Rule 4: Disrupt a single industry

Companies in Silicon Valley are one of two things: disrupters or enablers.

In early 2015, we were preparing to launch at SXSW and had an identity crisis. While writing a press release, we needed to give a description of our vision for Loopd, and we drew a blank. We understood our product, we knew where we started, but we had stumbled across an unexpected, immediate need to reevaluate our mission.

Disrupters make vertical plays and solve pervasive problems in specific industries. Enablers, on the other hand, create powerful global tools that solve a common problem across many industries.

While their purposes differ, the end goal is the same: scale to the point of profitable exit or pursue an initial public offering (IPO).

Among startups, it is common to begin with one purpose and then pivot to another in order to scale. Many companies pivot before even launching, so it’s hard to measure the true success rate of a post-launch pivot. Changing course after a launch is risky. You can lose investors who dislike the new direction, early customers loyal to the first version, or both.

The original idea for Loopd came from the simple idea of exchanging contact information naturally, like an unobtrusive handshake at a business conference. From this organic inspiration, we developed a wristband-handshaking concept, but quickly swapped that out for a digital badge attached to a necklace or lanyard with on-off button technology.

Even though our technical approach and user experience changed, we remained loyal to solving the same problem: elegantly exchanging contact information to form high-quality professional networks.

While a horizontal, enabler play focuses broadly on a technology, we were determined to use different kinds of technology to solve an even narrower human problem. Despite our specialized focus, we were constantly asked if our networking approach could solve other problems, perhaps bigger, more critical ones in industries like healthcare or supply chain operations.

We started to get lost in the endless “what ifs” proposed by possible investors, but were fortunately saved by a conversation with a trusted advisor who helped us make a final decision.

He reminded us that investors are on a constant hunt for horizontal plays that serve all markets. These investors spin big ideas and inspire a metaphorical frenzy, like attempting to annihilate a hive of bees by swatting madly at the entire swarm at once. Instead of obliterating the swarm, the horizontal play can easily destroy the hive — or the business.

Instead, entrepreneurs should focus on a single bee, aim carefully, and attack. After killing one bee, move on to the next, and the next, and the next until extinction.

After hearing this, it became clear that the disrupter route in a single industry (business conferences) was the best path for our company. With this specialized focus we could hopefully attract investors who could help us move on to healthcare and other critical industries after our technology was proven and refined.

In a October 13, 2014 TechCrunch article, our lead investor Tim Draper said, “Conferences are just a good starting point for Loopd’s vision — the device could eventually become a much broader source of location data, as devices and applications that need such data proliferate. This is a big idea.”

The original concept for the Loopd wristband, designed by Brian Friedman to blend into a professional setting
The original look and feel of the Loopd App, designed to make it easy to build a high quality professional network

I hope you enjoyed this preview to my new book Takeaways: Secret Truths from Leading a Startup. Don’t forget to subscribe to OWN IT to access the first ten rules.

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