With capital now more available than ever, large organizations should take notice of the exponential potential of startups.
A version of this article was first published on Medium.com.
I recently gave a keynote to a corporate audience, where I highlighted that exponential technologies allowed startups to quickly become significant and sometimes even existential threats to legacy incumbents.
There was I admit some degree of skepticism.
When I suggested that large organizations need to treat startups with renewed respect, because capital is now readily available, all eyebrows were raised.
The Light Phone 2 is an excellent example of why I stand by this statement. Capital is available, especially for anyone developing a product or service that was build around a purpose beyond profit.
In their 2015 Kickstarter campaign, founders Joe Hollier and Kaiwei Tang managed to raise $415,000 to create The Light Phone. Despite what seems to be a reasonably large percentage of their initial backers appearing unhappy with this first product, they then switched to Indiegogo to fund the build of The Light Phone 2.
Funds raised 1st March 2017 ~ $399,000
Not bad for a company that is creating a product that is marketed to be used "as little as possible!"
So how have they done this and what can large mature organizations learn from them?
Well, firstly they have not just built a product that makes phone calls.
They have in fact created an experience that helps you to find more time to “appreciate life and find more meaning and purpose.”
They are therefore not a "phone" company per se; they are a "lifestyle" company, and this difference gives them an advantage over every other phone manufacturer.
Their goal isn’t to compete with features but rather to provide a solution to the 24/7 bombardment of data that you face every day and at least for now, they are offering this solution via the medium of a phone.
They have therefore set a purpose that goes beyond profit. This is their advantage.
Funds raised 4th March 2017 ~ $619,000
The Light Phone team is not the first, the last or the biggest organization that understands this. In his book Start with Why, Simon Sinek explains why Apple’s iPod took the spoils over the arguably more advanced Creative Zen.
“The Creative Zen advertised their product as a 5GB mp3 player, whereas Apple gave you 1,000 songs in your pocket. The difference is Creative told us WHAT their product was and Apple told us WHY we needed it.”
More recently in The Four, Scott Galloway argues that Apple is a luxury brand in the same vein as Louis Vuitton. This makes perfect sense if you ask yourself, why would anyone pay substantially more for a laptop from Apple, than the cheaper, lighter, and better-performing options from numerous competitors?
“Apple logo, which graces the most coveted laptops and mobile devices, is the global badge of wealth, education, and Western values. At its core, Apple fills two instinctual needs; to feel closer to God and be more attractive to the opposite sex.”
I’ll let you make your mind up whether you agree with his view that your decision to buy a MacBook Pro or Louis Vuitton handbag is driven by primal instincts of superiority and sexual prowess. Still, one thing is clear: buying decisions are emotional, not as we like to think, analytical and logical.
And if that’s true, it’s not surprising that companies that build themselves around a purpose higher than profit (their "why" using Simon Sinek’s vernacular) have significant advantages to those that organize around solving practical issues such as costs, features, and distribution channels.
So when I say capital is more freely available for startups, no matter whether they are at the idea, prototype or production stage, the argument is undoubtedly strengthened when the company in need is clear about their "why" to the investment community.
Funds Raised 5th March 2018 ~ $700,000
The Light Phone founders are crystal clear about their "why."
They have designed a phone which should be used "as little as possible" to allow us to have more time to "appreciate life and find more meaning and purpose."
The Light Phone 2 offers something entirely different and emotionally more permanent. It gives you the freedom to appreciate life, which is analogous to how using an Apple product makes many feel cool and hip and brings confidence. It’s offering you a new identity in your social interactions in the same way you determine who you are by what you wear.
They have found a purpose (or why) that emotionally resonates, and therefore finding capital cannot be the determinant of whether they succeed or fail because deciding whether to invest money is as much an emotional decision as choosing whether to buy a product or service.
(I’d recommend you read Ray Dalio’s Principles to understand how Bridgewater Finance goes to extreme lengths to remove emotional bias from their investment decision-making.)
So, is the Light Phone 2 merely a costlier version of the retro release of Nokia’s iconic 3310, as some of my friends and family have suggested?
I don’t think so as HMD Global, who currently own the Nokia brand license, have generated interest because of the nostalgia many customers remember from their first 3310.
I’m not convinced that helping us relive the feelings we had for what was a remarkable phone in the 2000s can, however, create sustainable, long-term interest. It is undoubtedly a gimmick, in the same way, there was a spike in interest for the Rubik’s Cube a year or two back.
Secondly, looking at their marketing, the 3110 feels more like Creative’s Zen than Apple’s iPod. If they are to generate interest beyond the community who have fond memories of Nokia, they need to go beyond merely selling a relatively expensive phone with limited functionality.
The Nokia 3310’s — A (Marketing) Trip Down Memory Lane
Consider if you’d never heard of Nokia. Would you feel emotionally connected to something with a "custom-designed user interface which brings a fresh look to a classic" and a "2.4 polarized and curved screen window which makes for better readability in sunlight?"
Gosh, that would look great next to my Dell Inspiron 7370 Intel Core I7–8550U 13.3-inch Notebook, wouldn’t it?
Perhaps HMD can do for the Nokia brand, what BMW did for the Mini’s, but they’ll need to find a stronger, more authentic purpose than what appears to be marketing window dressing;
Nokia is shaping the technologies at the heart of our connected world, to transform the human experience
Errr…really? Feels like marketing to me more than genuine purpose.
Assuming the Light Phone 2 goes into production and works as described, I’d think carefully before taking a bet against them surpassing the sales of the Nokia 3110. After all, they are actually creating a product that transforms the human experience.
Funds Raised 6th March 2018 ~ $716,000 (07:00 AM CAT)
So, The Light Phone team have nailed the why. This has allowed them to create a concept, that resonates emotionally with investors and buyers alike, meaning that capital constraints should not be a factor in their success or failure. Indeed, in many instances, access to capital becomes cheaper than for an incumbent as they are not committed to quarterly earnings reports and annual dividend payments.
Incumbents can learn much from the startup community, but perhaps the most significant learning is how organizations that are driven by ideology can do things that those who are motivated by profit cannot.
So rather than creating a warm and fuzzy feeling by investing in a 3110, perhaps leaders of today’s large institutions should spend time rediscovering the purposeful, ideological goals that existed when their organizations were born.
I hope the Light Phone team succeeds with the "what" and the "how," not only to see how they fair against Nokia and other phone manufacturers, but because they currently have $250 of what used to be my money.
What makes this even more remarkable, at least to me, is I can’t imagine living a minute without my smartphone.
For now, at least until I receive my Light Phone, I’m off to Starbucks with my "sexy" Mac to see if Scott Galloway was right.
Funds Raised 6th March $721,568 (08:58 AM CAT)
JUNE 2019 UPDATE…
Since writing this article, production of the phone has been pushed out by ~ 6 months. (very Tesla-esque)
But, total funding raised on Indiegogo amounted to $3,164,506
This article was posted on ExO Works on June 13, 2019.
ExO Insight Newsletter
Join the newsletter to receive the latest updates in your inbox.