Investors in digital projects seem scared of commitment
Digital race to the finish line; Investors need a new approach to digital investments
“What is your exit plan? When do you plan on reaching profitability? How high is your burn rate?”
I think all startups have heard these quotes from investors ever too often. It feels a little silly to me sometimes, to speak about these important topics with investors and business owners alike. Of course, when your sole job is to invest in profitable (or possible profitable) businesses, you are programmed to think in monetization first, and long term impact second.
However, I feel that most of the longevity of technological projects needs a far longer time horizon than most investors would care to admit. We tend to think in months, instead of quarters or years. Where does this thinking come from?
Why do we expect digital projects to work within weeks?
Business owners have a different incentive, they need to find new innovative ways to run their businesses. Yet, even the most progressive entrepreneurs, expect digital projects to “work” far faster than anything else.
I think that one of the main “problems” with digital projects, is that they are started because the core business is doing poorly. Digital channels are a response to a situation that has been there for ages, but not acted upon.
Most projects are started, when it is actually too late to fix the main problem.
Hence, digital agencies, IT-teams and marketeers are given short term, partially irrational, targets. Long term objectives, are something most agencies have little or nothing to do with. Short, task based insertion orders are expected and marketing campaigns are planned in sprints of mere weeks instead of months.
The natural reaction of agencies and IT-companies alike, is to take whatever they can get, fast. They do the bare minimum to get across the finish line and onto the next project. It is sad really; brilliant entrepreneurs that started their businesses in the 80s and 90s have lost the courage to invest in something new. Build something meaningful, that can be the foundation for their children and future generations.
Business models are changing
This might not come to a surprise to you, but business models are changing. New technological advances, forces us to come up with a whole new way of thinking.
One problem with this is, that traditional entrepreneurs and investors are stuck in the idea that business models are evolving. They fail to see that these changes are far more intense. Our society is evolving at a pace, that is unparalleled to anything we have seen before.
We don’t know what the best and future business models will look like just yet; time is needed to explore the opportunities and make a long term impact.
This might be hard to take in, but we need to invest time and effort to learn how we can get the most out of our new tools and technology.
The bottom line
Digital businesses are developing faster than regular businesses. But there is a consolidation of skills in the market as well. We reach a far higher amount of potential target users with our technology now; this takes planning, dedication and a long term vision.
If we focus on short term profits with our digital projects, we will not be able to create the big impact that we are yearning for.
We need to remind ourselves, constantly, that “digitalization is a constant, not a variable” that can be dealt with within a few months – given the right resources.
Maybe investors and entrepreneurs are not scared of commitment, but they need to understand how their decisions influence the quality of our work – and the long term impact that we can create.
Digitalization is not a race to the finish – but long term means to an end; the only means available to us, if we want to make a substantial change to the way we live.