Growing up in Ireland being called a tool was a bad thing.
But now being a tool is very smart… especially when it comes to increasing your chances of startup success in the tech industry.
As a long-time fan of analogies, I like to summarise my thesis along the lines of ‘It’s easier to get rich selling shovels in a gold rush than hoping to strike gold’. As the volume of new startups explodes, so does their need for smarter ‘shovels’ to help them get to market faster.
While you cannot build a long-term sustainable business from startups (churn will be high as most startups fail), you can leverage this early cohort of fast-moving, risk friendly, early adopters to secure a critical beachhead of early revenues, testimonials and (very) honest product feedback.
This early momentum is pure gold when it comes to securing initial investment and attracting bigger customers. Therefore, selling ‘shovels’ as an initial route to market, is very smart combined with a focused B-2-D (Business to Developer) business model.
Like gold rushes, new ‘Startup Hubs’ are emerging. As an example, look at the startups that are leading the growth in the Irish Tech Industry right now;
Learnosity – A toolkit for educational assessment.[bootstrapped]
Logentries – A tool to analyse log events. [Raised $10M]
Intercom – A tool to better communicate with users. [Raised $30M]
Trustev – A tool to reduce e-commerce fraud. [Raised $3.5M Seed]
Swrve – A tool for in-app messaging and A/B testing. [Raised $11M]
Stripe – (..and while not exactly Irish) A tool for developers to take payments online. [Raised $120M]
As Matthew v5.5 famously said;
‘Blessed are the Tools, for they shall inherit the earth’.
2 thoughts on “Why the Tools are Winning”
Technology is all about tools – and a tool by definition makes performing any given task(s) easier, quicker and cheaper. When you combine the right tools together, whole paradigm shifts occur moving the frontiers of whats possible and practical.
To get value from new tools, the right people need to find them, sufficiently understand them to recognise their value, and in practice be able to use them enough until moving that frontier is realised.
Provided the total addressable market and scalable acquisition channels are there, startups that advance the frontiers of whats possible and practical, in accessible ways, are well positioned to “inherit the earth”
Great point Thomas. You are right that most software is a ‘Tool’ of some kind, but within the category of Technology I’m seeing more and more products that are targeted at developers or marketing departments that just need to ‘drop 1 line of code’ to solve X within their own product ‘supply chain’.
My definition of a Tool therefore is closer to that of a logistics or utility company in the non Tech world. For example, when I buy a new iPhone, Apple leverage’s several ‘tools’ like PCH and UPS to create and deliver their product. End users are typically never aware or concerned with what tools are involved and how they work. Their relationship is with Apple, or Salesforce, Or Soundwave etc..
You’re right too about the paradigm shift and discovery. New Startups can quickly bundle Tools A,B and C together with some custom code and ‘hey presto’ they can launch a new service faster and cheaper than ever. I’ve even discovered new companies that are taking IFTTT.com to the next level by allowing you to ‘bundle’ more complex workflows together to create new services and even products. Check out http://stamplay.com/ as an example.