Cockroaches, Lemmings and Pioneers

Editor’s Note: Welcome to Reality Check, a feature for RCR Wireless News’ new weekly e-mail service, Mobile Content and Culture. We’ve gathered a group of visionaries and veterans in the mobile content industry to give their insights into the marketplace. In the coming weeks look for columns from Mark Desautels of CTIA, Laura Marriott of the Mobile Marketing Association, Linda Barrabee of The Yankee Group, and more.
Back in 2003 I counted and realized that in the past six months I had seen over 100 business plans describing opportunities to invest in unlicensed spectrum operators.
In the ten or so years that I have been investing in the mobile value chain I have seen equally large herds of location-based services opportunities, flocks of MVNOs, and processions of VoIP, content mobilization, content aggregator, SIP call control, WAP portal, client portal, mobile IM and mobile OS plays. Usually, these flocks slowly grow, one company at a time, to a crescendo that then subsides in a predictable ebb. At least one, and usually more, in each category turns out to be a good idea.
As a matter of fact, I can hardly remember finding one lonesome, solitary, good idea. Good ideas are like cockroaches: Once you see one, there are bound to be more around just like them. It is just so unlikely that the worldwide mobile market, addressed by battle-hardened strategic competitors and served by enthusiastic entrepreneurial teams in dozens of countries, will generate only one good solution to a real problem or only one good product for a real opportunity.
I have focused on the wireless and the mobile value chain long enough to get a very large number of deals to look at. However, if I wait long enough to validate an idea by counting the number of similar ideas, I will join the next herd of lemmings dashing for an over-funded and too-late-for-the-market cliff. In order to leap with some degree of confidence at one of the first good ideas to arrive, and not one of the last, I first focus on whether the problem or opportunity is now, or soon will be, real.
If reality appears reasonable, then I’ll start to worry about whether or not the entrepreneurial team has the right stuff to address the problem. It’s a lot easier to work on making the solution better than it is to work on making the problem bigger. Entering text on tiny keypads designed for dialing numbers was a real problem; it turned out that Tegic, with T9, had the right stuff to solve the problem. Managing and selling content over systems designed to provision and count voice minutes was a real problem; QPass, with a lot of hard work, eventually had the right stuff to solve it.
Most of the companies I see just don’t have a big enough problem to solve or opportunity to address and many that do are too late to the party to have much of a chance of winning. But those that do address a big enough problem or opportunity, and are early enough, run the risk of being brave and visionary but ultimately unsuccessful.
These are the pioneers.
Pioneers frequently have a reasonable, but not perfect, solution to a problem or opportunity that is just beginning to crystallize. I love backing pioneers. Because they are early in addressing the problem or opportunity they have lots of time to perfect and shape the solution. But they have to make sure that they have enough patience and resources to wait while the problem or opportunity grows and to pour on the resources when it does. That’s where the right money can be really useful. Pioneering entrepreneurs need sources of money that know the market and can encourage patience, not panic, when the market is slow to develop (it always is). They need money that can help attract more money when the market finally does arrive (it usually does).
Entrepreneurs are the heroes of our business. They put it all on the line all of the time. They compete with the giants and with each other and then, as if that weren’t tough enough, they have to put up with gratuitous advice from venture capitalists. Well, here’s mine:
1, Work on addressing big opportunities and on solving big problems that are just beginning to appear. Now that data networks are pervasive, phones are smart enough, and lots of content is there to provide inventory, mobile advertising is looming as a big opportunity and companies like ZenZui, Third Screen Media and Google are addressing it. Some of the same factors are driving carrier backhaul costs through the roof and are turning shared backhaul providers like FiberTower and Telecom Transport Management into investment opportunities. These opportunities and problems may seem obvious now, but they weren’t four to six years ago when these companies started working on them.
2, Don’t worry too much when competitors try to solve the same problem. Other cockroaches are just there to tell you that you are on to something good.
3, Raise money from VCs that know your market and at valuations that are low enough to let you keep raising money while the problem/opportunities slowly emerge. If you discover that you are late to the party, raise lots of money and see if you can land on one of the other lemmings.
Remember, it’s the cockroaches, the lemmings and the pioneers that keep our mobile world moving.
You may contact Tom directly at tom@seapointventures.com. You may contact RCR Wireless News at rcrwebhelp@crain.com.