Point: Measure innovation from a variety of lenses, not just one
Story: The Information Technology and Innovation Foundation (ITIF) conducted a 40-country study of innovation, ranking countries on competitiveness. The ITIF used 16 metrics grouped into 6 categories:
- Human Capital
* Higher Education Attainment
* Science & technology Researchers
- Innovation Capacity
* Corporate Investment in R&D
* Government Investment in R&D
* Share & Quality of World’s Scientific and Technical Publications
* Venture Capital
* New Firms
- Information Technology Infrastructure
* Broadband Telecommunications
* Corporate Investment in IT
- Economic Policy Factors
* Effective Corporate Tax Rates
* Ease of Doing Business
- Economic Performance
* Trade Balance
* Foreign Direct investment Inflows
* GDP per Working-Age Adult
Action: Translate these country-level metrics to your organization. For example, Human Capital metrics: the education level of your employees, the skills employees must have to meet customer needs; Innovation Capacity: how much do you invest in R&D or in innovation? How well do you understand your industry, technology and the specific markets where you compete? Entrepreneurship: do you encourage employees to suggest ideas? Do you have processes in place to evaluate and fund those ideas? IT Infrastructure: do you invest in IT and software to let your employees communicate and collaborate easily? Economic Policy: do you minimize barriers to innovation, like bureaucracy and silos? Economic Performance: how many innovations do you have per employee?
For more information, see the ITIF’s report The Atlantic Century: Benchmarking EU & US Innovation and Competitiveness
Innovation, Metrics, Productivity
Point: Too much VC funding can be just as bad as too little
Story: As a small young company, ViaWest had only $34 million in funding. But it faced massive competitors with $300 million and $800 million in war chests, respectively. These big competitors used their deeper pockets to “get big fast” — acquiring other companies, buying big office buildings, and investing in lots of shiny new large datacenters. But sales didn’t materialize and the big companies went bankrupt. In many ways, the money distracted these companies — they were looking for ways to spend it rather than focusing on their core innovation and business fundamentals.
In contrast, ViaWest used its money carefully and made positive cashflow a major goal. ViaWest focused on low-cost, efficient web-based tools to help it out-innovate — not out-spend — its bigger rivals. ViaWest also watched its asset investments carefully, only adding new capacity as needed when demand appeared. After the big competitors cratered, ViaWest bought some of the competitors’ lightly-used datacenter assets for pennies on the dollar.
Action: Use Web-based tools that let you innovate much faster at less cost. Create positive cashflow sooner rather than later. Create business forecasts for investment performance and stick to them — don’t invest more if the first investments aren’t meeting targets.
Point: Get to the Point Fast
Story: Jason Mendelson, Managing Director of the Foundry Group, gave the following advice last night to entrepreneurs seeking funding:
- Send an executive summary, not a business plan – VCs are short on time. Grab their attention quickly. They don’t want to wade through a 90-page business plan at the get-go.
- Know your business better than anyone.
- Don’t ask for an NDA – that’s a rookie mistake. VCs look at so many business plans a year that if they signed an NDA, they’d almost certainly get sued.
- Have a 3-sentence elevator pitch about your business ready if you meet the VC informally.
- Be smart, but don’t be arrogant. Saying your product “has no competitors” is not believable.
Action: Do your homework before you approach the VC. VCs like Jason enjoy talking with entrepreneurs informally, such as at Boulder Open Coffees, but don’t have the fundraising conversation before you’re ready. When you are ready, be crisp and concise in your communication.
For more about Jason Mendelson, read his blog: http://www.jasonmendelson.com/wp/
Learn more about the Foundry Group: http://www.foundrygroup.com/
Join the Discussion at Ask the VC: http://www.askthevc.com/blog/about.php
Capital, Entrepreneurs, Opportunity