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The Connection Between Domain Expertise and Successful Startups

 

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A few questions come to mind when the topic of domain experience and startups arises:

  • Can an entrepreneur successfully found a startup without experience in the industry in which the startup is focused?
  • Are there particular types of startups that benefit more than others from founders with domain experience?
  • What is the specific impact of having domain experience on the founding team and how does that operationally benefit the startup?
  • Does having domain knowledge bring any negatives to the innovation process and the creation of disruptive technologies?
  • And most importantly, is domain experience a significant factor when it comes to the success rates of startups?

Before we tackle those questions, however, it is important to understand what we mean by domain experience. We all have some intuitive idea of the phrase, but we can agree that domain experience is an accumulated body of applied knowledge in a particular human endeavor. While it is a broad definition, it does cover the breadth of tasks across any industry or context. The important distinction here however, is “applied knowledge,” meaning knowledge that is gained through the process of using that knowledge towards the completion of work. Another way of thinking about domain experience is to say a person is in possession of a high level of skills or a group of complementary skills.

With definitions out of the way, the short answer to the question of whether domain experience helps is yes. In some cases, without the requisite level of experience, there is absolutely zero chance of success. This is particularly the case with highly technical fields such as biotech or medical devices.

Yet there are many industries where the knowledge barrier of entry is coming down. That is one of the reasons we are seeing such an exponential number of “tech” startups launching in recent years. Not only has the technology become much more accessible, but the technology itself has provided a platform that makes is easier to reinvigorate the standard operating methods across every single industry. While the “disrupt all the things” meme might be played out, there is some truth to the fact that the Internet creates untold opportunities where none existed before, threatening the status quo and those invested in preserving business as usual.

This opportunity window has enabled numerous startups to quickly establish themselves in the industry despite the lack of industry experience. Airbnb was not launched by experts in the hoteling and hospitality industry. None of the founders of Uber, to my knowledge, had experience in the taxi and limo business prior to launching. If you look across the founding teams of some of the biggest tech startups, you will see nary a stint or even an internship in the industry their startup specifically targets. Part of the reason is that some concepts, like crowdfunding or social media, are either very new or exist safely in the technology industry. But a more important reason is that the founders had a deep personal conviction to building something to fulfill their own needs. In the process, they managed through fits and starts to create something that many could use and enjoy. They found success in spite of, or perhaps because of, their strong vision, unwavering commitment, and a large helping of naiveté. In other words, there were no preconceived notions about what was possible or not possible, they just tumbled headlong into whatever obstacle that got in the way and pushed through.

On the flip side, however, not having enough depth in an industry can be an enormous inhibitor of growth. On this point, Mark Suster sums it up by saying:

“There is no doubt in my mind that on balance it offers you a huge Unfair Advantage.”

When you have been in an industry and doing things with some depth, you already come into a new venture with expertise and connections. That is hard to replicate if you are starting from square one, as you are playing catch up just to tread water. You can’t simply Google and Wikipedia your way to expertise, it requires time, research, talking to knowledgeable people and digging deep into the guts of the matter. And because you have little experience, you are more liable to set false expectations and make rookie mistakes, further contributing to the wasting of precious time and money.

Some people will dismiss the value of having a built-in network. There are some truths that once you launch a startup, your former industry colleagues and connections tend to ignore you. It is like you are off the radar for them. That being said, it is extremely useful to know who and how to reach out to when you are ready to show something. When those first few alpha customers are finding value in your solution, it becomes easier to find and secure customers as you come knocking on the door with built-in credibility.

Another thing that people tend to discount is the disadvantage you have in hiring for industry expertise. The idea on the surface sounds reasonable as you can simply bring domain experience on board once you get traction. However, how exactly are you supposed to adequately assess the level of expertise candidates bring when you yourself do not have deep experience? How can you sniff out the bull-shitters when you do not have a well-honed bullshit meter? I am not saying it is impossible, but it becomes even one more challenge on top of trying to start a company.

So where does this leave us and how does this answer the questions we started with? I am loath to tell entrepreneurs that they absolutely need domain experience. There are certain pockets of our vast technology market where such experience is not necessary. We need to remember that we are in the innovation business, and many of the best disruptive innovations and most successful companies came out of passion and determination rather than rote knowledge and credentials. However, when it comes to business-oriented solutions, such as enterprise tech or SMB SaaS tools, I would say that domain experience becomes a more important success factor. It just makes sense that if you make something for dentists or for architects, you should know something about dentistry or architecture.

Ultimately, it comes down to what advantages you have to help accelerate your growth and increase you chances of success. There is little downside of having domain expertise. Yet, if you do not have that experience, not all is lost. Talk to as many industry people as you can and get their input on your venture. Find advisors and investors that you can learn from and leverage their networks. Eventually, if you work at it long enough, you may eventually become that domain expert.

This article was originally publishing on Strong Opinions, a blog by Birch Ventures for the NYC tech startup community

Image credit: CC by paul bica

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About the author: Mark Birch

Mark is an early stage technology investor and entrepreneur based in NYC. Through Birch Ventures, he works with a portfolio of early stage B2B SaaS technology startups providing both capital and guidance in the areas of marketing, sales, strategic planning and funding.

  • Jim Hoffman

    Thanks for this great article Mark.

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