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 Dear CEO/Top
Executive
A few ideas from Perth Ventures that might just make your life easier, your company more valuable, you and your employees happier...
Current preoccupations: how will the new explosion in wi fi affect you and your low-tech products? Can tech founders sell? How do you re-architect your company to make it even more valuable?
Any ideas or suggestions? Email us at etedprince@perthventures.com or call at (352) 333 3768. Suggestions and ideas always welcome.
All the best,
Ted |
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We see many founders who have come from a technical background. They are frequently people who are intensely driven by the technical side of their product, have deep technical background either by way of training, experience or both, and have a detailed knowledge of their product in all of its many, complex technical aspects. Given such a background, what could possibly go wrong with their company and their vision?
The answer, of course, is sales and marketing. Many if not most of these founders have had little background in these areas and so do not understand many of the basic principles of selling and marketing. Furthermore they are frequently not able to even recognize people and situations that may be able to correct this imbalance due to their lack of understanding of the principles in these areas. The technical and sales approaches are often fundamentally at odds, intellectually, culturally, emotionally and psychologically. This truly is a situation where the technical people are from Venus and the salespeople are from Mars.
It is very difficult for a technical person to understand that it is not the technology or the product that leads to company success, nor that selling a product on its features is usually a sure step to failure. It is also difficult for them to understand very often that a selling process is not just a transactional experience but one involving relationships and organizational issues, both within their own company and the prospect.
For a technical founder and CEO, often the biggest step in their eventual success will be the realization that it is not technical and product issues that are the critical factor, but the selling signals they send off to their prospects and the sales and marketing environment they create. This is often a difficult step to take but one that will be crucial to their eventual success.
In our CEO coaching and advisory work, this is a common theme. If you fall into this category, you will need to think out your strategy very carefully if you are not to fall into a very common trap, which can easily lead to company failure.
This is an area in which Perth Ventures has extensive experience. Give us a call if you think you could use some help here. |
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Ultimately any founder wishes to increase the value of their company. This is a topic on which one can waste a lot of time, so let’s get to the heart of the matter as we are sure that the reader has as little of it as do we.
Clearly any potential investor in your company will look at the product or service. Their question will ultimately be how much value you have added. Is this something with little value-added, that anyone could make? Or is it something that has a lot of value-added, difficult to copy and for others to make?
The fastest way to figure out where you stand in this spectrum is the likely gross margin of your product. This is quick measure of how much value you have added. It shows for any price you charge what your direct costs of providing this product or service were. The higher the gross margin, the more the value-added, the harder it is to copy, and the more profitable the product (although not necessarily, or even the company). The gross margin is a proxy for company value. The higher the gross margin, in general the higher the potential value (we say potential since there is the thorny issue of what the typical expenses will be to run the company, but that is another story).
Making potato chips is usually low gross margin, software usually high. Potato chips may have a gross margin in the 20s or 30, software in the 80s. Can we get potato chips to 50% or even 70%? Can services, which often have gross margins in the 30s-40s, be raised to the 50s or even the 60s? The answer is yes, but we have to know how to re-architect the company and its processes so as to increase the value-added. We do this via strategy and processes. If we do it correctly, we can increase the value-added, and, just as importantly, send the correct signals to prospects that make them want to pay higher prices for the product or service that will result in a higher gross margin
Increasing their gross margin and the valuation is the Holy Grail for many companies. This is particularly the case for companies in the service area (even is their service is technologically sophisticated). Technological sophistication does not necessarily lead to a high value added. If you want to increase the value of your company, and potentially to make it more attractive for outside investment, this is an area you will want to work on if you do not want to leave money on the table.
As companies get nearer to a potential capital-raising event, the above issues will become ever more important. If you do not get the story, the positioning and the value right, you will either not get the investment or get it at a far lower valuation than you could have achieved. Frequently companies enter into a capital-raising process without having prepared correctly, or at all and suffer the inevitable, adverse consequences. Let us know if you need help in this area. |
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Several years ago I was one of the great unbelievers when Linux came out. Figured something maintained by a global community of volunteers would never make an industrial strength operating system infrastructure. I sure got that one wrong. With Linux now appearing on PCs and PDAs not to mention industrial-strength servers, we have a new commercial phenomenon.
Open source is big. The Internet changed the dynamics of open source, making it all possible. Without the Internet, I believe that Linux would have been toast. Like open source, the Internet also made possible the economics of free distribution and with it, blockbusters such as the Real One player and PDF.
Despite Linux and PDF, not too many players have harnessed the power of open source but with broad-band, the Internet 2 and grid computing, the potential has only gotten bigger. Think about this in your next business plan and when thinking about novel ideas for product distribution. The open source movement is still in its infancy and there are going to be far bigger players in it yet. One of them could just be you. |
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"Leaders are visionaries with a poorly developed sense of fear and no concept of the odds against them. They make the impossible happen"
Dr. Robert Jarvik (inventor of the first mechanical heart, and entrepreneur extraordinaire). |
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Ted Prince’s Technology Enterpreneurs’ Newsletter (formerly "The Technology Fundamentalist") is a publication of Perth Ventures, Inc. Offices at 488 Madison Ave, 19th Flr, New York, NY 10022 and 8524 SW 23rd Pl, Gainesville, FL. 32607. Telephone: (917) 216 8907 and (352) 333 3768. Email info@perthventures.com. Website www.perthventures.com. Copyright. All rights reserved. Articles may be copied or reprinted with the permission of the Publisher.
Perth Ventures provides advisory and coaching services to CEOs and founders of young technology companies. Perth Ventures assists these leaders in developing strategy, increasing sales and in positioning themselves to raise capital from professional investors. Perth Ventures’ clients are young and emerging companies in advanced areas of computer software and services, biotech and the health sciences.
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The Coming Era of Ti Fi
Wireless is in, wired is out. Wi fi is big and getting bigger. Pretty soon the whole of the US will be one giant hot-spot of wi-fi networks. Wi fi will get a whole lot faster. It is already migrating to PDAs and soon will be in most phones. And 3G is coming no matter what the pundits say, just will be a bit slower than we thought to get here. This gives us a whole lot of ways to ship data, voice and video around.
Genetic Engineering for Chips
Now the really big question. What happens when you cross wi fi with cheap, miniaturized RFID (radio frequency identification) chips, put them in miniature devices and let them all collaborate in broad-bandese? Our thesis: we are about to see a new phase of wi fi, which, just to follow the idiom, we call ti fi, for tiny fi and this is going to make our lives as tech entrepreneurs even more interesting.
So apart from a new name, what is ti fi? The ti is for the rapid miniaturization of electronic devices, some to the nano level, and their simultaneous linking via broadband wireless. For us, the really operative word is broad-band rather than wireless, thus the fi, which we still don’t get in 3G, much as it is going to do some cool things too.
Experiencing the Rush
We aver that nothing really useful happens below 10MB per sec. But once you get there some really cool things start to happen. Like you can start swapping video images in real time, together with other data types like sound and motion. So the miniaturized bits of electronica can start to swap experiences, not just data, and also do some real-time processing to figure out just what all that data means.
This opens the door to all sorts of new and interesting applications. A major area is use of ti fi sensors embedded in the body for numerous types of medical and hyper-medical applications. The medical applications are obvious, intra-body monitoring and control of organs and nerves. The hyper-medical ones are less so, the use of ti fi for altering consciousness in certain useful and maybe entertaining ways, for altering thought patterns and changing mental states. In biotech it opens the possibility of allowing genes to take on multiple appearances so as to allow them to perform different functions depending on the circumstances.
Kiss That Jewelry Goodbye?
Another area is smart clothing and personal decoration devices. Clothing that responds to the environment to become warmer or cooler depending on the ambient temperature outside. Maybe changing its colors and patterns depending on emotions of the wearer that are picked up in real-time through embedded body and brain sensors. Smart necklaces that change color depending on what their wearer thinks of you. Rings on the fingers that change color and glow depending on how their hand’s owner responds to your touch……
Location, Location, Not.
We see precious few products and services that couldn’t benefit in some way by moving in the same direction. There are many older products that will get a facelift from being untethered a la ti fi. Many of the totally new emerging products will also adopt concepts such as location independence linked with ti fi in order to differentiate themselves and to create new markets and customers. Location-specificity is hard-wired into many of our business and mental constructs. As people gradually unwind from this burden, watch for products and services to demonstrate a new dimension.
Our take: pretty soon you will be in the unwired area no matter what your business. Everyone is going to be a communications company, even if they don’t know it. And from there it is only a small step to ti fi your product or service.
Ti Fi Noodles Anyone?
As the great wi fi and 3G revolution proceeds, we will see a profusion of revolutionary new products and services. Products that were hitherto seen as being non-technology will increasingly morph into technology-driven products as they embed RFID chips. Wi fi and its offshoots are already blurring the boundaries between the old and the new and the canny entrepreneur is going to creatively wi fi-enable many products that we had not previously seen as being wi fi-able. For them, ti fi offers yet another dimension.
It’s a big world out there and if you aren’t thinking about these directions, other people will be.
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