Second Time Around – Lessons Learned From A Circuitous Route To Exit by Forbes – Entrepreneurs

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Tom Strange had to rethink his business model on the road to an exitSource – Tom Strange

 

By now, most of us have probably made a decision on whether or not we want to invite voice-activated personal assistants in our lives. To some, asking Alexa or Siri to call up playlist or find a local taxi company is as natural as making a coffee or reaching for the TV remote. To the refuseniks among us, issuing instructions via a smart speaker, phone or tablet,  may feel like a slightly unnecessary and perhaps also slightly creepy exercise.

But here’s the thing. Regardless of your response to artificial intelligence-driven digital assistants, companies such as Google and Amazon are not only selling shed loads of voice-enabled devices, they are also spending serious money on developing the underlying technology for the consumer market. And in the not too distant future, as the systems get better and more intuitive, many of today’s refuseniks will undoubtedly join the next wave of adopters.

But on the face of it, there doesn’t seem to be too much room for innovative startups to enter the market. As things stand, you can find smart speakers by Google and Amazon is just about every electrical store and supermarket, with Apple providing a reassuringly expensive Siri-powered alternative. Added to that, of course, we can all – should we have a desire to do so – talk to our phones and computers. In other words, the consumer market seems pretty much sewn up.

Enter Tom Strange, a British entrepreneurs with big ambitions. His new company – Constellation A.I. – is setting out to develop the next wave of digital assistants. Mixing A.I. and natural language technologies, Constellation’s IMI system is being designed to feel more like calling a friend than talking to a soulless machine. To slightly oversimplify, users will be able to talk to IMI about aspects of their life and how they feel. In return, the system will provide intuitive suggestions about what to do or how to cope with situations.

Something Different

In other words, Strange is aiming to crack the market by offering something different – and as he would describe it empowering, but it isn’t his first attempt at changing the world through technology. Strange’s previous venture was recently sold to online compliance and privacy company Privo, but only after strange had brought an ambitious project to market, only to pivot into a completely different business. When we spoke last week,  I asked him what he had learned from the process of launching a tech company and then switching business model ahead of an exit. And how will those lessons be applied to the new project?

Tech For Children

A Chartered Accountant by training, Strange set up his first company Riyo with the intention of creating an A.I.-driven tool that would – in his words – enable children to fulfill their potential.

“I was good in school, so I didn’t have to try too hard, but that not what it’s like for everyone. I began to think about education and the role that technology could play in the modern world. A.I. seemed to provide an answer in terms of tailoring education to individuals.”

Strange acknowledges that he didn’t know much about the sector, but he took the view  that if he identified a big mission and took time to pull together the research and find the right people to help execute his plan, he could succeed.

The Regulation Problem

But Riyo as it was originally conceived fell foul of an unforeseen problem – namely, regulation. Or to be more precise the U.S. Child Online Protection Act. Put simply, the legislation presented a very big very possibly immovable hurdle to a company that the education of children enabled by data analytics at the center of its plan.

Strange says that he hadn’t necessarily intended to pivot, but because of the COPA obstacle, he found himself working on a different problem. “I was talking to some VCs – they suggested I look into the I.D. verification business.

And it was at this point, Strange says that he began to learn lessons about entrepreneurship. I.D. Verification became his  business, not because his first ambition was replaced by a second, but because he saw opportunity in focusing on a problem that he could solve. “You should really to solve as few problems as possible and concentrate on those that are of most value to the end user,” he says.

Know the Landscape

The small problem of COPA also taught the value of fully understanding the regulatory landscape. As he explains, working in the “child space” required clearance by the Federal Trade Commission. After seeing applications by others being blocked, Strange felt he needed to establish contacts. He did that by positioning himself as an expert. “I would comment on other people’s proposals – that gave me an in,” he says.

Finding The Exit Route

The philosophy of “knowing the landscape” was also applied to exit strategy. “Even before I was considering an exit I was thinking about who would want to buy and why?” he says. In that respect, he focused on potential customers for the I.D. identification software. Customers who might be buyers. Privo emerged from his deliberations, not just as a likely candidate, but as the preferred buyer.” I wanted to sell to Privo,” he says.  In that respect, he says “know your buyer” as a key lesson. Developing an initial seller/reseller relationship was the way forward.

With his accountancy background in M&A, Strange decided against hiring an adviser, but he stresses the need for good legal advice – he chose PwC – to ensure the potentially problematic issues around intellectual property and warranties.

Taking the Lessons Forward

Now focused on Constellation, Strange is once again focused on knowing the landscape – and in particular where a new player can find a niche in among the Google’s an Amazon’s of the world. Strange sees opportunities in the speaker market. He cites brands such as Sonos. They currently sell on the basis of audio quality, but it’s not hard to see a Google, Amazon and Apple capturing the audiophile market. So there is scope to sell a state of the art smart speaker offering. The car industry is another target market, at a time when customers are expecting every more sophisticated in- ar systems. “There are also opportunities in the hotels market,” he adds. “A brand like Hilton could differentiate its rooms by offering IMI insider.”   

t’s very early days for constellation – users are being invited to join an app waiting list and more investment is required – and it remains to be seen what course the company will take and whether pivots will be required. But with one exit behind him Strange is determined to learn past experience and deliver on an ambitious project.

 


January 27, 2019 at 07:07AM
https://www.forbes.com/sites/trevorclawson/2019/01/27/second-time-around-lessons-learned-from-a-circuitous-route-to-exit/
Forbes – Entrepreneurs
http://www.forbes.com/entrepreneurs/
http://bit.ly/2CMy7Yu