Chapter 2 The Incumbent’s Advantage

“Play to your strengths.”

“I haven’t got any,” said Harry, before he could stop himself.

“Excuse me,” growled Moody, “you’ve got strengths if I say you’ve got them. Think now. What are you best at?”

—J. K. Rowling, Harry Potter and the Goblet of Fire

Spend any time at an industry conference in Silicon Valley and you will be startled by the palpable, sometimes offensive, hubris of the startup culture. You’ll hear a lot of “Big companies just don’t get it” and “The fast eat the slow for breakfast,” backed up with “When one of our people left to go to a big company, the average IQ of both companies went up.” Experienced sages will actively be counselling startup CEOs in the hallways to be careful about partnering with big, established industry leaders lest their companies be dumbed down, slowed down, or both.

On the face of it, this can be written off as part fake-it-until-you-make-it bravado and part irrational youthful exuberance. Dig deeper, though, and you can sense the remarkable fragility that is the venture-funded startup. Startups survive one funding round to the next based on what are often subjective assessments made by their investors using metrics such as “eyeballs”—or the even more vague “market traction.” Early-stage startup CEOs often spend one-third to one-half of their time raising capital for the next funding round instead of running their businesses.

Your Crown Jewels

As the wizard Alastor Moody implores Harry Potter, ...

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