Startup Success – Easy as Sliced Bread

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By: Harry Singh, Director Intel Capital

Harry Singh is a contributor to CVCA and a director at Intel Capital, Intel’s venture capital arm, where he specializes in software and security investments.

As a Canadian citizen and a director Intel Capital, few things make me happier than the success of a homegrown high-tech company. Unfortunately, too many startups across Canada are holding themselves back because they prioritize invention over innovation.

To understand the difference, think about the last time you made a sandwich. At some point, you grabbed a loaf of sliced bread. That loaf is the epitome of innovation and the work of an entrepreneur who died more than 50 years ago.

Otto Rohwedder invented the first commercially successful bread slicer in 1929. Within three years, every major bakery in the US had one. It created an entire industry around spreads and sandwich fillings. Sliced meats and delis exploded. Rohwedder didn’t invent the knife, but he used that technology to innovate in a way that was truly disruptive.

Steve Jobs was cut from the same cloth as Rohwedder. While the Apple iPod is often cited as innovation at its best, it wasn’t the first portable music player; the Sony Walkman debuted 22 years earlier. Nor was the iPod the first to hold hundreds of songs; dozens of already-available MP3 players could do that.

What the iPod represented was the power of an innovation: taking the proven concepts of portable music and digitized songs, reimagining them in a way that made it easy to use, and marketing it to the masses. Innovation distinguishes between a leader and a follower,” Jobs said.

Canadian entrepreneurs would do well to emulate Rohwedder and Jobs. Here’s a quick roadmap for moving in that direction.

It’s All About the Return

When I walk into a pitch meeting, too many startups focus on their engineering expertise. Trust me, I’ll take a hard look at your technology. But what I really want to know is how are you going to make a strong return on my investment?

There are at least four ways to come up with a truly innovative answer.

The first is to combine an invention with a market, existing or new. A great example is Facebook. Social media technology had already been around for more than three decades – think CompuServe, Six Degrees, and MySpace – but it was Facebook that gave people the experience they wanted and a service that was easy to use.

Alternatively, you can combine an invention and a business model. Again, Apple is a great study. It didn’t invent the digital music player or smartphone, but it did create iTunes and a business model that let us take music, books, and movies wherever we go – a combination that is valuable far beyond the hardware of the iPod or iPhone.

But innovation is not only the province of large companies. Consider the startup Nervana, which took a third path to success: Combining an invention with commercialization. It scoured decades of publicly funded research into artificial neural networks and found ways to further innovate and commercialize that underutilized knowledge into specialized chips and software. How’d it work out? The company was acquired by Intel only three years after its founding.

The fourth way to be innovative is to marry an invention with a path to money. Google, for instance, took the concept of searching the Web to bring people to advertisers. And those advertisers knew far more about what people were searching for thanks to Google’s backend analytics. But without that path to cash, Google’s innovation – its search engine – would have been meaningless.

Changing A Mindset Costs Nothing

I spend a lot of time meeting with companies in the United States and Canada, so I have a strong sense of the similarities and differences between their high-tech communities. Canadian startups have great ideas and fabulous engineers. The only thing left is to be more like Silicon Valley and prioritize innovation over invention. It’s a shift in perspective for which there are many examples, which costs nothing, and which can be incredibly rewarding.

Food for thought the next time you make a sandwich.

Harry Singh is a director at Intel Capital, Intel’s venture capital arm, where he specializes in software and security investments.