For many people, selling a business for $50 million is a win.
But for venture capitalists, its a poor outcome.
VC success is defined as achieving top quartile return status among your peers.
In other words, go big or go home.
At the same time, barriers to building software are falling exponentially.
How do you go big in a world where the barriers to innovation can be so low?
Thats strategy andthats also how VCs think about strategy.
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A proprietary data pool creates value.
Your core software shouldnt just be helping your customers achieve a goal it should also be generating data.
Consider, for example, an inventory manager who uses your analytics to do their job better.
You now have an automated workflow powered by analytics.
Can you connect this to a unique piece of hardware, such as an IoT gear?
Can you pair your software with a machine to create something proprietary?
Such a pairing takes you out of the world of commoditized software by adding a unique differentiator.
Its slick and has analytics, but its not a solution.
Then you have a real differentiator.
Can you build a two-sided connection?
Such businesses are frequently winner-take-all markets, and are highly risky and expensive to create.
Theres a reason that VCs are searching for unicorns and not just your basic good business idea.
Malcolm has served as an adviser to private equity firms Advent International and Vista Equity Partners.
