Why Now?
How External Inflection Points Shape Business Success
Happy Thursday, 👋
What external changes are taking place today that create an ideal environment to launch a new business? This is a critical question we often ask startup founders to help identify companies that are changing how industries operate or transforming the way business is conducted. Companies that shift the trajectory of an industry tend to be small and nimble, able to solve specific problems with unique solutions made possible by the alignment of multiple external factors.
Answering the question of why now is the right time to launch a venture can be challenging, but it’s a crucial consideration for founders at the inception of a business idea. What are the macroeconomic, technological, political, or geographic shifts happening today? The convergence of the right external conditions can be a deciding factor in the success or failure of a startup. Some of today’s largest companies would have been unrealistic even a century ago, as they required several technological advances for success.
External Inflection Points
Timing plays an essential role in any entrepreneurial journey. We often witness ideas emerging long before the ecosystem is ready to support them. In many cases, founders attempting to solve hard problems are ahead of their time. Science fiction writers often excel at imagining these futuristic solutions because they are unconstrained by the present. For instance, The Man in the Moone, a book credited with one of the earliest depictions of space travel, was published in 1638, centuries before technology could begin to catch up.
For founders, addressing unique problems requires approaching challenges from the perspective of a science fiction author with an ability to think beyond current technological constraints. Some of the most successful founders we have met keep a list of potential ideas, revisiting and refining them over time. Every great leap of society begins with an idea. Moon missions were impossible in the 1600’s but that did not stop discussions on the hypothetical. With the pace of technological advancements accelerating, founders with creative, unconventional solutions will continue to have opportunities to test their theories. Revisiting old ideas and constantly asking “why now?” can sometimes spark the creation of a true industry inflection point. Maybe your idea is not feasible today but keep looking for how underlying technological advancements might make it a reality.
Optimization vs. Differentiation: Key Questions for Investors
As investors, we are continually evaluating what makes a business idea unique. Is the company optimizing an existing process, or is it offering a completely differentiated solution?
Ideas that focus on optimization, making incremental improvements to existing processes, tend to be more common. In recent years, we have seen many companies use AI to streamline or enhance workflows. While AI can be a powerful tool, we often caution that AI is not a business strategy in itself; rather, it’s a means of improving processes. Companies that rely solely on technology for optimization may enjoy short-term success but struggle as these technologies become broadly integrated across industries and markets.
Differentiation, on the other hand, occurs when a startup introduces a completely new approach to solving a problem. This distinction can be critical to a company's long-term success. One way to evaluate whether an idea is about optimization or differentiation is to assess its potential impact on the market. Does the product lead to faster, more efficient outcomes within an existing market, or does it create an entirely new marketplace? Also, thinking about the customer’s perspective, how they perceive and use the product, can provide useful insight.
The Importance of Customer Choice
Customer behavior is an effective indicator of whether a startup is on the path to success. Are customers choosing the product or service because it is better, or because it is different? This distinction can provide valuable insight into how successful a startup might become and how much interest it will attract from investors.
📈 Better: A product that is “better” improves upon existing solutions. These companies compete in established markets and often offer products that are faster, cheaper, or more efficient. Much of the economy is built on businesses that continue to innovate by improving the ways we already operate. For example, Zoom succeeded by offering a better and more efficient platform for video calls, building on the foundation set by earlier solutions like Skype and WebEx.
🚀 Different: A company that is “different” introduces a completely new approach to solving a problem, often creating an entirely new category or segment in the process. The innovation offered by these companies may be unanticipated, requiring a steeper learning curve. These solutions often rely on shifts in underlying technologies that were previously unavailable. Uber, for example, redefined transportation by building on the combination of smartphones and real-time GPS technology, something not possible a few years before the company was launched.
Conclusion: Seizing the Moment in a Dynamic Ecosystem
In today’s dynamic environment, external factors, from technological advances to shifts in consumer behavior, are constantly reshaping the landscape for startups. Founders must continuously ask themselves why now is the right time to launch their venture. By understanding the intersection of timing, innovation, and market needs, founders can seize opportunities to define entirely new business models.
As investors, we look for companies that not only recognize these external inflection points but also have a clear understanding of how their solution fits into the broader market context. Long-term success lies in the ability of founders to anticipate and adapt to changes in the external environment, defining why now is the ideal time to launch their company.
Wishing everyone a great weekend,
-The Caymont Ventures Team.