Time in the human sense doesn’t mean much when it comes to technology, because — unlike something living — a tool doesn’t struggle to survive or to pass on its pattern. Rather, it’s the increments of design, manufacture, refinement and combination that mark development. In this sense, no time whatsoever passes for a technology if there is no development. Tom Chatfield, 2019.
In the year two thousand the internet spawned a lot of startups that tried to disrupt the market and succeed. However, the dot-com bubble burst a couple of years later and many of these companies failed to survive.
Today it is very common for people to order the week’s groceries online. Emarketer, reported a 41.9% increase from 2019 to 2020 of shoppers in the U.S.; and moving from a range between 1–4% before 2019 to 9–14% of online consumers for groceries in Colombia, Mexico and Peru. In addition, the pandemic has accelerated this trend with a large supply of home delivery companies such as Amazon Fresh and Freshdirect, including online convenience companies such as Grubhub, Doordash and Jokr. Twenty years ago, Webvan online grocery store delivered perishable and non-perishable goods to the doorstep of U.S. homes. The company was once worth $1.2 billion and had 4,500 employees, but in less than two years it was liquidated.
Another of the many companies that failed at that time were GeoCities and The Globe, the first sites to appear as social networks. The first, as a web host and the second enhancing the experience of having a personal page connecting people with similar tastes. GeoCities was fully acquired in 2002 by Yahoo for about USD$3.5bn. It closed definitive operations of its activities in 2009. The Globe debuted on the New York Stock Exchange in 1998, reaching a market capitalization of USD$842 million. Two years later it was delisted.
Although disruptive and necessary today, Webvan and The Globe did not meet the most relevant characteristics for innovation to prevail over time: technology, context and time.
No matter how rustic or refined, technology is everything that human beings use to change their environment. The origin of the word technology comes from the Greek techne which means art, craft, technique, trade and logos which means word, language, science, knowledge. Thus, technology is a broad concept that can encompass a set of knowledge, techniques and processes used for the design and construction of objects or elements and processes that can satisfy human needs.
Technology can be contrasted between human and wildlife developments. For example, bees create hives to produce their honey, birds use branches to build their nests, and beavers build dams. These attributes are the result of instinctive behavioral patterns and cannot be modified to adapt quickly to circumstances. Humans in contrast do not possess highly developed instinctive reactions but have the ability to think systematically and creatively about techniques. (Britannica)
Thus, the impressive electric cars that have made Elon Musk’s name are just an accumulation of previous technologies and processes accumulated over time. Refined, yes, but ultimately an accumulation.
CB insights has listed twelve reasons why a startup fails. These are directly linked to the issue of context, which are those macroeconomic, socio-demographic, regulatory, public health and other elements that positively or negatively affect the development of a startup. Among the main causes, 38% corresponds to the lack of capital or failure when going through this financing process. Secondly, because there is no market need, 35%. In third place, because they are outpaced by the competition, 20%. Then, because of a failed business model, 19%, and because of regulatory or legal changes, 18%.
No startup can escape the fact of this social involvement in its context, which has three clear objectives to be met in any innovation: the satisfaction of the consumer’s need, the resources to carry it out, and comprehensive social ethics.
Wattage is an example of a company that, although with an innovative product, could not sufficiently validate the market’s interest in its product which consisted of breaking the barriers of entry for hardware designs. It was founded in 2014 and closed a year later.
Some ventures can take years to be realized, such is the case of several projects such as helicopters, submarines and airplanes that Leonardo Da Vinci had during his lifetime that due to lack of capital, materials and skilled labor could not be developed in his time.
Every enterprise should have a comprehensive social ethic, it is not only about generating economic returns at the expense of consumers, it is about generating value to multiple stakeholders. But, above all, this value must be perceived in the ecosystem where it is born and developed. This acceptance could be much faster in those places where its members are more willing to accept and adopt the changes that each technological disruption brings.
The Greeks described the notion of time in two major elements:
- Chronos: linear, divisible time used as an administrative tool to coordinate activities.
- Kairos: events in time that stimulate moments of birth and actions in time and form.
Going back to the reasons why a company fails, according to CB Insights, 10% of them correspond to a lack of timing. This means that whether it was due to capital, personnel or other resources, the startups were not at the right time to succeed. Aria Insights, founded in 2008 was a startup that developed highly advanced drones, could not find the right business model and had to close in 2019. Probably if Aria had been in the right time chronos and kairos, the story today would be one of success.
Timing is the result of technology, i.e. infrastructure, and context being aligned. In the case of drones, while Aria may have had the right technology, its context did not meet a market need and the capital, materials and labor were focused at the time on other industries whose perceived value and context benefited them to be more attractive than Aria.
All entrepreneurs and investors are tasked with constantly evaluating their investment thesis. The former to continue developing their company and the latter to continue improving their portfolio, but both to allocate capital in the most strategic place. Considering the context as valuable as the technology is vital to survive in times of great innovation like the ones we live in today.
Hector Shibata. Director of Investments & Portfolio at ACV a global Corporate Venture Capital (CVC) fund and Adjunct Professor for Entrepreneurial Finance.
Ana Aguilar, VC Investor
ACV is an international Corporate Venture Capital (CVC) fund investing globally in Startups & VC funds.
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