How Entrepreneur Chris Evans Exited for $500M in 24 Months Without Being in Silicon Valley
By: Aaron Dinin
Tags: Startup, Inspiration, Entrepreneurship, Business, Silicon Valley

How startups are taught to play defense

As someone who’s listened to thousands of startup pitches over the years, I can tell you I rarely hear entrepreneurs describing their defensive strategies, so it’s not a concept that’s particularly common among founders. The two closest concepts are perhaps IP strategies and so-called “land grab” strategies.

As most people know, IP — intellectual property — revolves around using legal structures to protect your business. The company files for patents on a certain technology or type of process, and those patents theoretically prevent other companies from doing the same things. However, I’ve used the word “theoretically” because IP protection only works well as a defensive strategy in a very specific set of situations that don’t apply to many startups, especially the ones outside pharmaceuticals, healthcare, or, in some cases material sciences. Worth nothing: IP is particularly weak in relation to software, which is, of course, where modern-day Silicon Valley really thrives.

The second strategy — the “land grab” strategy — is usually more applicable for software and consumer products and is very “Silicon Valley.” The idea is to get as many people using your product as possible before your competitors. Once you’ve done that, it’s easier to keep those customers through a combination of branding and feature lock-in. The best way to do this is to raise tons of venture capital, which, of course, is easier in Silicon Valley than anywhere else in the world.

Defensive strategies like IP and land grabs aren’t necessarily bad. They’re certainly better than nothing. But, unless that startup is well-funded, they tend to have limited long term value because they’re add-ons that get applied on top of whatever the startup already is. They’re not core to the startup itself, which makes them expensive to implement and maintain. In a sense they’re like the finishings in a house. You can upgrade the finishings of a poorly located house to make it more luxurious, and that might increase the value somewhat, but the nicer finishings don’t change the fundamental issue with the house that it’s not in a great location.

“Poor location” is a great way to describe Chris Evans’s first startup. He and his company built DaVinci Email, the first email client for the Windows operating system. By being the first email client on Windows, they had first-mover advantage — something plenty of startup founders like to brag about — and they were able to onboard lots of users before anyone else. But, as Chris explains, there was still a big problem:

“We had this email program and it was the top reviewed email program, PC Magazine and InfoWorld and PC Week and Network Magazine all reviewed all the email programs and said we were the best. So we were the market leader and top of our class. And that was in 1989. By 1991, we were competing with Microsoft, a company whose coffee budget was probably bigger than our revenues. And so Microsoft was essentially giving away their email for free if you would buy Excel and Word, while we were still trying to sell it. We had no leverage to compete against somebody with the likes of Microsoft.”

Being first to market and the market leader didn’t matter for Chris and DaVinci Email because their defensive strategy was easily defeated by a company with more resources. Simply put, if you’re not a well-resourced startup — and if you’re not a Silicon Valley darling, you probably aren’t — then add-on defensive strategies like IP and market saturation can’t protect you. If a bigger, more powerful company wants the market, they’re going to take it, and there’s nothing you can do to stop them.