How Intuition Can Fuel Innovation
John Borthwick, co-founder of Betaworks--a tech studio that creates and invests in emerging Web services--attributes much of his success to gut instinct. He and his team are known for Web tools such as Bitly, the URL shortener and analytics provider, and Chartbeat, a real-time Web analytics service, that have become integral to our everyday lives.
Creating "essential" companies is the ultimate goal, says Borthwick, and that's the metric he uses to weigh risk of an investment against potential reward. Together with Inc. associate editor Jill Krasny, LearnVest founder and CEO Alexa von Tobel recently put some questions to Borthwick. He explains how he places his bets.
Creating essential businesses:
When we use the term essential company, we mean products or companies that are essential to people's habits and daily workflow. We always start by trying to build insanely wonderful user experiences. We measure that by the engagement these services have. Are they essential to everyday use on the Internet? We want to be deeply ingrained in people's minds, day in and day out. We want to understand deeply the quality of the user interaction and the emotion in the interaction around the products. There are also metrics to measure engagement, such as daily and weekly active users, how long people engage, and so on, which tell us if our intuition was accurate.
On risk versus reward:
The risk of building a company is that you will be wrong or it won't work, but our job is to take that risk. We have gotten markedly better at refining products at every stage of the process, all the way from concept to scale. Sixty percent of the things we start get all the way to the scale phase. That's because we have better people, better processes, better data than we had five years ago. Data helps inform intuition. Building products that create even more data, such as Digg Reader, Chartbeat, and Bitly, has helped us measure the performance of other products. Our people are also passionately in love with our products; they want to be in the studio environment building them.
The role of intuition:
We use data a lot here, but at the end of the day, we decide where to invest Betaworks's time and money by intuition. Ultimately, we're doing things because we believe they need to exist in the world. I come from a family of creative people and artists, so I believe you try to create beautiful things to stir the soul and make a difference. Design is part of that, and understanding the human implication of design is what should come first and foremost in the development process.
In praise of fast:
Innovation happens when you believe fervently that you need to get the product in front of people. You start off with a question: "If I do X, will Y happen?" You build an initial product and see if it solves a problem. You then roll it out to a set of people and beta-test it as soon as possible. We take feedback from that test and refine the product, make changes, and put it back out there to see if we did it right. It's a rapid prototyping process. It's not just throwing it out there and hoping it works.
Below are some Betaworks investments that prove intuition pays.
Twitter acquired Summize in 2008 and TweetDeck in 2011 for a reported total payout north of $50 million in cash and stock. Betaworks was a key investor in both firms.
Yahoo acquired this microblogging service for a reported $1.1 billion last summer, making it one of Betaworks's most lucrative and high-profile exits.
Last March, Yahoo purchased Summly for a reported $30 million. Summly had raised more than $1 million in funding from investors, including Betaworks.
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