In business, the single most valuable thing you can have is what we like to call “unfair advantages.”
After graduating from Columbia University, our father (the CEO of a large industrial company) gave us some sound advice for starting our first venture: unfair advantages are assets you have that others don’t — and put you into a unique position within the marketplace. They leave competitors saying, “I can’t believe they have X, Y, Z. How can we possibly compete with that?”
This is exactly what we lacked.
When we were starting VEEV, we were walking into one of the most notoriously difficult industries to break into: the liquor business. There’s a reason so many liquor companies are started by people whose families are in the liquor industry: the space is uniquely complicated from a distribution and legislative standpoint, and learning to navigate it from scratch is challenging (and in many ways, a fool’s errand). Essentially, we knew no distilleries or distributions and had no experience or connections.
As we eventually learned, our lack of “unfair advantages” meant we had to do everything from scratch — the hard way.
After successfully building and exiting VEEV, and recently opening our venture capital firm, M13, we’ve become obsessed with finding “unfair advantages” in the companies we invest in — because they are exactly what we lacked in our first company.
Here’s how you can find yours:
1. How can you reverse engineer a consumer need?
Most entrepreneurs make the mistake of coming up with an idea they feel is original or unique, and then spending an exorbitant amount of time trying to figure out how to make consumers find it valuable.
This doesn’t work.
Instead, we encourage entrepreneurs to flip conventional thinking on its head: what do consumers find valuable that you already have access to?
That’s an “unfair advantage.”
2. What’s different about the way you see the world?
In business, vantage point is what allows you to see opportunities others can’t.
Chia Company is an incredible example. It started as a family farm in Australia, which at the time was the only place in the world where chia was being grown. Founder John Foss was a farmer and scientist by trade, and he saw the demand for chia increasing at exponential rates. So, he reached out to other farmers to combine forces and corner the market on chia.
They used their vantage point as suppliers to see the growing demand — and then they capitalized on it fast enough to lead the chia craze.
So, ask yourself: are you in a position to spot trends early? And if so, what might you be able to do to get ahead of those trends?
3. What do you do best?
I’m sure you’ve heard the quote, “Do what you do best — and outsource the rest.”
Well, when it comes to unfair advantages, this is advice that sounds simple, but isn’t commonly practiced. Many founders continue to insist on building their vision from the ground up, handling all the “important functions” to make sure they get it right. And while that’s certainly the traditional way entrepreneurs have grown businesses, it leaves founders feeling like they’re playing a game of whack-a-mole.
It’s time-consuming — and in an increasingly complex and specialized world, unrealistic.
Instead, our philosophy for building companies has become centered around this idea of exploiting a business’s unfair advantages and outsourcing everything else. Remember the Chia Company? Well, the founder set up a world-class global chia supply chain, creating economies of scale and a major unfair advantage. Unfortunately, the Chia Company ran into trouble when its directors decided to venture too far up the value chain and become a consumer brand. It spent time and dollars on marketing, rather than being an industrial supplier for consumer brands, leveraging its unfair advantage, and letting other companies fill in the gaps.
We believe that the startup game these days is all about creating the minimum amount of new infrastructure necessary to take advantage of your “unfair advantages.”
Which means your job, as the founder(s), is to find them, and then exploit them.