Reality Check: Nothing Ventured…
Both the venture and cable industries are undergoing rapid change. The venture business is besieged by the worst financial crisis since the Great Depression and the cable industry is increasingly becoming less about ‘cable’ and more about voice, data and content.
Yet the need for innovation has never been greater. New technologies will be needed to drive the conversion to IP video, targeted advertising and over-the-top video. More and more video will be on-demand, and applications will become an integral part of the television experience.
As a mature industry, service providers are facing challenges and opportunities that grow more numerous and complicated with each passing year.
Despite having significant resources, established technology companies don’t always have the answers, vision or willingness to take the necessary risks to develop everything service providers need to innovate their offerings. We need young companies to bear some of this risk and to leverage the energy and enthusiasm that accompanies new ventures.
"You have to be compelling enough to become part of your customer’s agenda."
Many of the greatest contributions to the cable industry have come from vision of venture-backed entrepreneurs that go on to beat the odds. Broadcom, River Delta, N2BB, Navic, Broadbus, and even Cisco are but a few examples of companies that started with an idea enabled by venture capital.
A decade ago, I joined the cable industry with a vision for Television on Demand and a drive to help enable near limitless access to content. The cable industry embraced that dream, but the venture industry was understandably skeptical.
For nearly two years, fund after fund shot us down. After all, there had been a long line of entrepreneurs that had failed in delivering on VOD’s promise and related "interactive applications." Returns for venture investors were abysmal, and the excesses of the tech bubble had been replaced with fear, caution and pessimism.
At Broadbus, we persevered and succeeded because we had the right approach to fill a significant need for reliable, scalable and cost-effective VOD solutions. We listened to the customer, added innovation and vision, and executed. That was our secret sauce, and has been the secret sauce of every start-up to succeed in the cable industry.
Despite successes like Google, Amazon and others, the venture industry has endured nearly 10 years of sub-par returns and countless failures. Venture capital fund raising (funds raised from limited partners) is now at its lowest level in a decade, and all but the very best funds are facing the prospect of reduced size if not outright extinction.
The truth is many venture investors lack vision, courage and in many cases the expertise to invest in the cable space, but those who possess these traits have and will continue to be rewarded. The cleansing of the venture business and healing to follow will leave more than enough great investors and funds to get the all of the very good ideas in our sector funded.
The real culprit is neither the venture industry nor the service provider; it is the cold reality that there is only room for a few new products every year.
A great idea, pent-up demand, competitive pricing, scalability, a great business development team and a little bit of luck are only a start. After all that, you have to be compelling enough to become part of your customer’s agenda.
So if you dare to brave the gauntlet and pursue the next "big" thing in the cable space, do yourself a favor and worry less about money and more about customer needs. If you can find your way to the top of your customer’s priority list, more than enough venture capital dollars will find you long before you ever start looking to raise money.
Jeff Binder is general partner at Genovation Capital, LLC.
