have a positive impact on our society and the world at large. Our multiplier effect changes startup velocity with our team-first approach, network of world class experts, proven methodology, repeatable processes and company creating platform.

The DVx team has created more than a dozen companies, generating tens of thousands of jobs, delivering a 9x return to investors and creating billions of dollars in value. We’re not only inventors and entrepreneurs, we’re also operators and scalers; our founders bring experience from key roles in growing Tesla, Lyft, eBay, Google, Lululemon, BCG and Symantec among other great companies.

We’ve built a platform to bring companies to life that’s based on these principles of innovation:

• Team-First Philosophy. We empower our world class team of multi-disciplinary experts to win together. Diverse teams with a broad set of experience, perspectives and backgrounds that reflect the marketplace will have the best chance to win. We firmly believe that while individual MVPs may win games, teams win championships.
• Proven Processes. We’ve built a “way” — a repeatable method to explore, incubate, launch and scale breakthrough businesses. We leverage rigorous research methodologies to define businesses that meet our stringent criteria for desirability, feasibility and viability.
• Bias for Impact. We solve challenging problems at unprecedented speed. If we can’t find a way, we make a way and battle through, around and over obstacles. We lead to learn because improvement is a discovery process and there is always a better way — our challenge is to find it.

We’re excited to have several companies in our pipeline and our teams are already innovating and building in the heart of this crisis and at record speed. Through our mission and unique approach, we believe we will create the next version of 2008’s unicorn chart.

Now is the time to innovate and build breakthrough businesses.

Henry Vogel is an entrepreneur, investor and executive who has founded and scaled several businesses, leading companies from early stage formation to hyper growth scale. Henry was an early partner at BCG Digital Ventures, founder and CEO at Raved (BCG) and Apptera (Soleo), CRO at Quigo (AOL) and VP of Corp Strategy, Business Development and internet Marketing at eBay. Today, Henry is Co-Founder & Managing Partner at DVx Ventures.