Supernode Global.
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Supernode Global.

What 6 Months of Research Taught Us About Building Successful Media-Tech Companies

We founded Supernode Global to invest at the intersection of media x tech.

Why?

Because we love it.

We are fascinated by how developments in technology are evolving how we consume media — as well as challenging media as the monolithic industry it once was. But we don’t just want front row seats to the revolution, we want to lead it. And — yes — we’re the kind of people who believe revolutions should start with a well-researched plan.

So about 5 months after officially launching Supernode Global, my partner Mawuli, our intern (at the time) Fearghus and I embarked on a massive research project, where we looked at all media companies that exited for $500m or more, basically since the dawn of time.

I wish I could say that this was a labour of love — it wasn’t. It was a labour of labour. It was a slog. We plodded through what seemed like interminable amounts of data, and never-ending spreadsheets.

We put ourselves through this mind-melting marathon in order to challenge our assumptions about what it takes to build a successful company at the intersection of technology and media.

And we believe we have achieved just that.

Our Key Findings

As mentioned, we believe in the value of a well-planned revolution. So we used our research findings to develop a framework for assessing companies.

Below you will find a high level summary of the thesis we extracted from our research, along with some other interesting titbits. This is the result of analysing more than 9,000 data points, which have been distilled into 4 key points that we feel are absolutely critical in the pursuit of success in media

Without further ado, I welcome you to this peek into a portion of SG’s collective brain (trust me, you’re lucky that you’re seeing this portion and not some of the others…)

What do successful companies operating at the intersection of media x technology have in common?

  1. Compelling value proposition

The most important thing is that your product has extremely high utility:

  • Does your product have a non-depreciating use case?
  • Does it service a regular need?
  • Does it solve an undeniable problem?
  • Does it provide a significant financial benefit?

Some other aspects that are nice to have, but are not necessarily essential are:

  • 10x better user experience relative to alternatives
  • A strong element of scarcity

2. Favourable market conditions

This is not so much about identifying your initial target market, but more about knowing the scale at which your product will end up likely being used — i.e. your eventual target market. What we found is that it should boil down to one of the below three:

  • The entire global population
  • The entirety of a major geography
  • The global population of an international sector or niche

3. Enduring defensibility

Every company needs to be able to build some sort of moat, or competitive advantage. You should try and identify yours as early as possible. There are basically 3 areas that provide the best defensibility:

  • Clear and high barrier to entry into the market (via regulation, technology, licenses, switchover costs etc) — This is undoubtedly one of the best forms of defensibility..
  • A sustainable advantage through the following means:
  • Brand
  • Unique IP
  • User Experience
  • Convenience
  • Pricing
  • Network Effect

There is one final thing that you need to consider which we think of more as a nice to have, rather than a must have (but in the SG offices this will definitely help get a deal over the line):

4. Clear exit potential

Will your company be able to:

  • Provide an incumbent with complementary revenue?
  • Divert a large number of customers/users/revenue away from an incumbent?
  • Make an incumbent’s market position meaningfully stronger?
  • Have the financial and business characteristics that Private Equity buyers look for?

Other Interesting Bits of Trivia From Our Research

Now that you’re awake again, here are some interesting bits of trivia from the research

If a company has more than one founder, 73% of the time those founders had worked together before. Perhaps this is circumstantial, but that leaves us to believe that if there is more than one of you founding a company, you should ideally have worked together before.

Although the reasons why products were successful were varied, the most consistent reason (14% of companies) was because a product had satisfied a daily high priority need. In other words, don’t just settle for fixing a high priority problem that afflicts people once a year, make sure you are fixing a problem that people are faced with everyday.

Another point on what makes a winning product, was that utility and convenience clearly trumps user experience (44% of companies had successful products due to utility-based reasons, whilst UX-based ones made up 23%).

Finally, the main reasons for an incumbent acquiring a startup were

  1. Protecting their business (41%).
  2. Increase revenue (35%).

So the playbook is as follows: figure out early if you are going to be able to scare incumbents. If you can, run with it. If you can’t then make sure that you position yourself to make money in a way that is complementary to their business. Whatever you do, make sure you are either disruptive or complementary to incumbents — just don’t get stuck in-between.

Being an Early or First Mover is probably less important than you think. Only 16% of the companies analysed had this as a competitive advantage.

Please note that the above is a high level summary. Each phrase has been very carefully chosen, and we have written an internal definition of each of them, as well as reams of data sitting behind it all.

We will continue to share the results of this research project here, so please stay tuned. Until then, if you are interested in finding out more details, hit us up at hello@supernodeglobal.com.

Nearly finished, I promise…

Some of you may be interested in how we ran our process. I will cover our methodology, as well as what we learnt from the process (both about ourselves, as well as about our industry) in subsequent posts.

Here though, are the key statistics relating to our process:

  • 114 media companies analysed
  • 80 questions asked of each one
  • 9,120 data points collected (well done for those of you who have figured out that is the result of multiplying the first two points!)
  • 18 excel tabs
  • Finally, a 97 row long checklist for analysing companies (which we use every day).

So that’s all folks. I hope you’ve found this useful. We would love feedback on the post so feel free to leave thoughts below. Alternatively, you can tweet us @SupernodeGlobal or email hello@supernodeglobal.com.

And finally, a huge thank you to Fearghus Barkley for taking on a significant amount of the groundwork that made up the backbone of this research.

Until next time!

Mike

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What do you think? Agree? Disagree? Which successful media x tech companies subvert the above?

Comment below or hit us up on Twitter at @SupernodeGlobal or via email at hello@supernodeglobal.com

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SG Team

SG Team

Editors of the Supernode Global publication