Don’t Listen To Your Critics, VCs Are Not Enough, and Other Lessons from Breakthrough Idea Forum
This week, I’ve learned a lot about game-changing ideas and how to think about making them work. Like anything meaningful, some of the lessons will take more time and effort to sink in. But here are five lessons to take away from our Xconomy Forum (“What’s Your Breakthrough Idea”) held at the University of Washington on Monday:
1. Not everything is, or should be, a breakthrough idea. Nick Hanauer of Second Avenue Partners framed the whole discussion by pointing out that entrepreneurs have different motivations: some might want to make a lot of money whether or not they change the world; others may want to change the world whether or not they make much money. Either approach is perfectly valid; just be true to yourself.
2. Venture capital alone won’t sustain breakthrough ideas. VCs don’t fund new ideas or the invention process, said Nathan Myhrvold of Intellectual Ventures. Instead, they fund “zillions of ‘me-too’ ideas,” he said. Which is why Myhrvold is trying to create a new “invention capital” marketplace—and why his company has awarded $315 million to individual inventors in the U.S. and has deals with more than 100 universities to support the invention process.
Meanwhile, Hanauer told me last week that most VCs don’t take risks anymore because the VC business model rewards those who can simply avoid a major screw-up. “The business model is toxic to risk-taking, because it’s so unbelievably profitable for the partners just if it doesn’t fail,” he said. (Of course, VCs will tell you that their model isn’t broken—because it isn’t.)
3. The proper mindset of breakthrough-idea thinking is to be “narrowly insane but not a total whack job,” as Myhrvold put it. By narrowly insane, he meant that inventors need to be crazy enough to think they can do something unprecedented, without being delusional. Put a different way, it’s helpful to be a “high-functioning contrarian,” as Hanauer says Jeff Bezos has described him. (“A low-functioning contrarian means you’re in prison,” Hanauer adds.) In other words, try to see the world differently, and imagine what would happen if things were arranged in other ways. Amazon.com, for example, delivered more than 10 times the selection of a brick-and-mortar store at a cost savings of more than 25 percent. That’s the kind of thinking that can transform an entire industry—in this case, those who sell books (for starters).
4. Part of being a good entrepreneur means not listening to your critics, or the entrenched interests. As Lee Hood from the Institute for Systems Biology and Integrated Diagnostics put it succinctly (I’m paraphrasing), people have seriously doubted him six or seven times in the past—and he’s been right every time. (He didn’t say how long it took to be proven right.) But the basic message was that if you want to change the world, you will meet with resistance—the people and companies in power don’t want things to change—but don’t let that deter you. Hanauer stressed the importance of turning big companies’ strengths into weaknesses. And Myhrvold emphasized that failure is inevitable if you’re taking risks, but “you have to have a business model that can sustain that.”
5. Put the right team and culture in place. This is nothing new, but when it comes down to executing on breakthrough ideas, it is the most important factor. “The key is getting the right CEO,” Hood said. “And get focused. The biggest destroyer of young startups” is trying to do too many things, he said. (This is an example of a common principle governing both tech and biotech startups.)
Here are some thoughts on the deeper dives into potential breakthrough ideas that we heard at the event:
—Christina Lomasney from Seattle-based Modumetal showed how nanomaterials grown in a novel way could change the entire metals industry. It is already having an impact on defense and industrial applications. One question is whether the technical process (and the business) will scale up to handle mainstream applications in energy efficiency, transportation, and manufacturing.
—Mick Mountz of Boston-area Kiva Systems dazzled the crowd with videos of mobile robots moving inventory around in warehouses to improve the logistical efficiency of retail distribution. This got a lot of interest, especially given the strengths of the Seattle area in e-commerce and retail.
—Steve Seitz of UW computer science and engineering (and Google) showed how computer vision techniques can be used to do things like build 3-D virtual environments from the world’s Flickr photos, and produce smooth imaging sequences of your kid’s face as she grows up.
—Bill Bryant of Draper Fisher Jurvetson outlined his firm’s philosophy of investing in “brave new world” startups that don’t just provide 10 times more value than the status quo, they strive to create new industries. Bryant argued that DFJ takes risks and invests in potential breakthrough ideas (such as Synthetic Genomics, Tesla Motors, Space X, and locally, Redfin and Opscode).
—Norm Wu from Seattle-based Qliance tantalized the crowd with his vision of primary care without health insurance companies, which is already working on a relatively small scale. One question is whether Qliance can scale up its business to handle all of middle America and still deliver more personalized care at a better price.
—Dan Weld of UW computer science and engineering (and Madrona Venture Group) showed us the state of the art in semantic Web search and knowledge systems that enable a computer to understand the question you’re asking and find an answer. He also mentioned new applications in areas like product search. (Amazon, Bing, and Google might want to keep an eye on that.)
A few more thoughts in closing:
—The intersection of biology and information technology is still not a place where that many entrepreneurs (especially techies) are putting their energy. Despite hugely important problems to solve—in human health, diagnostics, computational modeling—I think there’s a significant language barrier, and quick commercial opportunities are not easily found. Also, the culture gap between tech entrepreneurs and academics seems much wider than it is between their counterparts in life sciences. I’m not sure why; it might just be the nature of the disciplines.
—The Paul G. Allen Center at UW beats the pants off the Ray and Maria Stata Center at MIT, for a quarter of the price. And not just for hosting an event—for everything, I dare say. The Stata Center, which was also funded in part by Bill Gates, has housed many of MIT’s computer scientists since 2004 and is still a monstrosity, in my opinion. (I’ve never been a Frank Gehry fan. Sorry, EMP.)
—Some of the best slides weren’t shown on Monday. David Bluhm from Seattle-based Z2Live had to cancel his talk because of a medical emergency. I won’t spoil his punchline, but any deck that includes iPhones, chimps, and Tom Hanks—and how the future of social gaming will impact education and society—needs to be seen in its entirety sometime soon.