When The Sea Parts — Knowing When To Go All In With Your Product & Company

Then Moses stretched out his hand over the sea, and the Lord caused the sea to go back by a strong east wind all that night, and made the sea into dry land, and the waters were divided. So the children of Israel went into the midst of the sea on the dry ground, and the waters were a wall to them on their right hand and on their left.

Exodus 14:21–22

Most are familiar, at least in its most basic construct, with the story of the parting of the Red Sea.

Captured in Exodus 14, Moses leads the Israelites out of the slavery of the Egyptians to Canaan where they are to settle. With the Egyptians in pursuit and all looking lost, Moses raised his staff, splitting the waters of the Red Sea allowing the Israelites to cross. Once on the other side, and instructed by God, Moses once again raised his staff, bringing the waters back together, drowning the entire Egyptian army and setting the Israelites free.

I have used this story many times over my career when speaking to others about the delicate nature of entrepreneurship. While I’m not religious, I feel that this story best exemplifies the specific timing needed to be successful as a business, without which even the best can be washed away.

It is a common misconception that what makes a company successful is the product that the company produces. Wrong. A close second is “the team” or the capital raised — sorry, not those either. Of course, all of these things are important to a successful business, but they are not what makes a company successful. What is it?

Timing.

The best entrepreneurs are genius product people with world-class vision and sales skills, but almost every single one of them has had lady luck on their side that when combined with their vision as well as the product, team, and capital creates a synapse that drives success.

My father used to use a term when I was young when he was telling me to be patient. He used to say “Neil, keep your powder dry.” This was his way of telling me that “now” was not the time to light the fuse.

I think the same applies to business. Using the Red Sea analogy, if you are too early or impatient and push forward, you risk driving you and your company right into the sea and drowning.

The list of companies who were too early is long. People forget that Friendster was the social network launched two years before Facebook. Or, how about Segway? With all the hype around the transportation IPOs of Uber and Lyft and the recent $2b valuations of Bird and Lime, it seems like they were just a little early.

How about those that were too late and had the proverbial waters close in on them before they could get to the other side. This list, too, is long and includes Nokia, Kodak and countless other startups, but the one I always come back to is RIM (Blackberry) and how badly they dropped the ball on messaging.

Not only did RIM help prop up WhatsApp in the early days by providing them with API’s from their messaging service BBM — but they also had an intern who had ideas around agnostic messaging that fell on deaf ears. We all know what happened with WhatsApp, but many don’t know that the intern was Ted Livingston, who went on to launch KiK and KiK’d the ass of BBM.

BBM was messaging, but RIM didn’t evolve and as a result, they couldn’t get over to the other side. It’s bad enough that they created the smartphone and lost that to Apple due to arrogance, but they also created messaging and lost there as well. Name me another company that coughed up two categories bigger than smartphones and messaging. Ouch. Professors will be using this case study for years to outline very specifically where they went wrong.

This is a really important concept for entrepreneurs to understand. You may think you are ready to “blitzscale,” to borrow Reid Hoffman’s term, but if you are early, all you will do is burn your cash and blitzscale directly into the “sea” and drown. Not going fast enough when the opportunity presents itself is just as dire, as the fickle market will turn on you and leave you behind to talk about ‘what if..’.

The OG of entrepreneurs, Bill Gross, does a masterful job of explaining this in his TED Talk from 2015, where he examined all of his companies (he has started more than 100 companies!), and found that timing was the single biggest difference between success and failure. I would encourage you to give it a watch. I have played this in my town halls in years past to explain why we are waiting, or why we are pushing in on something.

The genius (or luck) of great entrepreneurs is to know exactly when to hit the gas and to see the signs that the sea is beginning to part. The key for any new startup is to keep your powder dry and wait till these signs are prevalent. When they are — hit the gas as if your life depended on it, because… it does.

A great example of this was the creation of Lululemon. Chip Wilson, the founder, outlines the factors that were becoming increasingly apparent for the creation of a new technical fabric for what he deemed “Power Girls” — those young professional females who were being neglected by the big athletic brands — in his fabulous book Little Black Stretchy Pants. The generational change where women were waiting longer to have children, were increasingly more independent and were kicking ass in business also coincided with a movement for a more active, healthy lifestyle. From building pop-up shops to scaling physical stores, Chip was able to see the trend building and pushed in at the right time, in turn creating the ‘athleisure’ category that brands like Nike and Under Armour have since copied. Love it.

What are the signs that the market is building for your product? Besides the obvious research and intuition here are a couple that many overlook and should be discussed with your team.

  • What’s the revenue?

I am not interested in this fallacy about how “we are going to focus on revenue later.” You are not Zuckerberg. If you can’t sell it, you’re dead.

  • What’s the growth rate?

Entrepreneurs focus way, way too much on price in the early days. Don’t do that. Price is arbitrary and determined by the market, not you. All you care about is:

a) Can you sell it?

b) Can you sell it again — both to the same client and a new client?

Transactional revenue is a function of all early-stage startups, but you must figure out how to turn transactional revenue to recurring to grow. In one of my businesses we had 17% recurring revenue in year one (not bad), but made some adjustments to our product, pricing and positioning over the next year and moved that to 65% by year three (better). That’s what you want to be looking for, as recurring is the only way to scale your business.

  • Tell your clients what’s coming and gauge their reaction/appetite.
    Product is not about what you have today, it’s also about what you will have in the future. If clients are excited about what’s to come — they bind to you and scale with you. Anyone who has worked with me has been exposed to this vision riff with clients before. Usually leading to an awkward elevator ride where my co-worker says, “I had no idea we were building that.” My response? “We weren’t, but we are now.” This is a product velocity gauge, as it will tell you that the market wants your iteration NOW or that it’s “interesting” — which is code for them thinking your idea sucks.

There is an insatiable appetite for innovative new products that solve problems. Sometimes you can see what nobody else can. Trust that. It’s what makes you an entrepreneur and those that don’t see it, future employees. If you can take your vision, benchmark it against some revenue and know when to push in, who knows, you may get to the other side before the water closes the gap. I hope you do.

Good luck.

Neil

Original Medium Post 9.10.19 https://medium.com/@neil_22007/when-the-sea-parts-knowing-when-to-go-all-in-with-your-product-4551e9dd99cd