Katherine Barr, a general partner at Mohr Davidow Ventures, says that in the family tech space, companies need to focus on developing technologies that enables parents to reconnect with other human beings, not dominate their lives.
At the Mama Bear Conference hosted by 500 Startups, Barr gave a talk entitled, “The Wizard of Oz: The Myth of the Yellow Brick Road & Why ‘Family Tech’ is No Place Like Home.” Her talk, at an event geared towards supporting startups and technology for the family unit, discussed venture capital and why companies in this industry are running into some difficulty.
Where are the exits?
She admits that the family market is a huge one, with sectors like travel, groceries, healthcare, childcare, home security, and toys being multi-billion dollar markets. However, what might be surprising is that there hasn’t been that many big exits. Yes, Club Penguin did get acquired by Disney. Likewise, Quidsi, Blackboard, and Shutterfly also saw their companies enter the exit/acquisition phase. But not many others since then.
Observations about family tech investment strategies
Barr offered some observations when it comes to venture capitalists funding startups in the family tech space. She notes that one of the first things is there’s a “mismatch” with investors — companies are targeting investors who don’t get it. If you’re reaching out to the mother demographic, speaking to male investors may invoke a statement along the lines of “Let my wife give the product a try.”
Another thought is that startups just don’t understand the target market. Barr says that what the families do not need is yet another photo-sharing platform for parents.
Investors may also be leery about a startup when comparing the served (actual) addressable market and the targeted addressable market. If, in reality, the market just isn’t that large, then this could dissuade funding from VCs.
Other concerns Barr raised included being able to demonstrate the capital raised equaled traction — if there isn’t enough value created for the money invested, this could be a sign of trouble. What’s more, being efficient how the capital is used to help grow the company and the product is essential.
Lastly, if founders cannot instill confidence in their company’s business building capability, then investors will be turned off. Startups need to know what investors are looking for and what they’re expecting. If founders cannot answer their questions in a smart and correct manner, it could risk not getting funded.
Success at the venture scale
But while Barr may have inadvertantly shared offered some doom and gloom to startups within the family tech space, not all hope is lost. She suggested that companies need to define what they consider to be success — the metric is different for everyone.
When entering into discussions with venture capitalists, founders need to make sure that they’re addressing one of five risk-related concerns, including about the market, company finance, its product and technology, and the people involved.
It’s important for the company to find a way to “dramatically” differentiate itself from others in its space. Barr says that investors also want to know if a company has solid business fundamentals and that they understand the real assumptions of running their business.
In addition, VCs are quite interested in a startup that has the “right” entrepreneur and team — Barr suggests that if companies in the family tech industry want to go after multi-billion dollar opportunities, they should have someone on their team who really understands the industry, whether they’re in sales or are one of the founders.
Families have busy lives, so help make it better
One of the final things that Barr spoke about was that families, specifically parents, have busy lives. Whether it’s helping to run a household filled with children, working, finding time to run errands, or the addition of countless other things, technology should help them become more efficient and productive.
She cites companies like Uber where it helps her get around when she doesn’t want to deal with the stress of driving from meeting to meeting or do pick up her kids. Technology should be integrated in with the parent’s LRP, or Life Resource Planning, strategy.
Barr defines it as “a technology system that integrates the management of internal and external information and tasks for our lives.” Examples given include ways to help find the best travel options, pay the bills, adjust the home thermostat, order meals to be delivered weekly, and approve purchase of home supplies.
The hope is that technology will enable us to reconnect with our significant others, children, and others as human beings, not that it will consume our lives and instruct us on how to communicate with people.
In her opinion, family tech companies need to focus not on the product or technology, but rather the pain point that families, not mothers or fathers, are dealing with. They should avoid being too myopic with their targeting and instead reach out to the entire collective, not just a single channel.
Photo credit: KARL-JOSEF HILDENBRAND/AFP/Getty Images