• Undefined, inefficient early-stage markets* by definition don't exist, creating natural Canyons between buyers & sellers.
The Canyon Players: Sellers - Technology Innovators live on one side of the Canyon. Some are interested in getting their technology across the canyon. Others like the isolation of a haven that offers a quiet place to focus. Whether they are fearful of management fads, or determined to "figure it out" themselves, the sellersí challenge is getting their innovations adopted. Many lack critical business skills needed for success. While the necessary skills can be learned, unfortunately they often aren't until it's too late, when they've run out of cash. This is often the first sign to investors that something is awry.
Who makes it across the Canyon alive? There tend to be fewer qualified Technology Innovator sellers than qualified buyers of technology innovations. With buyers having the upper hand, the Canyon dwelling technologists faces more hurdles than just their own technology milestones. If they wish to survive thy must either acquire key business skills, or else they must resign themselves to a dusty quiet cave in the desert. Market forces are unrelenting. The most successful technologists master product marketing, sales, and finance skills, to go on to become professional venture investors themselves.
The VenLogic program offers these skills, facilitating technologists in making the kinds of decisions that enable their innovations to reach their markets.
Buyers - Technology Investors (including government labs) live on the other side of the canyon. They know that taking new technology to market can make great wealth. Technology Investors either invest in projects across the Canyon, or patiently wait for "quality deal flow" to arrive, so they may invest. They are a special class of risk-adverse value-added investors who organize to service technology innovators. These include professional early-stage venture capitalists and venture developers.
For Technology Investors building a credible investment brand is hard work. Quality deal flow is the key to their brand. When there is not enough ďdeal flowĒ to invest in, they end up with a smaller portfolio which can reposition their business in the capital market. The natural order of oversupply of capital chasing too few deals can cause investors to shift their positioning. This creates an equity marketing research problem for Technology Innovator sellers. They have to raise capital to get across the Canyon and often waste time knocking on the wrong doors.
Some say Canyon Crossing skills are a black art. It's not entirely, there is a process. The Buyer's job requirements do not require that they be experts in Seller technology. However, they do require that Buyers be experts in the in the business model that unlocks the latent economic potential of the technology. The result? much of what is required for successful canyon navigation can be learned.
The Buyer's job requirements don't require them to train Sellers on how they do their job. As a result, there exists a $350B VC industry with very few experts who will explain the process of business model to the technology innovators. That knowledge remains a trade secret, the material that creates a proprietary advantage that Buyers use to differentiate their brand in the capital market.
Typically, more money supply is available for investing than quality technology deals to invest in, so "quality deal" demand is high. This advantage goes to the Buyers who drive demand in inefficient markets. They set the price, and depending on their geographic location and business model, they can facilitate a level of market efficiency that generates a return on investment to their investors.
[Whether that leaves a return on investment for the technology innovator above depends on how well they focused on learning the required skills to extract their pro-rata share of value from the technology they invented. VenLogic offers to teach technology innovators these skills.]
What is the Pattern here?
Proper market planning drives sales - whether the sale is a technology product or an equity/debt product. Failure to make the right "sale" can cause Technology innovators to get lost crossing Canyon (aka: the "Valley of Death," a dry, lonely place where companies grasp for straws to keep the lights on with continual bridge financing that lead nowhere). When projects are in the Canyon nobody wins. Investors lose; companies and employees lose. Worst of all the potential customers of promising technology lose when a great solution gets lost somewhere in the Canyon between the lab and their doorstep.
"The Canyon is a very lonely place..."
Where's the Solution?
Canyons occur in nature and in business.
Successful teams make strategic decisions based on a process.
Decisions that can be mapped on a visual Venture Strategy Indexô diagram.
They learn the skills to spot Canyon crossings and map their way across, so they can budget the resources necessary - up front in a calculated, strategic decision making process.
Success can be less of an accident. Where failure is predictable when key skills are unknown and unused.
Crossing the Canyon begins with recognizing where the real gaps are:
For Early-Stage Technologists in Government and in Industry
For Managers and Executives in early-stage technology companies
And for Investors in Early-Stage Technology
What does a Technology Innovator need to be Successful?
Attitude. VenLogic believes that if you have the right attitude and are willing to rethink some of what you learned earlier in life, (e.g. grad school, previous jobs, etc.), you can successfully cross the Canyon. The catch is the time required to assimilate these new lessons. It requires commitment, focus, and patience. Most Technology Innovator teams are unable to pass the "Attitude test," they are impatient, frustrated, and under pressure to deliver.
Failure to execute results in a situation that is embarrassing. The fact is most projects usually had, at one time, enough capital to get across the Canyon. Investors see this and know immediately that it is easier to walk away from the deal, than it is to "restart" or fix a broken deal. Of course, Technology Investors often share the blame for not stepping in soon enough, but that is another issue, one that implies that the investor is also down in the Canyon. This is where a lot of investors ended up after the Dot Com era. However, the early-stage investor market is a very different place today.
Tools. Using proven, integrated learning tools can accelerate the learning curve dramatically. VenLogicís Canyon Crossing tools are the critical few business tools that drive success. These tools close the gap between technology developers and technology investors. They are predictable, rules-based, but easy to overlook in a noisy environment.
VenLogicís Canyon Crossing tools are repeatable methods and processes that work in a wide variety of situations.
VenLogicís Canyon Crossing tools can be delivered by a consultant, by a trainer or via interactive software.
VenLogicís Canyon Crossing tools can be adjusted to fit the situation based on clear business rules.
VenLogicís Canyon Crossing tools include refined assessments and diagnostics that highly compress critical best-practices wisdom in ways that simplify executive decisions making.
VenLogicís Canyon Crossing tools utilize best team practices. Beginning with simple but tough questions that expand in a predicable pattern, team sessions drive critical decisions. Using the team approach, the tools facilitate collaboration by sharing knowledge among peers. Team members respond to these key questions and use the tools and best-practices methods to defend their responses in real time. This speeds learning, team building, and reduces dependency on classroom style coursework.
VenLogicís Tools Get Used. Tools pushed down from the top tend to not get used. Top down tools can appear as a management fad to be avoided. Tools that reduce the time needed to create ďdemand generationĒ get used. Engineers soon begin to demand these tools to save themselves time and money. They use them to get their jobs done. Once users are exposed to VenLogicís tools, they tend to be requested by users, creating a pull effect, which drives adoption deeper throughout the organization.
VenLogicís Tools Empower. The tools empowering the organization to develop its own unique sustainable competitive advantage (SCA).
VenLogicís Tools Embed Rules. Since strategic decision tools embed rules, the ideal client experience is about applying the right tools to the problem, at the right stage. An approach which is going to be relevant, memorable and likely to be applied with success.
VenLogicís Environment. Great tools and training content set the stage. Our executive learning environment is designed to maximize the use of very the limited and expensive time of Executives. The entire program is designed to fit their needs. With VenLogic this is about less classroom style coursework and more collaborative learning. Executive training agendas and spaces are designed to provide private time for absorbing concepts, and group time for assimilating ideas and reaching agreements. All training sessions function like a fitness system for the executive mind, enabling it to learn faster in less time.
"Typically, its a knowledge and focus problem first.
Often, failure to focus on acquiring Canyon Crossing skills soon enough
results in a serious cash flow problem."
Technology Innovator Question: Am I Alone?
Tough one. Yes and no. Yes you are. The most common zip code for start-ups resides with the nearest bankruptcy court. Most firms end up there over time, due to a series of miscalculations. But, they only see this in their rear view mirrors. When the cash runs out, the team is usually past the point of rescue. Whatís left goes to the canyon vultures who will promptly dismantle the remains for whatever value they can salvage.
Few firms actually are aware of the dangers of Canyon crossings from past experience. They consciously try to avoid the known hazards, but somehow they end up short of cash anyway. The difference is they know when they're lost, how they got there, and can retrace their steps, pinpoint what went wrong. Sometimes they can avoid repeating the same mistakes again.
When a AAA Canyon Rescue consultant is called, the first challenge is often finding where the team actually is in the canyon, since there usually aren't any reliable coordinates to go by. The consultantís challenge can resemble a forensic project to reconstruct the journey. Often, by this time, cash is too limited for a complete forensic analysis. If there is cash, but the team lacks experience, then the consultant's challenge is to educate the team, quickly and efficiently, in order to get at the right information. It is a race against time to save the team. Most often, it is not cost effective for the canyon rescue consultant, so the vultures swoop in.
Most projects & companies die of cash starvation
before the experts are called in.
No you are not alone, hundreds of professionals have faced crossing the Canyon with thousands of clients. Few of the experts, however, have developed quick, effective, predictable, systematic tools for articulating where in crossing you are. VenLogicís goal is to enable a dashboard approach, so the warning light goes off before the cash tank runs dry. These tools are coveted for their ability to put things back on course. Mastering a pathway out of the Canyon is worth millions to technology innovators - in terms of jobs, revenues, market share, brand leadership, profits, and return on investment. VenLogic has the tools and the expertise needed for this journey.
Conference presentations among the DoD on this topic go back a decade or more. Looking Internationally, the same phenomena exists in almost every nation that supports a free market economy. So this matter remains a multi-billion dollar, global dilemma that faces almost every early-stage technology company and investor, as well as mature Fortune 500 companies launching new early-stage market categories (and their public shareholders).
Bottom Line: Ignore the Canyon rules that govern early-stage markets at your peril, because anybody can end up in Death Valley, and dead deals don't talk, except perhaps in University Case Studies, to the benefit of the next reader technology innovator planning to cross the canyon.
* Note about inefficiency in early-stage technology markets.
Are early-stage markets really inefficient because of the "market's" shortcomings? Professional venture investors very efficiently avoid deals stuck in the Canyon, while word-of-mouth travels very quickly for hot and cold prospects alike. Therefore, private markets have certain efficiency mechanisms built in, some more accurate than others. See if you agree.
Some believe early-stage market inefficiencies really due to an extraordinary large number of myopic, technology-oriented players who lack fundamental business skills and tools (which accounts for an entirely different "market" of those in need of a less costly educational approach.) Many investors suggest it's the "Peter Principle" at work, with too many up-and-comers involved who have moved up in responsibility too quickly, and therefore "don't know what they don't know. But then when pressed for repeatable solutions, few investors are able to articulate the specifics of their proprietary approach, citing the "black art" and large investment behind their decision analysis.
Fast changing markets certainly create a demand for more frequent continuous learning, which is an issue that affects everyone - young and old alike. Perhaps a more beneficial approach is for investors to recommend solutions that are explicitly clear about what best-practices are responsible for ending up in the Canyon, which are most critical to master, and whether those skills exist or not.
What is becoming more clear is that there are more, larger Canyons than ever imagined since we first began analyzing this phenomena in 1996. We have personally experienced this as entrepreneurs prior to the formation of VenLogic. As venture consultants, we have come to recognize it among some of the largest multi-billion dollar funds. It seems the solution is not necessarily a function of money, but proper focus.
We have since developed a set of tools that can be used by investors to monitor where a company is in its journey, or by the company to monitor themselves. It can not only help identify whether they're in a Canyon or not, but what one might consider doing about it. While these tools continue to evolve with each new case we encounter, hopefully companies and investors find them useful. There are, of course, no guarantees in early-stage markets where rules are remade daily. However, we believe we've identified some of the best practices that can be more effective than others. Furthermore, given the vast number of potential solutions, this is not so much as a universal solution set, but can be viewed a reliable referral network of solution experts focused on similar goals. We expect this will invite others to share their solutions, so that they may be more efficiently brought to the market players who need them, creating more efficient markets for early-stage investors and entrepreneurs.
I welcome your feedback and recommendations. :-) Robert Kruse
Valley of Death Slide Example:
Dr. H. Randall Goldsmith, President
San Antonio Technology Accelerator
FLC National Meeting, Venture Capital Panel
San Diego, May 2004, Slide #3
Accelerating Technology Transition:
Bridging the Valley of Death for Materials and Processes in Defense Systems
Committee on Accelerating Technology Transition, National Research Council
68 pages, 8 1/2 x 11, 2004