A recent discussion with my wife triggered the idea to write this blog post. We were discussing careers and she was explaining to me how much she liked Simon Sinek's "Start with Why" and the concepts behind it. This led me to start thinking about so many questions we received regarding Liquid Labs, which Michael Backes and I founded back in early 2012. It dawned on my that we so often spoke of the "what" but hardly ever the "why".
So why do we do it? Well, to put it briefly, because it allowed us to do what we wanted to do without giving up so much of what we had done to date. Let me explain that a bit. Michael and I have fairly varied backgrounds but one way or another, they are a combination of entrepreneurship, corporate roles, venture capital and consulting. I also spent time at a law firm. We had initially been planning to launch our own startup but were pulled back over to the corporate side. We felt that by focusing on only one business we'd be leaving so much on the table. We had both built up so much experience and very extensive networks. We wanted to see how we could address many problems in the business segments we felt comfortable in verses focusing on just one problem.
First, I have to address the three problems Michael and I identified. After we decided to go for it and pitch Liquid Labs to the Otto Group, we sat together and looked at the market. From our mutual backgrounds, we were able to filter out and focus on the following three:
- Entrepreneurs oftentimes can fairly easily raise money but find it far harder to find customers and scale .
- Corporates so often try to innovate yet fail and end up buying startups at ridiculously high prices and further, fail miserably at post-merger integration.
- VC's can help startups get funded and build a product but they struggle most at helping their companies find customers and ultimately exit channels.
There were a couple other problems but the above three seemed to be the most prevalent. Additionally, we felt as co-founders that our skillsets were so complimentary, enabling us to address these problems together with a team we wanted to build. Liquid Labs ultimately has become a win-win-win solution built upon the back of the three above mentioned problems.
- Customer win: we are able to build products quickly, oftentimes working directly with our customers to create custom solutions. They get a best-in-class solution built without skimping on resources and can depend on the start-up to be sufficiently funded and somewhat future-proof.
- Corporate win: we are quickly prototyping and building companies with full teams. The corporate not only has technical problems solved but can ultimately acquire the full team plus their product and integrate it into their business without all the drawbacks of M&A.....specifically the high prices, generic solutions and all the issues with post-merger integration.
- Company win: the teams which we put together are able to work with all the benefits and freedoms of a startup without many of the downsides such as crap salaries, limited funds, zero VC support and lack of brand or recognition in the market.
Both the problems and the win-win-win solutions are just briefly defined above for context but they give a good idea of what we are generally doing at Liquid Labs.
Now back to the "why". Michael and I wanted to be operational. We both felt that as former VC's, we were too far removed from the day-to-day of the startups we were funding. We wanted to be in the midst of the product, sales, hiring and so forth. As a VC we felt we were more focused on the financial engineering side of things and found the role to be almost boring when compared to actually building businesses. Don't get me wrong. There are great VC's and they love what they do. People thought I was crazy to turn my back on venture capital and the career I had built up but I didn't feel that I was a good VC. Picking companies wasn't where my heart was. I wanted to be more involved in coming up with the ideas and getting them built. I wanted to feel that what I did was mine. Michael felt the same.
We also didn't want to be focused on financial return. We both had seen so many corporates fail in the past to build their future. They were so bogged down in corporate politics and their hierarchies that they stood in their own way. We wanted to find a new way of driving innovation for corporates and recreating the innovation model. We didn't want to be another incubator, accelerator or corporate VC fund. There are already so many of those and being old enough, I saw the massacre that happened to these endeavours post 2001. We've already started seeing the next wave of deaths in this segment and it will only get worse. It's all cyclical and very few corporates get it right (hat tip to SAP Ventures ...... now Sapphire Ventures, for being around over 20 years). There was an opportunity to do things differently and not only try something new. It was possible to build something lasting.
Finally, we wanted to serve all those people in the corporate ranks who wanted to be entrepreneurial without risking it all. US VC's will all shake their head at this and say you have to take a second-mortgage on the house and risk it all. Otherwise, you won't work hard enough. Bullshit! This is what they want so you are enslaved to being successful, where they make the most outsized returns. That's fine if that is what you want to do with your life. A small percentage of people are brilliant at this.....see Elon Musk, Steve Jobs, Zuckerberg, etc. At the same time, I sure don't want Elon Musk's private life nor Steve Job's relationship with his first daughter while he was denying she was his. The fact that some of these well-known entrepreneurs teeter on the brink of being psychopaths is enough deterrent for some. That fine line of passionate enough with slightly less risk appetite was the perfect combination of folks we wanted to create an environment for. (Oh, and we've kept the psychopaths out fairly well. We have some divas but they flavour the environment more than they stand in the way of success.)
In summary, Liquid Labs was started to prove a point. Corporates can be innovative by building startups. Founder-like employees can launch, scale and exit businesses, working together with large companies. Great products can be built, combining the best of both the startup and corporate world. That's why we do it. That is why we've spent the past six years proving our model. That is why we tolerate a lot of crap from the corporate, the market and our competitors. I think we picked the right "why".