November 8, 2023

The importance of timing

By Babbage

In 1970, for a monthly fee of $160, which is equivalent to $1,259.61 today, U.S. businesses could sign up to use the Bell System Picturephone. This service allowed for face-to-face video calls, as well as transmitting documents and graphics. Sound familiar?

Despite predictions of a million sets by 1980 and $1B in revenue, AT&T CEO John de Butts canceled the product in 1973, referencing that customers generally didn’t like being seen on the telephone, even in a business setting.

Fast forward the clock, and one finds 300 million people now using Zoom every day, generating $4B in annual revenue. And yes – this was exactly (and eerily) equal to $1B in 1980 dollars. The Bell System was correct in its prediction. They were just off by 43 years.

Timing is everything

A study was done recently by Bill Gross, founder of technology incubator Idea Lab. The study was focused on trying to identify the most important factors that will drive success for startups. (You can watch his Ted talk here.)

The factors considered in the study – which reviewed the performance of 100 startups over several years – included the startup’s idea, team, business model, and funding. These were assessed and compared against the performance of the company. Despite the obvious importance of these four factors, Gross found that the most direct correlation with success involved a fifth business factor – namely, timing. That is, in the study, timing accounted for 42% of the differences measured between success and failure.

Our view at Ballistic Ventures is consistent with this research finding. It’s been our experience as investors, entrepreneurs, and practitioners over many decades spent primarily in cybersecurity and software, that it’s been timing that’s mattered above all other factors.

This can be read as both good and bad news. That is, if you believe you’ve timed your new company perfectly and you can make the case – think Netscape in 1994, or the Web was being developed, or Uber in 2009 as the smartphone was expanding in usage – well, then you will benefit from this correlation.

But it can also be bad news. If your amazing idea – even when curated by a dream team with a great business model and good funding – is timed badly, then you will struggle. Sure, you might succeed through sheer will and patience. But it’s obviously easier to fly with a nice tailwind than into a strong headwind. We often say that a successful startup should feel a lot more like surfing than trudging through a blizzard. 

So, how do you learn to time your startup idea?

It would be misleading to imply that there is some algorithm for timing a new idea. (Even the all-knowing ChatGPT might not be able to help you with exact timing.)

You must also be careful expecting industry research and customer feedback to provide accurate insights into market timing. Of course, you should certainly speak with potential customers; and market data is always a useful decision input. But you cannot just translate these into a business plan. The market can educate you on its problems and the current solutions, but it cannot define your solution (assuming you want to be competitive), and it cannot perfectly predict the acceptance of your solution a priori.

One useful method that does help

It’s important to realistically determine if your area of focus is at the bottom, middle, or top of the S-curve. That’s an analyst technique that uses the shape of the letter to show the early planning, followed by aggressive vertical growth, and then final leveling off of a business. It’s a simple model, but quite useful. You can bring a new product to market at any point along the curve, but it is crucial that you factor this into your product and go-to-market strategies. 

An example: Conventional firewalls

By any measure, conventional firewalls designed for perimeter protection are clearly leveling-off in terms of growth. However, domain-specific firewalls that microsegment OT systems on zero trust ICS networks – well, that is just getting started. Innovation defines products released early in the early adoption curve – there was no solution before. Whereas innovation later in the curve requires a rethinking of the current approach and clear demonstrable improvement. 

Another example: Conventional EDR platforms

We all know that the market is saturated with conventional EDR platforms. There are literally dozens of great options and plenty of differentiation amongst those to address many segments within the market. But if the endpoint is an electric vehicle, then perhaps you’ve found something on the front end or middle of the curve.

Mind you, just because a focus area is at the bottom of the S-curve does not mean that it will certainly rise to hyper-growth. It only means that it has not yet. And yes, it’s entirely possible that it never will. Remember: This is not easy, and for companies in this group, survivability and patience may be a key trait for success.

Regardless of your method for catching a wave with your startup, recognize that timing is something that cannot be easily controlled. The winds can change for or against your idea – and there’s generally nothing at all that you can do about this. Companies with multi-billion dollar marketing budgets can have a hard time moving those winds.

Our advice is to pay close attention to timing, and to be aware of your honest mapping to the S-curve. Then, if you are passionate and you truly believe you’re developing your solution at the right time, then go for it. If you’re correct, you’ll know quickly.

And just know, one of the great values of time is that it happens whether you like it or not.