Is your start up a “category winner”?

I have spent the past 2 months encouraging a client of mine to see “Social Network”, a fascinating product of Holywood, which portrays the rise to fame of Facebook.

Clearly, I am in good company. Niklas Zennstrom, a co-founder of Skype, has written an excellent critique of the film. He correctly ignores parts where the director may have possibly assumed facts for the sake of the box office.

Instead Zennstrom observes that start ups strive to be “category winners”, and the entrepreneur is often desperate for success at almost any price.

There are implications here not only for start-ups, but also for the venture-capital firms that back them. Indeed, we founded Atomico, our firm, to address precisely these kinds of issues, seeing that new technology would disrupt not just consumer markets, but the venture-capital industry itself. For example, traditional financing rounds, when companies seek fresh capital at different stages of development, start to blur when start-ups grow so fast, and potentially require more capital at short notice.

This can create a situation where venture capital firms, not just entrepreneurs, struggle to keep up. Both need to think ahead if they want to create category winners, and understand that it’s essential to aim for this goal.

Back to my client, and I am seeking a way to urge them to realise that what they have is unique. Getting it to the market will have to be a fast process, ensuring that the competition is left with no choice but to give up. But unlike Zuckerberg – and the film’s creators – they don’t get it.

In comparison, I want to praise a lovely lady, Sonya Davidson. Now Sonya has discovered an amazing technology to create electricity out of hydrogen. With around US$50,000, she has put together a prototype and got herself in front of a key investors audience in New York – all within a year.

What next for Sonya? Simple: get the job done, and do so quickly – understanding all the time what is core value and what is not. As I said to her this morning, the final product would (unfortunately) have been a winner in Japan this week.

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