Why is it that Cambridge, and even Europe as a whole, still doesn't really get the idea of market-led innovation?
Psonar, the cloud music service of which I'm co-founder, was lucky enough to be selected for the Discovering Start-ups event run in Cambridge last week. The panel of judges was impressive with a cross-section of Europe's VC, telecoms and tech cluster elite. The 22 businesses showcased were of varying degrees of maturity across a range of technologies. It was a well-run event and we had three approaches from potential investors.
What struck me however, when I saw the businesses selected as the winners, was the focus on the cleverness of technology rather than the market vision of those businesses. Innovative technology is laudable, but only where it is part of, and subordinate to, a business model that is driven by market opportunity. If the cleverness of the solution, rather than its ability to capitalise on an attractive and profitable commercial opportunity, is seen as the most important characterictic then the person making that judgement is suffering from "Tech Syndrome". It seems to me that with the notable exception of Cambridge Temperature Concepts and, to a lesser extent, Magic Solver, the winners showed that the judges were suffering from Tech Syndrome - or maybe there wasn't any choice.
So why is this? At the excellent celebratory dinner in the hall at Newnham College, the guest speaker was Laurence John, CEO of the Amadeus Seed Fund. Laurence is an enthusiast for what he does and always a pleasure to listen to. He was at pains to emphasise his belief that Cambridge is too much in love with technology and not focused enough on applications. To illustrate this, he suggested, for example, that new applications exploiting the capability of cameras that "know what they are looking at" would be the kind of innovation that start-ups should be pursuing instead of simply smaller, better, cheaper or higher performance devices themselves.
While I agree that focussing on the application is better than focussing on the technology, really valuable innovation has to make the extra leap to being market-driven. Taking the same example as Laurence - cameras that know what they are looking at - why is it useful or beneficial to consumers or businesses to have devices with this capability? Even if there are needs that can be met by this application (which I would argue is really an assembly of technologies) are those needs part of one or more markets which a business can address coherently, acquiring the knowledge and experience to exploit them fully and profitably. Or is it really no more than clever technology, apparently productised but, in reality, in search of a profitable market opportunity?
I'd contrast this love of technology, of gizmos, to the approach of the really successful US venture funds. Take Menlo Ventures for example:
"At Menlo Ventures, we invest in entrepreneurs that Think Big. We seek passionate teams with big ideas that can disrupt existing industries or create entirely new markets. Our track record over the past 32 years of helping companies achieve market leadership through great strategy and great execution speaks for itself...".
Of if you look at Sequoia Capital's investment criteria, the word technology, or even application, isn't mentioned once.