Metaphors have a way of sticking with you.

Recently, Bill Warner – an investor in our company and close personal mentor – told me how he evaluates companies. But he didn’t talk about markets, margins, or even products. He spoke about energy.

Here's Bill:

"People say business is about money. I would say business, and anything else that involves people, is about energy. If you look at things people do that have a small energy input and big energy output, those will continue. Those are things that are extremely valuable. I look for things where more energy is coming out than is being put in."

Bill used the open source movement as an example. Investors were deeply skeptical of the sustainability of crowd-sourced knowledge. With no financial return, the enthusiasm would die and the communities would disappear. Right?

We know now these movements have stayed strong. Wikipedia is the 7th most popular website in the world; Red Hat, an open source software company, is publicly traded with a market cap of $14.5 billion. The energy one feels of being part of these communities is significant.

Using this paradigm of energy has been tremendously instructive for me as I've been building Fortified Bicycle. Here's two stories as examples.

Seeking energy arbitrage

In my team's earliest days, we were putting dozens of hours and thousands of dollars into paid online advertising to sell our bike lights. But we were eeking out small returns. Lots of energy input, but small impact.

One night, mostly to relax, we visited a bike shop that sold our gear. We brought pizza and beer, and hung out with the employees at the store. We saw that our bike lights were sitting on their shelves, but the employees didn't know the inner workings of our products and sales were slow. So we unboxed the lights and showed them. We didn't know it then, but this was our first sales training session.

We checked the numbers for that location a few weeks later, and store sales had tripled. We started visiting other bike shops that carried our products, and each time sales shot up at the location.

These in-person sessions became a core part of our sales strategy. The pizza and beer sessions gave off more energy than online advertising ever could, so we switched tactics.

Systems that put out more energy than go into them thrive, and our sales began to grow.

Focusing on your company's potential energy

Bill also taught us about what he considers the most overlooked aspect of a startup: its potential energy. He said, "imagine you're standing below a boulder and it's teetering on the edge of falling. It doesn't have kinetic energy yet, but it has tons of potential energy.

You need people to feel that your startup is that boulder. Investors need to believe your team will push that boulder and the potential energy will become kinetic.”

This hit home with us when we were preparing for Demo Day at TechStars, which is a chance to present in front of hundreds of investors, entrepreneurs, and family members. We were finalizing our pitch, which was a story of our past: bike lights sold, distributors signed. We were proud of our track record.

We practiced in front of Bill, and he truth-bombed us.

He told us our wins were nice--but where are we going? What's our potential energy?

He was right. We flipped the presentation. We led with a story about two-thirds of the world's population living in cities by 2050; car ownership falling and bike ridership skyrocketing; the fact that we're the team to empower these cyclists to bike safely with invincible bike gear. We inspired first with our vision, and gained credibility later by presenting our past wins.

As a founder, promote your potential energy. Your track record gives credibility, but it’s the vision that inspires (and gets investors’ checks!)

 

Published on: Jul 9, 2015