Being a Founder in the Best Time for Consumers

Reading Jerry Neumann’s post The Deployment Age four years ago has really stuck with me, probably because I can track my career through working on technology that feels like they moved through the transition that the Perez model describes. This post will (hopefully, and maybe only) make sense if you’ve read Jerry’s post, so I really highly recommend you start there.

I’ll also summarize very quickly so that I surface the ideas in Perez’ theory as I understand them and so it should be clear how I interpret some of the vocabulary. I’d describe Perez’ theory as an explanation of technology-driven economy-impacting boom/bust cycles. The types of companies, investment capital, and end-products are different on either side of the crash (the “Turning Point”). Pre-crash is driven by Finance Capital, innovation is fundamentally large and disruptive, and companies push products at early adopters. Over-investment leads to a bubble and a crash, after which the larger role is played by Production Capital, companies make smaller innovations, and the technology penetrates the fuller market of consumers. The pre-crash lead-up is called the Installation Period and after the Turning Point is the Deployment Period. See the figure titled “The S-Curve” in Jerry’s post for the relevant visual.

If the theory holds, then the most recent of these cycles was the development of the commercial Internet and related communication technologies, with the Turning Point period of transition being the 2000 dotcom crash through to the 2008 financial crash. Why the 2008 financial meltdown is considered related isn’t clear to me as I haven’t read up on it more, but however long the duration of the “Turning Point”, the theory would certainly hold that either two decades after the dotcom crash or one decade after the financial meltdown we would certainly be in the Deployment Period.

So, does the theory hold and are we in a Deployment Period? I can only appeal to the anecdotal, but feel like I can see it looking back at my experience in my career spanning from the Installation into Deployment. The more recent rise of SaaS, focus on UX, and customer-driven innovation and development are more votes in favor.

Most importantly I think the Deployment Period this time around is a great time to be a Founder if you’re looking to create something that will reach many people and make their lives better.

My Journey, Through Installation Into The Turning Point?

In the mid-90’s my career started in what looking back definitely aligns with the Installation Period of the cycle. I started out working on LAN technology, like FDDI and the beginning of Ethernet switching. LANs weren’t even standardized at the time, Novell’s IPX was still battling with IP on the corporate LAN and styles of deployed Ethernet encapsulation hadn’t settled down.

From 1996 to 2008 I was on the founding teams of three VC funded startups all having to do with network infrastructure that looking back sure looks to be a walk from the Installation Period into the Turning Point.

In 1996 at New Oak Communications we were the first startup dedicated to creating VPNs to enable remote work and connected remote offices without corporate modems or dedicated T1 or ISDN lines. Definitely smells like Financial Capital deployed in the Installation Period.

In 2000 at WaveSmith Networks we were looking to both make existing carrier technology smaller and more cost effective (denser ATM and Frame Relay switches) while enabling new switching technologies (MPLS). That feels about right for being right on the cusp between Installation (MPLS as new capability) and Deployment (cheaper ATM & Frame Relay). The timing of May 2000 for closing our A round puts us right on the edge of the transition in the Perez model that begins with the dotcom bust.

Then in 2005 at BlueNote Networks we built reliable VoIP for corporate networks. Our focus on financial companies as our primary customers wasn’t kind to us as 2008 rolled around… This feels like Installation from a technology perspective, pushing the IP revolution to corporate voice communication. Maybe the capital side is a little muddier though. Our lead investor was Fidelity Ventures, who were pushing for the technology as something they wanted to deploy within Fidelity Investments (in fact the company spun out of our Founder/CEO being EIR at Fidelity Ventures). Kinda sounds like a side-door for Perez-style Production Capital.

Beyond Infrastructure

After a little over 10 years in those first few startups it was time for me to leave network infrastructure work behind. It felt like the opportunities for innovation just weren’t the same. The 90’s were an exciting time to be working on the lower levels of networking during which it felt like there was still a lot to be figured out. It’s not that there wouldn’t be some opportunities (like the array of interesting things my former colleagues are working on, like 5G, shows) after that, it’s just not where I wanted to be. It was time to move “up the stack”.

It feels like Ad Tech is its own little parallel world that has its own cycles, so I’m not sure where to place it, but it felt like Installation still back in 2009 when I teamed up to co-found Yieldbot and serve as CTO and we wanted to disrupt the Ad Tech world . Developing Ad Tech is one of the most hostile tech environments, and over a 9 year period we had a front-row seat for huge transitions in the publisher web environment, browser technology, and tectonic changes in business dynamics. We pushed hard for the way we thought things should work, but maybe we took an Installation mindset into a Deployment period?

Deployment and Customer Focus

I came out of Yieldbot knowing that what I did next I wanted to be about making something clearly and directly useful to people. I wanted to create something that people will pay for outright because the value proposition is obvious to them and the product proves itself. I couldn’t ask to be in a better place and a better time than right now to make that happen.

On the face of it a Deployment Period may not seem an exciting time for an innovator. But Installation in this particular cycle created infrastructure that enables the creation of new services that can reach massive scale at a cost point not previously imagined. We have cloud platforms for outsourced/automated infrastructure for services and just about everyone is walking around with a network-connected platform in their pocket. What the hell else could you ask for?

Even though innovation might be described as “small” in Deployment (as opposed to, say, switching the entire world’s information sharing infrastructure to fully-connected packet based systems) the opportunities to create value, both for customers and for a company and investors, are still huge. Especially relative to the amount of investment required.

Jerry makes several points in his post about building in the Deployment Period that I want to explore a little more.

To appeal to more customers in a given market [companies] must make their products both cheaper and easier to use.

Witness the rise over the last decade simultaneously of SaaS and the supremacy of UX. It’s also clear that more than ever services are being built more for the general mass of people that have found themselves online as opposed to the technically savvy early adopters.

In the installation period, much of the new technology needs to be ‘pushed’ to market: customers don’t necessarily understand the benefits and need to be sold on each new thing. In the deployment period, technology is ‘pulled’: customers demand the new technology and are often ahead of the technology companies on what they need and how they will use it. The sources of innovation shift from exploratory companies to forward-thinking customers.

As Jerry notes, you see this strongly in the rise of “customer development” and “lean” development processes that aim to make change incrementally, with feedback (explicitly surveyed or implicitly measured) from the user. Identify a problem, solve it well using customer feedback, and win.

during the deployment period the technology becomes familiar, easier to implement and repair. This means the economic benefits of tech knowledge that in the installation period accrued to a small, well-educated elite start to spread out across the population, lessening economic inequality.

More votes here for SaaS solutions built with familiar (and ever-easier) UX paradigms on existing accessible platforms aiming to solve the problems of everyday people . But there’s more here too. The emerging growth of Low-Code and No-Code platforms really brings the “easier to implement” into focus in a way that is well beyond the availability of cloud platforms and IDEs which are great tools but only for the technical crowd. It’ll be interesting to see how far Low- and No-Code can go, and if there are any companies get build on such a foundation and grow to be big. Current day also features products aiming to make the familiar even better and more accessible, like AirTable aiming to be the evolution of the ubiquitous spreadsheet.

Standing here with my toes on the edge as a Founder this time around I take to heart the following points from the post, as a warning for understanding the environment that you’re building in.

Some things we’ve learned over the past 30 years–that novelty is more important than quality; that if you’re not disrupting yourself someone else will disrupt you; that entering new markets is more important than expanding existing markets; that technology has to be evangelized, not asked for by your customers–may no longer be true. Almost every company will continue to be managed as if these things were true, probably right up until they manage themselves out of business. There’s an old saying that generals are always fighting the last war, it’s not just generals, it’s everyone’s natural inclination.

Whether conscious of it or not, I’d bet the most successful SaaS companies are operating in ways that aren’t just reflecting “the last war”. Though I wouldn’t give equal weight to each of the points in the paragraph above, they are all worth considering and not taking for granted.

Two things I’m sure of — it’s a great time to be a consumer, and also a great time to be a Founder looking to build, with your eyes open, useful valuable solutions for them.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s