AirTree Ventures

Stumbling Upon Genius

by Cath Rogers @cathrogersvc

The mythology of the internet is that someone has a problem and then with single minded focus solves that particular problem and in doing so builds a great company (ideally at a billion dollar valuation) and that all successful companies evolved in this way. However sometimes great products are born as a side project when you’re busy focusing on something else.

We’re not talking about pivoting from monetising a product in one particular way to another or taking a different go to market strategy than you first thought you would. This is about building something significantly more valuable than what you set out to build, almost by accident.

If you’re sceptical, here are a few examples:

Slack CEO Stewart Butterfield and his team had not one but two attempts at building a massive multiplayer game – each spectacularly unsuccessful. The first; Game Neverending spawned the photo sharing site Flickr which was only ever developed as a way to make some money to allow them to finish the game but wound up being sold to Yahoo (we all know how that turned out, but for the founders it wasn’t so bad, they walked away with an estimated US$25M). As soon as they could get out of their Yahoo contracts, the team began work on their second (unsuccessful) game, know as Glitch. As a way of managing workflow across remote locations, developers hacked a platform as a more efficient way to share messages and electronic files than email, which was the foundation for the now multi- billion-dollar company Slack.

In an even bigger departure from their initial business model, Tobias Lütke and Scott Lake needed an online shopping cart for their snowboard business. Unsatisfied with the available options, they wrote their own. In time they made the shopping cart available to other online businesses with similar needs and today the business is card carrying Unicorn club member, NYSE-listed Shopify.

Justin TV was launched by serial entrepreneur and Y Combinator investor Justin Kan as a general interest live streaming video site. To the surprise of the founders, the growth of the gaming category far outpaced any other and eclipsed the popularity of the site as a whole. Who knew gamers watching other gamers play video games live would be so popular that Amazon would end up buying the newly branded company Twitch for US$970 million. The founders certainly hadn’t but once they realised the user validated potential of the gaming category they shut down Justin TV and focused exclusively on the gaming focused Twitch.

By the way, this phenomenon is not specific to tech start-ups or even the internet era. Two of the more famous examples in history are Wrigley; customers were more interested in the free gum a salesman provided than his soap and baking soda products and Avon; free perfume samples were far more popular than the books they came with. In each case, the gimmick used to sweeten a sale became the core product and ultimately spawned multinational corporations.

While founders need a healthy dose of tunnel vision or at least unwavering focus, it’s worth noting that there are many paths to greatness, including building a world class product while focusing on everything but that product. The message here is a simple. Be open to salvaging the treasure amongst the ruins or less dramatically in spotting the best hand available to you and refocusing the company on that.

It’s incredibly difficult to predict how a given market will evolve, particularly when working on concepts that are novel rather than derivative (i.e. there isn’t yet a proof point). So you need to be flexible and data driven to stay the course of getting to a great product even if it’s not the great product you set out to build.

Here are some suggestions that may help uncover hidden genius within your venture, and even if they don’t are good business sense;

Authentic connection to the problem; build products in response to a genuine user need that can’t be met in any other way. As founders you need to live through the user problem and design a solution specifically to address it. If you notice this happening by accident, look harder at the situation.

Listen to the customer (even if it’s you): customers will be very clear about what they value. Regardless of what you think customers should value, pay attention to what their behaviour is really telling you. This is the most important signal there is so make sure it’s your number one priority.

Data-driven Flexibility: you should never become so emotionally invested in a single outcome to the exclusion of all else, that you run the risk of missing something great. Keep asking yourself the hard questions and use data wherever possible to prove or disprove your thinking. This still applies even when you’ve taken on investor capital for a specific product or business. Keep in mind the decision investors made when they funded your business was predominantly based on their confidence in you. AirTree actively encourages strategic resets in our businesses where warranted.

None of the above will guarantee a home run but it will ensure you are building something that matters to customers, measuring that impact and, in turn, this increases the chances of being the next big thing.

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