The "Because Of" Factor: A Corollary

Earlier this week I was quite happy to hear Rick Segal of JL Albright Ventures on CBC Radio's Sounds Like Canada. Beyond the rebounding investments in the sector, it’s nice to hear more national discussion around the limitless opportunities that the Internet and related technologies continue to present to enterprising entrepreneurs.

One of the things Segal discussed was an emerging company success factor he calls the “Because Of” factor, to which I'd like to offer up a corollary. While I agree that the turning point in most companies comes “because of” word of mouth, referrals, blog traffic and other factors beyond a business’s control (the premise of Segal's theory), it’s important that prospective dot-com entrepreneurs realize that success doesn’t simply follow “because of” an idea being a good one.

For one thing, even the best idea or business model won’t go anywhere without the support of a team that can execute. With Windows and VHS cassettes as the classic examples, even the best technologies in the world (arguably Macintosh and Beta, respectively) won’t succeed in the face of competitors that can actually get a product out into the market. So, if you’re going after folks like Segal for funding, remember that as important as your idea itself is convincing backers that your team is the one that can get this into the hands of paying customers, fast. Remember Thomas Edison’s famous quote about genius being 1% inspiration and 99% perspiration.

Of equal importance, even with an experienced and accomplished team, just because an idea is seemingly brilliant idea doesn’t guarantee that customers will actually pay for it. Entrepreneurs – and I’ve seen hundreds of them do this – love to cite the success of similar offerings (like Google’s share price) or the overall size of the potential market as evidence of their company’s impending success. Quite common is what Guy Kawasaki and others have referred to as the Chinese Soda analogy; if you can get just 1% of the Chinese market to buy your soda, you’ll be selling 1.3-million cans of soda.

To be sure, the most convincing evidence a company can provide that customers will pay for its product is a purchase order or cheque (or thousands of them). The closer you can get to this, and the further you can get from magical, faith-based marketing projections, the more convincing you’ll be.

The days of the Internet are far from over and, with wireless, gaming, Web 2.0 and others as examples, the next 2-3 years alone will see some incredible advances in how we communicate, interact and do business. To paraphrase Winston Churchill – and at least one Silicon Valley venture capitalist whose name escapes me – we’re not at the beginning of the end of the dot-com era; if anything we’re at the end of the beginning.