Paul Singh: Traction is the New IP
There are few people in the industry that know more about creating scalable companies than Paul Singh. A serial entrepreneur, investor, and founder, Paul was formerly a Partner at 500 Startups, one of Silicon Valley’s top accelerator and venture firms. Today, he heads up Results Junkies, a free weekly e-newsletter for people who want to stay up-to-date on startup news… you should definitely subscribe. But before that—back in the days before the Internet was a ‘thing’—Paul was a used car salesman. His job, as with any car salesman, was direct sales to a local market. At that time, Paul wasn’t concerned with infrastructure or access; he just needed more people in his local community to come to the lot, look at his cars, and listen to his sales pitch.
But that was then—and, as Singh pointed out in his recent keynote at Vancouver Startup Week, the world doesn’t work like that anymore.
Tech is the Cause of Economic Development, Not the Effect
According to Singh, local services—though they still make up the bulk of businesses in North America—are no longer the main drivers of economic development. Not surprisingly, the future depends on new kinds of platform businesses—the Lyfts, RealReals, and DoorDashers of the world—for economic stimulation. Based on stats Singh shared, roughly 20% of the United States’ GDP comes from venture funded tech companies. That’s a huge amount of money being generated by a very small portion of the population. As we all know, tech companies thrive on being lean. The industry is run by small, agile teams… and the teams are getting smaller.~20% of the U.S. GDP comes from venture funded tech companies. - @paulsingh Click To Tweet
According to Facebook’s website, the social networking giant currently employees 10,955 people globally. That’s up roughly 1,700-ish people from 2014 employment numbers—which might sound like a lot, but we’re talking about a company that recently serviced 1 billion people in a single day. Yes, you read that right: one billion people in a single day. Economies of scale have replaced local service economies as the main drivers of growth; and yet, paradoxically, tech companies don’t actually create a lot of jobs, the traditional benchmark of economic strength.
“But hold on Chantielle, didn’t you just say that tech companies are responsible for a huge chunk of the GDP?”
I realize I’m being contradictory. Luckily, Singh provided a brilliant explanation for this disparity. While they don’t create a ton of traditional jobs (like a lumber mill, for example), lean, mean tech companies are designed to enable the growth of local services, globally.Is your #ondemandeconomy platform building global infrastructure to improve local services? Click To Tweet
Consider transportation services. In a local service economy, taxi fleets are designed to service passengers. There’s a taxi company in your city that helps you get from point A to point B, and there’s a different taxi company doing the same thing 6,000 miles away. What Uber has managed to do in the new economy is build a global infrastructure to improve local services. One app can now provide you with access to drivers and transportation practically anywhere. Did Uber create thousands of corporate jobs when they opened their doors? No. If we believe their Linkedin profile, the company employs somewhere between 1,001-5,000 at their offices. However, according to an article in the Wall Street Journal last September, Uber’s army of drivers grows by roughly 50,000 people a month.
(Mind = blown)
Tech’s impact is undeniable, but let’s not get ahead of ourselves. Not every tech company is going to change the world. In fact, most fail miserably. The tech companies that ultimately succeed aren’t always the ones with the best ideas or intellectual property, either. Rather, Singh firmly believes that the companies that can achieve traction (sometimes in spite of their tech) are the ones that will strike it rich. The trick to gaining traction? Singh says it’s all about notability.
Notability > Credibility
“In a crowded world, credibility is table stakes. Notability is what matters now.”
This is probably the statement that stuck with me the most from Singh’s keynote because it’s so simple, but so true. In a crowded world (and the on-demand economy and digital marketplaces spaces are definitely crowded) no one cares about your credibility. Of course, you still need to be credible, but hanging your hat on subject matter expertise and exceptional engineering isn’t enough. If you want to stand out, you need to be notable. To do this, Singh believes companies need to learn how to both communicate and inspire. “Think of your company as a marketing firm that just happens to do something else really well. That’s how you need to operate to be notable.”Credibility is table stakes. Notability is what matters now. - @paulsingh Click To Tweet
Now, there are various ways you can do that: charismatic founders can leverage their personal brands in order to become evangelists; your company can give back through social corporate responsibility; etc. But let’s think about Singh’s original point: fast-growth tech companies are helping to enable global growth for local services. In these double-sided markets, platforms need to appeal—and thus increase their notability—both to their local service providers (Uber’s drivers, for example) and the end consumer. Remember the old adage, “a happy wife makes for a happy life?” Well, in the new economy, a happy worker makes for a profitable company. And in case you didn’t know, funding follows profitable founders. Even Singh himself stated that Venture Capitalists are looking for the “least-worst company” to fund.