Timing Matters

Timing Matters

I re-watched this short TED presentation given by Bill Gross (not the fixed income guy, but the Venture Capitalist):

Fitting neatly into this, Sequoia Capital’s biggest question for entrepreneurs is “Why Now?

Although the context here is Venture Capital backed startups, it helps to answer a broader question – how do great enduring businesses with deep moats get built?

Digital startups of today are the staid mature businesses of tomorrow. I have no doubt that technology titans such as Zuckerberg, Musk and Gates will be regarded as the Vanderbilt and Rockefeller of our generation.

Vanderbilt and Rockefeller could not have built their respective railway and oil empires in a different era. Similarly, this generation of Chinese billionaires could not have achieved their success if they were born in any other time period.

This is why I can’t stress enough the importance of understanding where you are in the industry cycle whether you’re starting or investing in a business.

If your market is growing by 20% a year, it allows a lot of room for error. You could be only half as competent as your competitors and still grow by 10% a year because there is a huge flow of new customers you can sell to. Conversely, if your market is shrinking by 3% a year, you and your competitors are most likely fighting for each other’s customers. Competitive intensity increases exponentially as it usually devolves into fierce price competition which only shrinks the pie further. Consequently, any error you make could mean the end of your business.

This is why timing matters.