The changing dynamics of disruption could lead to extraordinary new businesses.
The rewards for investing in start-ups that have the power to disrupt can be significant. In the last few decades there is no doubt of the benefits of disruptors for consumers and investors alike.
Many of these like Zoom, Deliveroo and Netflix are key in making the navigation of Covid tolerable.
However with the deep uncertainty of 2020 still very much still lingering, the adherence to the dynamics of disruption could become undesirable. Further, the issues of founder mental health largely generated by an outdated approach to early stage funding from VCs still pervades.
Not all founders are meant to stay
First, take the issue of founder tenure. I had always questioned whether all founders were born to lead based on my own experiences.
Over a decade ago my own wellbeing led me to step away from a pioneering digital music platform which I founded a few years before record labels were using data at the core of their strategy and music streaming platforms like Spotify were household names and go-to distribution technologies.
Monzo’s Tom Blomfield departed the bank he created earlier this year citing mental health issues. He was the very tip of the iceberg. Unless we recognise that the skills and talent needed to launch innovative ideas aren’t necessarily going to help founders as they scale their babies.
But this doesn’t mean that the founder is not the right person for investors to back. We must challenge the concept that the founder is the leader with the keys to all of the kingdom and be willing to back a different type of founder.
Discussing the length of tenure early in the relationship with investors could have a significant impact on the talent and diversity pool of founders. People who may not even recognise themselves as entrepreneurial could dive into the fray leading to greater innovations.
After all, few ideas are established from the outset with the intention to scale a global business. Sometimes they are the seed of something that needs further creative input and work to become a great invention.
VC funding is ripe for change
Crowdfunding disrupted start up funding but VCs themselves still operate pretty much as they always have done.
Unless this shift is supported by investors in the startup ecosystem, we will have the same demographics of founders continuing to get the lion’s share of the early stage capital and we will see the continued ‘failure’ of 90% of ventures launched that receive that capital.
They need to be willing to re-orientate and nurture this new outlook and be ready to look at an investment in terms of the potential of the founder rather than readiness to launch a product.
While this model of Product Market Fit has great potential to deliver early return on investment, it misses out on the opportunity that the shift from Disruption to Navigation could create.
Founder Market Fit on the other hand - where the investor focuses on what the founder can bring to the table - creates a real opportunity to solve the most pressing market, environmental and societal problems led by founders.
Founders who may not have the entire solution but who know how to partner in order to find the answers that could ameliorate and change the way we all live, work and progress.
Allowing the founder to focus on navigating the uncertainty of the first six months is an entirely different way of thinking for early stage investors. They are providing the fuel and funds so that the founder can test and iterate their startup in order to get it off the ground.
Essentially, disruption has served its purpose. We are not talking here about the end to innovative startups. The big changes and giant leaps that we sorely needed have been prolific, leaving few sectors or ecosystems untouched.
Founders who can navigate change
As these three changes collide a new type of founder will emerge; more orientated towards navigating change, rather than creating disruption.
This particularly applies in the early stages of the founder investor relationship where fragile aspirations to launch something extraordinary, into deeply uncertain market sectors, require a different type of patience, stimulus and resourcing in order to give that venture even the chance to get off the ground.
A re-evaluation of the lens through which early stage funding orientates is inevitable; a shift that enables the right founders to have the time and opportunity to launch the extraordinary, and, in doing so, hopefully be able to take us all somewhere new.
Dan Simmons is Founder at pre-seed accelerator Propelia.
Is This The Year The Startup Ecosystem Shifts From Disruption To Navigation?