In the capital communities of venture capital or angel investing, we often talk about the considerations of a startup that is “tech-enabled” rather than “tech.” A tech company, it seems, is often valued to a greater degree relative to revenue, than a company tech-enabled.
Is that valid? What is the difference? Is your work in technology or is it tech-enabled?
Most importantly, one is not inherently better than the other; the distinction exists to help characterize the nature of the company. And yes, while there are implications that help determine the team, possibilities, and valuations of the work, one is certainly not better nor worse. If anything, we really see it proven that risk and reward find balance.
A tech-enabled business uses existing tools, platforms, libraries, and frameworks to make a company or a solution it provides more efficient or effective. Tech-enabled businesses are greatly valued over businesses that are not, particularly in today’s digital / online driven economy. The internet is technology, and increasingly the more successful companies are using the tools, platforms, and even people it provides, more meaningfully. We’re witnessing that companies that are not tech-enabled, struggle.
How you might think of it is that a tech company is more oriented to science whereas as tech-enabled company is oriented more than otherwise to engineering.
A technology company is an organization that wouldn’t (indeed, couldn’t) exist if it weren’t for technology.
Tech companies deliver completely new products to the market by way of either:
- Push: when the organization uses a new invention to create a new market. It’s from this that the idea that the customer doesn’t know what they want until they have it comes. Sony Walkman might be considered a push technology whereas the later Apple iPod isn’t the same notion.
- Pull: when the economy or an industry reveals a problem to be fixed and technology creates the solution. Here, Apple’s iPod applies since the portable player already existed and with the emergence of MP3s, the market revealed a problem to solve with a new technology.