Investing in Innovation: A Venture Capital POV

Investing in Innovation: A Venture Capital POVAs a VC investing in technology-related companies, be they atoms or bits, the depth and breadth of the innovation is critical. This is a rather obvious.  So how do I define innovation? Innovation = invention + commercialization. If it isn’t viable in the market, if it doesn’t even reach enough of the market to know, it’s a lovely, but it’s an invention, not an innovation – and most of us VCs like the latter more.

Take a look at most pitches and usually more slides are on the technology and functionality than sales and marketing. Take a look at most ‘use of funds’ and most of the money goes to product development, with not that much towards sales and marketing. Granted, in the early stages there is a lot of discovery to be done on sales and marketing. That’s ok. We’d like to know the business’ thoughts on how it is going to find out what it doesn’t know. Everyone in the room knows there are a ton of unknowns. It’s ok not to know but a plan for finding out is critical. VCs know there are risks, and we want to know how the business will discover, mitigate and provide contingencies for those risks.

Now maybe I’m a bit unusual in what I’d like to see and hear from entrepreneurs coming to our firm for funding, and I probably am. Coming from Bell Labs, I have a passion for technology…but I also know first hand that if you don’t market and sell your ‘stuff’, it’s doesn’t really matter. The Lean Startup Movement has helped some in terms of getting feedback for the product or service but it’s not a panacea for identifying markets, marketing and sales.

Even when the markets and plans for attracting those markets are identified and great, effective messages are developed, the gulf between how the startup wants to sell and how customers want to buy can be huge. Unless you have the next iPhone and can dictate the rules of the market, changing customer buying behavior is not easy and is critical. Startups need to test and find the balance between how their targeted customers want to buy and an effective and efficient way to sell.

So, after 10 years of being a VC, and loving the opportunity to help companies grow, my advice is don’t neglect marketing and sales. It’s not as ‘sexy’ or as fun perhaps as working on the product or service. It’s usually less tangible, more open to wide interpretation…but it’s critical. You can have the greatest product or service in the world, but if no one knows or cares, then why should I?

image credit: sierraclub.com

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Why am I a VC?Deb, founder of Mills-Scofield LLC, is an innovator, entrepreneur and non-traditional strategist with 20 years experience in industries ranging from the Internet to Manufacturing with multinationals to start ups. She is also a partner at Glengary LLC, a Venture Capital Firm.

This entry was posted in Entrepreneurship, Innovation, Intellectual Property, Sales, marketing and tagged , , , , . Bookmark the permalink.

7 Responses to Investing in Innovation: A Venture Capital POV

  1. Pingback: Investing in Innovation: A Venture Capital POV ...

  2. You are awesome, thanks! This comes at a great time for me in talks with my potential business partners!

  3. Thanks, Deb. BTW, you were great at BIF9.
    It’s interesting to get the VC point-of-view and something you don’t see enough of. We’re actually hosting a webinar, “Fostering Innovation through Corporate Venture Capital” shortly: http://www.imaginatik.com/events/fostering-innovation-through-corporate-venture-capital

  4. Jonas says:

    I like the fact that somebody is putting the Schumpeter definition of “invention+commercialisation” back on the table. This is what its all about. Commercialising a new invention. Nothing else counts.

    regards
    Jonas from http://www.innovators.cc

  5. Pingback: Innovation Excellence | Investing in Innovation...

  6. Good advice, Deb. Success hinges on a company’s ability to get their product adopted by customers. Spreading the word and closing the sale are critical components that many young companies leave as a “here be dragons” element.

  7. Arnon says:

    So true and corect. As in every multi-disciplinar activity, the main issues of concern are the interphases between disciplines, understanding the need and placing the Pareto. Need to understand that “First things – first”, and no activity can continue when there are no resources . . . . brain, idea and enthusiasm are not enough

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