The overlooked value of domain expertise


In today’s startup marketplace, we tend to overvalue founding teams with experience building technology products and undervalue teams with domain expertise in the particular market being addressed. Let’s consider two fictional founders, Bill & Ted, creating two different startups to attack the same market:

Bill is a great engineer. He worked at Google for 5 years and then left to start a social technology company, which was promptly acquired by Facebook. Bill is now leaving Facebook with a few of his engineer friends to start a company to bring analytics to retail stores. He understands the technical challenges with building and scaling analytics software, but his experience with retail stores and their need for these analytics is limited to reports he’s read online and anecdotal learning from friends in the space. When Bill goes out to raise money and hire other engineers for this project, he will have absolutely no problem doing it. He’ll probably raise a $5M uncapped note from the leading valley VCs and hire his early team of 15 top-notch engineers in a couple of weeks.

Ted, on the other hand, is not an engineer. Ted has worked in retail for 15 years, starting in the store-room of a clothing store when he was in college. Because of his people skills and leadership he soon became a store manager, and by the time he graduated college he was managing 3 stores for the popular retail brand. He then quickly rose up the ranks, eventually managing the whole East Coast region, comprising 97 clothing stores. Ted has never written a line of code in his life and wouldn’t know where to start, but he knows exactly what information a retail store would need in an analytics service.

He’s also seen how technology has solved many problems in his personal life. He’s a Gmail user, owns an iPhone and uses Uber constantly, so he intuitively knows what good software looks like and how transformative it can be. When Ted leaves his retail job to start a company that brings analytics to retail stores, he will have a much harder time hiring engineers and raising money than Bill did. VC’s will not touch Ted with a ten foot pole until he has found a suitable tech co-founder. He will probably go to tech meetups and “founder dating” events where he’ll be looked down on by engineers for being a “business guy” and be told to learn to code.

This shouldn’t happen

At Quotidian, we think this shouldn’t happen. Ted, the non-technical founder, has expertise related to the market that is just as valuable, if not more valuable, than Bill’s expertise building technology. And while Ted can probably learn how to work with technologists and build a product team in a few months, Bill will spend years making mistakes and internalizing the nuances about the market that Ted knows instinctively.

Ted also probably already knows potential customers and beta testers and can relate to them by having gone through the same problems that he’s now attempting to solve for them, whereas Bill will have to spend years building those relationships and understanding their problems. So while we definitely believe that the best companies have a Bill AND a Ted, we’re willing to make a bet on Ted alone and help him eventually find Bill, so together they can have an excellent adventure.

Editor’s note: Nicely timed, Quotidian Ventures is hosting a meetup for “the Teds of the world” on October 22nd in NYC. The firm is looking for people with domain expertise in a particular industry, who are looking to start a tech company to modernize that industry. More details.

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