Before you get disrupted, think like a VC


Brian Rich, Catalyst Investors, venture capital
Brian Rich, managing partner, Catalyst Investors. Photo courtesy of the firm.

By Brian Rich, Catalyst Investors

I couldn’t help but laugh at the video of the auto-following suitcase, as it flopped around pointlessly trying to follow its master. However humorous this seems, seriously consider the amount of reinvention that has to take place at a luggage producer to possess the skills necessary to effect a viable, world-class solution to this problem.

A luggage company does not possess a critical electrical engineering, computer science or RF engineering staff, for example. It would undoubtedly be an easier transition for a company like Apple to make an auto-following suitcase than for a legacy luggage brand.

We have all experienced the hype of the various “game-changing” and “disruptive” technologies over the past several years. Cloud, mobility, SaaS and big data were all terrific buzzwords five-plus years ago.

Investing in such companies was the realm of venture capitalists, and hundreds if not thousands of startups were conceived based on these emerging technologies. Companies such as Box, Twilio, MindBody and MongoDB were born as result.

Going back to the luggage example, old-world companies have always had to stay in touch with advances in such areas as materials and design.

What has sharpened the need to change, however, is the advancement of fundamental technologies and connectivity to the internet. Machine-to-machine communications, virtual reality, blockchain and, of course, artificial intelligence are prime examples of these change agents.

Fast forward to today and you are hard-pressed to find a company that does not utilize these core technologies.

Everyone knows that a retailer needs to be “mobile first” or be left in the dust. Old-line retailers like Macy’s have developed their own solutions, but more often than not retailers have incorporated third-party products into their core offerings.

Companies large and small in basic industries have embraced the cloud and continue to port their old systems and database operations to it. I am quite certain that the aforementioned VC-backed industries will ultimately be widely adopted by most businesses in some fashion.

The point being: Every company ­— big and small, non-tech or tech — is facing competition everywhere and needs to harness a VC mentality to thrive in today’s world.

A VC is always looking for profitable disruption — and aggressive disruption at that — and so too must an SMB owner. Like a VC, an entrepreneur needs to take chances and be willing to fail while trying.

Further, an entrepreneur must acknowledge that if he or she is in the buggy-whip business, it may be time to get out.

Take, for example, the family-run restaurant losing loyal customers to takeout via Seamless or GrubHub, or the optometrist whose business had been disrupted by Warby Parker. The competitive landscape has been turned upside-down for small businesses like these (not to mention Amazon), and the application of technology is the solution.

SMB owners/management can not only stay in the game, but they can win if they constantly consider how to adopt innovation.

By understanding the secondary effects of innovation and how to use technological and third-party advancements, they can successfully pivot their competitive offerings.

The good news here is that hundreds, if not thousands, of third-party providers are offering best-of-breed tech solutions for SMBs to integrate into their businesses. But first they’ll have to think like VCs.

Brian Rich is managing partner with Catalyst Investors and an executive-committee member of the National Venture Capital Association board. He can be reached at [email protected] and +1 212-863-4848.

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