Not all businesses are meant for venture capital. To be more precise, according to our latest interview with Ann Miura Ko, “roughly 25 companies per year exit for $500 million-plus.”
Floodgate and Miura Ko describe these companies as ‘thunderlizards’, and they enumerate four required powers that make these companies successful.
1.) Proprietary Power
This special power is the unique insight that allows a company to avoid or overcome competition. This can be in the form of proprietary intellectual property (Ayasdi), access to scarce supply, creation of high switching costs and network effects. It can also be applied to a company’s core team with Miura Ko suggesting, that team authenticity can be true proprietary power. Ultimately, proprietary power is an edge that gives you an unassailable advantage on the competition.
2.) Product Power
Product power is when you achieve product market fit. To remove confusion, product market fit implies market power. Many founders ask, ‘Do I have product market fit?’ According to Miura Ko, “If you are asking, you do not.”
So, how do you create a product with product power? Build a product that attaches to a growing market rich with customers. More specifically, this product must solve a visceral need.
Alternatively, such product power can be achieved with the creation of a transformative product that creates the market. A good example of this would be, Snapchat. 10 years ago the market for ephemeral messaging was non-existent. Snapchat created their own market which solved a visceral need; the ability to communicate without fear of message storage and repercussions.
3.) Company Power
This refers to the scaling period in a startup life-cycle where the avoidance of technical and organizational debt is crucial. “The discovery of a scalable business model is key to reducing such debt,” according to Miura Ko. However, it can also be diminished through the creation of a cultural identity that develops and rewards talent. Therefore, fostering a clear line of communication throughout the company.
4.) Category Power
Miura Ko argues that this is potentially the hardest to view at the early stage but often the most important. Category power is the conversion of the previously mentioned powers into disruptive powers. This can be in the form of defining a new space by changing the rules on the incumbents. Alternatively, category power can be achieved through changing the buying or use case criteria for consumers. A good example, Netflix defined a new space in the market, compared to Blockbuster, delivering media to your home. Ultimately, changing the consumer purchasing patterns for traditional media forms.
Despite these powers, the most important of all; founders. Miura Ko states that ‘the founders must have a genetic mutation that pre-disposes them to be successful.