The entrepreneur-VC hybrid: the philosopher-king of innovation
The act of starting and growing a business takes a lot of faith, passion and endurance. Atomized enterprises and the resulting changes in the economics of starting a technology business, however, have opened the door to a new breed of innovator: one who thinks like a VC but executes like an entrepreneur.
Jeff Bussgang, an entrepreneur-turned-VC has written a fantastic BusinessWeek article on entrepreneurship that explores this theme a little. The central problem Jeff identifies is this:
Unbridled, unfocused entrepreneurial energy can easily be squandered and misdirected. In my last six years as a VC, I developed an appreciation for the attitude and vantage point that VCs have when sifting through business proposals and allocating scarce capital to the best opportunities.
Jeff goes on to talking about how thinking like a VC and executing like an entrepreneurs is desirable for employees, but I want to explore the significance of this advice for technology-enabled enterprises and innovation. Atomized enterprises are capital-efficient ventures born out of momentous, loosely coupled combinations of labor, ideas and capital. To keep permanent overheads low, atomized enterprises must necessarily pursue more rational resource allocation strategies than traditional enterprises.
The tightly-coupled nature (relatively speaking) of a traditional enterprise, where many non-cohesive functions are nonetheless integrated together, means fewer points where rational decisions are made on the basis of market prices. The act of paying a price is a powerful reminder to maintain efficiency and imposes a certain crispness on any transaction. The loosely coupled nature of atomized enterprises has two key implications for innovation:
- more functions are accomplished by relationships to external organizations, which are in turn mediated by rational behavior-enforcing market prices and;
- assuming a relatively liquid market of service providers–which is reasonable for the kinds of commodity functions that are outsourced to external providers–rational decisions to switch to more capital-efficient service providers will be far less expensive.
With sufficiently rational and efficient resource allocation, an entrepreneur may even be able to pull off multiple, loosely associated atomized ventures simultaneously. I came across one example of an atomized enterprise recently when I was speaking with a fully managed Web hosting provider. One of their customers is a dentist who sells dental drug compatibility data online with no overhead of his own, while simultaneously carrying on a full-time dentistry practice. As atomized enterprises become more widespread, I believe we will see more examples of entrepreneurs who manage not one but a portfolio of linked technology-enabled ventures while allocating resources rationally and dispassionately among them. These practitioners of the atomized enterprise, whose passion for execution will be informed by a perspective that enables them to make truly rational decisions, will indeed be the philosopher-kings of innovation.
in|vest: Arvin Babu, Greylock Partners
Name: Arvin Babu
Location: Bangalore
Bio: Arvin Babu joined Greylock in 2007. He is focused on early stage company investments in India.
Prior to joining Greylock, Arvin co-founded two Greylock backed companies: Perfigo and Brience. Arvin was CEO at Perfigo, the leader in network admission control (NAC). Perfigo was acquired by Cisco in 2004. Post-acquisition, Arvin was at Cisco for over two years and led Cisco’s NAC appliance business unit to #1 market share. Previously Arvin served as CTO at Brience, a leading mobile software developer. Prior to Brience, Arvin was CEO at Webvibe, a developer of application middleware. Webvibe was acquired by KPMG Consulting in 1999. Post-acquisition, Arvin was CTO at KPMG Consulting where he led KPMG’s eBusiness technology initiatives.
Arvin holds an MS in Industrial Engineering from Clemson University and a BS in Mechanical Engineering from India.
Have you invested in startups meant for the Indian market before?
No.
What sectors or investment themes look most promising to you in the Indian market?
A startup needs an ecosystem of local market opportunities (customers), partnership opportunities (GTM, M&A, OEM, etc) and great talent pool to thrive. There are some sectors which readily lends itself to consideration in the near term and some in the medium term. Near term sectors include: Solution as a Service, in which leveraging local talent pool and achieving scale non-linearly with cost based on, say, cloud computing; infrastructure solutions that can address low-margin, high-growth last mile communication needs and infrastructure solutions that allow large IT services to scale non-linearly with cost, such as virtualization management, infrastructure management, etc.
What excites you most about your sector of choice in the context of India?
Local market requirements are unique to include: lower margins, high growth/volume and tougher environmental conditions in the case of last mile solutions. These attributes impose a barrier of entry for global players but give local entrepreneurs an opportunity to achieve scale prior to going global.
What is the most important lesson you have learned from your operational experience as an entrepreneur?
I learned the ability to understand & articulate the value proposition of the solution clearly to customers. Getting the solution out as soon as possible while iterating all the way to perfection reduces the gap between expectations and reality!
Connect: arvin@greylock.com
[To learn more about in|vest, read the overview page and this blog post. If you are an investor with an interest in India and would like to participate in in|vest, please read the participate page as well.]
in|vest: a special project on One More Thing
Innovation is the central focus of One More Thing. For the short time that this blog has been alive, I’ve tried to cover a mix of topics that highlights the ways in which our lives are changing thanks to technology. Naturally, startups and investment are part of this conversation and continue to hold my interest.
The impact of what we know today as emerging markets on the innovation of tomorrow cannot be understated. The US has been a strong locus of innovation in the 20th century, but numerous views indicate that in this century, the US will not have a monopoly on innovation. It’s not that it’s a numbers game alone. In addition to countries like China and India offering much larger market opportunities, the social and cultural constraints that these countries face compel them to come up with innovations unseen in economies of abundance like the US.
I have a interest in innovation particularly in the context of the Indian market because of my ties to India. To try and do my part in advancing India-focused innovation, I am launching a special project on this blog called in|vest. in|vest is an ongoing social discovery of investors interested in India. Periodically (each week, I hope), I plan to publish a profile of a venture capitalist or angel investor looking to invest in companies targeting the Indian market. I’ll quote briefly here from the FAQ for in|vest:
Why are you doing this?
Social networks are ineffective channels to learn about and meet new people. The goal of this site is to facilitate networking among entrepreneurs, venture capitalists and anyone with an interest in startups and innovation related to India. This site is greatly inspired by Portland on Fire, a similar project done by my colleague Raven Zachary to encourage networking in the technical and creative communities in the American city of Portland, Oregon. A blogging platform such as Wordpress enables free-form and naturally flowing profiles.
You’re welcome to read the rest of the questions on the overview page.
Entrepreneurs looking to innovate for the Indian market: I hope you will find this project useful and connect with the investors who participate. In return, all I ask is that you send me names of investors you would like to see profiled here.
Some stuff to chew on
As I work on further posts for One More Thing, I wanted to throw out a few links for my readers on the topic of Atomized Enterprises:
- Gartner has recently published some research on a cohort it calls "Generation V". This cohort is defined not by demographic attributes but by behavioral ones–specifically its use of digital technology to demonstrate achievement, collect knowledge and share insights. As with several other things Gartner, Generation V has been neatly segmented into quadrants: lurkers, opportunists, contributors and creators, in decreasing order of engagement with digital media. Forrester analyst Jeremiah Owyang rightfully expresses some skepticism on the supposed demographic-agnosticism of this cohort and adds some of his own color to Gartner’s characterization. The intent of mentioning Generation V here is not to call out anybody on the specifics but rather to emphasize that it is precisely Generation V that raises new possibilities for a workplace and constitutes the flexible labor pool of an Atomized Enterprise.
- On the subject of new ways of working, the most recent Ultra Light Startups meetup featured some content about coworking, a relatively new mode of working that is making waves among the younger segments of the workforce. Some examples of ventures were brought up as having been conceived entirely within coworking communities. These are still early days for coworking and businesses in this arena are still couched as real estate plays. However, opportunities further up the value chain–including business services and even monetizing the carbon credits that may be saved–abound.
- This may be old news but is worth reiterating. BestBuy has switched to a Results Only Work Environment, which enables employees to set their own hours and derive their own definition of a work-life balance. This ultimate focus on results is an important part of how Atomized Enterprises must operate, and will be the focus of an upcoming post in the near future.
Meanwhile, I hope all my readers are having a great summer!
Update: Another noteworthy piece in the New York Times about a flood of higher-value Wall Street jobs being outsourced to India. After blue blooded Wall Street banks started to cautiously explore nontraditional venues for research five or so years ago, third-party research firms (in other words, non-captive operations) are seeing an 20-40% increase in business just this year.
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