“You have to debug your business model.”

I looked across the table at the VC I was having lunch with. It wasn’t going how I thought it would. I was ready to tell him about the cool technology I had developed. How it would transform the world of enterprise computing.

He wasn’t interested in that. He wanted to see how many clients we had. When he found out we were pre-revenue, that was when he started to talk about the business model. Then he went on to talk about a bunch of enterprise technologies he had invested in. They were hyper-technical, incremental add-ons to existing technologies that I thought were not very good in the first place.

But those were the ones he was investing in.

After a long time of not getting meetings, having meetings abruptly canceled, and taking meetings with investors who displayed a distinct lack of interest, I started to realize that I didn’t have what investors wanted.

What was I doing wrong?

There is no lack of advice on platforms such as Medium. Develop your elevator pitch — make sure you have a good team. Pitch a lot of potential investors and wait for the millions of investment dollars to flow in.

So I started to try to figure it out from my side of the fence.

First I realized that an early success in something can lead you to false assumptions.

I know that because it happened to me. In the late 90s (just before the dot-com crash) I was an owner/partner in a company that got investment money based on a technology we were developing. It was a nice bit of software that allowed you to view Office and other documents anywhere. It was very technologically difficult as we used Java to get the ‘run anywhere’ effect, and Java at that time was massively less capable and reliable than it is today. Everyone made money when we sold the company based on our technology.

That, I thought, was a path to success. Build a better technology and the investors will beat a path to your door. But that was a different era. The dot-com irrational enthusiasm was running strong. The concept of start-ups hadn’t entered the popular consciousness and investors were as naive as we were about software and its potential.

I had learned the wrong lesson and thought it was all about getting a killer technology.

So I set out to develop a killer technology. There was this problem that no one had been able to solve and that had fascinated me from the very start of my career. So I rolled up my sleeves and started to work. After years of R&D, I solved the problem and formed a company.

I was convinced that having a technology that would “change the world” was the ticket to getting investment and being able to … well… change the world.

Here we are many, many years later and my company is slowly bootstrapping its way and seems to have as much chance of bagging an investor as we have of having tea with Bigfoot in the woods. (I’m not going into details here as I’m an enthusiast and if I start talking about my ideas it will hijack this article.)

All of this has caused me to try to figure out what is going on.

Now, I emphasize, that I don’t know a lot about investment from the nuts and bolts view. My experience has been as someone who had received investment in the past and has failed to get it in the present.

Sometimes I feel like Richard Hendricks of the HBO show Silicon Valley. Poor Richard is like me, someone who is happier programming away than doing the business thing. Like me, he can do the business thing when pushed, but at times he is totally perplexed by the motivations and actions of investors. It is as if they are a different species.

So I have developed my own analysis of what investors want and why developing amazing technology doesn’t turn them on. (I know I’m a naif, moron, twit and generally worthless person, so please don’t bother telling me that in the comments. This is just me trying to make some sense of a seemingly incomprehensible world.)

What was initially puzzling to me is that there are thousands of stories on the internet about investors rushing in to back all kinds of ideas — some of them seemingly just sketches on a napkin? So why were we being treated like beef kabobs at a vegan convention?

First, let me state that I’m talking about software innovation. Other technologies like computer hardware, medical technology, and everything else that you can touch and feel, are in a totally different area. I have no experience in any of those.

It is much easier in these established fields to determine expertise. If you are trying to get investment in super-conductors, for example, there are professional qualifications and intense technical knowledge that an entrepreneur must have to be credible. You can’t just be anyone in a garage and expect to be taken seriously in these kinds of fields. You have to have established academic credentials and a serious research program that meets some level of peer review standards.

Software is … well … different. People are encouraged to drop out of formal educational programs and build the next best thing. People who have had mere months of experience feel totally at ease in questioning the opinions of those who have had decades. And who is to say they are wrong? Are the more experienced just stuck in old ways? Do the newcomers see the technology in a new way that opens up new possibilities?

This is because the software is a new frontier. It’s only been around for sixty years or so and the truth is we don’t really understand it enough to figure out what constitutes expertise.

My analysis led me to conclude that there are two kinds of software innovation.

Business Innovation and Technical Innovation.

Business Innovation is having a great business idea and implementing it with off-the-shelf software technology.

Think Facebook, Airbnb, and Uber. None of those had any real cutting-edge technology. Facebook was technically not much different from predecessors like MySpace. As far as AirBnB went, any competent programmer could build a website that showed lists of spaces for rent and allowed them to be booked by members and collect/pay money via a credit card. The technical issues like interfacing with credit card gateways and displaying image galleries are off the shelf. Looking at Uber you can see that building a service that shows car locations really rests on the GPS system and with Google mapping. These are technologies that are available as a service to everyone.

Certainly, as those organizations grew the technical issues of scale became complicated, but that is a later-stage problem. Scaling issues can be solved by having millions of customers, making huge income, and being able to throw lots of money at it.

The key to business innovation is the business idea. The technology is really an incidental issue; it is the business idea and its power to gain traction with the target market that really counts. It is the business idea that investors are evaluating based on their experience of what works and what doesn’t in the hyper-competitive marketplaces of the 21st century.

Business innovations are understandable to investors. Their potential risks and rewards can be evaluated by business people.

Technological innovation is inventing a new software technology and then figuring out what businesses can be built on it, i.e., how to monetize it.

Technological innovation is less common than business innovation. In business innovation, the idea is often a flash of epiphany. The hard work is in getting it to market and making it popular. In technological innovation there is the hard work in inventing the technology, then there is the hard work of figuring out how to use it in a business, and that is followed by the hard work of getting it to market and making it popular.

Technological innovation may produce a viable business. On the other hand, it may not be much use for business at all.

In fact, when you look at technological innovations they have varying degrees of obviousness for use in business applications. Let us call that factor the Monetization Potential Factor (MPF), say on a scale of 1 to 10, where 1 is no obvious potential, and 10 is a technology begging to be monetized.

Take the current hype-du-jour, blockchain. It’s a really cool technology. If you’re a programmer you can read the technical specs and be really impressed. Why didn’t I think of that? A totally public registry that is totally secure and unhackable — wow! Bloom filters — cool! Mining by solving hashing problems — really cool.

But it has an MPF around 1 or less. That is evidenced by looking at how many companies have taken that technology and built a major business. To my knowledge, it is zero.

Everyone figures blockchain has to be useful somehow, but how? People talk about it transforming registries, banking, voting or whatever. But the fact is that things like land registries have been working for centuries, and have been reliable. A blockchain implementation of these is massively more inefficient and complicated. Why would you do that?

In voting, paper ballots are cheap and reliable and, like some of the supposed advantages of the blockchain, they too allow you to recount votes. What is blockchain going to bring to the table?

I’m not saying there couldn’t be something there but so far there aren’t any really obvious reasons to use it.

Of course, there is Bitcoin. Is that monetization or a form of collective insanity? I really don’t know.

A successful technological innovation is Google’s search algorithm. When Larry Page and Sergey Brin developed it there were other search engines — Alta Vista and Yahoo to name two major ones. Yahoo was trying to treat the internet like a library and creating something similar to the Dewey decimal system. Given the fractal nature of information on the internet that was doomed to failure. Larry and Sergey instead developed an algorithm based on eigenvalues and showed that massive searches could be done efficiently.

But that was the technology. What had to follow was the business based on it. In this case, it led pretty directly to the idea of putting ads on search. If someone is searching for automobile prices then it is pretty obvious that an ad for automobiles is going to be orders of magnitude more effective than just showing random people the same ad. So it had an MPF that was high, maybe a 10, as evidenced by the fact that Google was quickly able to raise money and is now one of the biggest companies in the world.

Another technological innovation in software is the development of image recognition and voice recognition. A problem that seemed intractable a decade ago is suddenly in our midst.

What business do you build around image recognition? Well, Google search certainly can monetize it with their ads. It is useful for checking copyrights and for identifying illegal content, but there are no real giant companies that have grown up around it. It is early days but the MPF is not as high as the search algorithm Google started with. It may be mid-range i.e. around 5. I think technologies in this range are often licensed rather than flowering into giant companies. Maybe extremely profitable but not unicorn growth food.

So, just because you have a great technology, it doesn’t mean that it is immediately something investors want to support. If it has an obviously high MPF they might. If it doesn’t you are going to have to prove it to be business -worthy.

Investors want returns and large ones at that.

VCs raise money from moneyed people and have contracted with them to get the best returns they can. Angels use their own money but they are naturally trying for the best return they can get.

These people don’t want to change the world. They want to make money. Their reputation with their fund members depends on it. Their careers depend on it.

So you have a great software idea. You have been working in the garage/basement for years and finally hit upon it.

You figure that is the hard part. Surely everyone will see the worth of your idea and support you in bringing it out into the world.

Not really.

Your idea may be far better than existing technologies. It may save time and money, so surely — surely — investors will be lined up to back it.

Again, not really.

A pedestrian, incremental change to those old existing technologies may be far more profitable and investment worthy. If the existing technology is in widespread use then there is an identifiable market for incremental technology. If you want to attract investment this is probably a surer path than some radical innovation that is hard to explain because it is a radical change to existing ideas.

Business innovation is far easier to explain. Everyone gets the underlying technology. The issue is whether the business idea will capture market share and generate money. This is a risk investor can evaluate.

If you have a technological innovation you have a much harder road to travel. For example, it is harder to give an elevator pitch for a technological innovation than a business one.

Elevator pitches are never easy — finding the right words is tricky. But with a business innovation, you don’t have to explain the technology, just the business idea. That you can make it easy for people to rent out part of their house, or use their car to give rides to customers, our business ideas. No one is talking about how to build the website. If investors ask questions it’s about potential competition, regulatory concerns, or the stickiness of the idea — i.e. business concepts.

However, if you have a technological innovation you will have to explain the technology to a non-technologist.

Back before it became part of the well-known technology landscape what was the pitch for blockchain? You could describe it, but would it really register — or did it just come across as a lot of technobabble that the recipient had no mental hooks to hang it on. Even if you explained blockchain to a potential investor you hadn’t said anything of much interest to him/her. Where was the money? How were you going to take that idea and monetize it? That is what the investor wanted to hear.

The blockchain is getting tons of investment today because it has, mainly due to the media excitement around Bitcoin, entered into common understanding. That took 10 years or so. Now it is off-the-shelf technology and the business innovations are popping up everywhere. My own feeling is that most of them are just hype. I still think the MPF is very low and the failure of these blockchain-based startups will confirm it.

But let’s get back to you and your technological innovation. You have an idea that is going to revolutionize some part of the economy and change the world. You are certain it’s a sure thing. No one can stop you because you are on a mission. You set up in your garage and start working.

What you are doing is starting on a very, very tough road. A business innovation can be thought up in a moment and whether it is a success or failure can often be determined in a few years. A technological innovation can take far, far longer than you think is possible just to develop. It is R&D after all, and that is totally unpredictable.

Once you have developed your technology you have to figure out a business. If you want investment you have to start a long and difficult process.

Not only is the search for investment long and depressing it is probably totally outside your set of interests. You are a technician, someone who loves to create and build stuff. The world of investment is share structures, agreements, rounds of financing, tranches, and working with people who see the world totally different from you.

Can you stand to spend all your time trying to get meetings, which mostly you don’t get? Then when someone agrees to give you a few minutes, they want to talk about things you really don’t enjoy talking about.

So you may want to think long and hard about mortgaging your house and plowing your retirement savings into your innovation. If you don’t have deep pockets can you really finance this thing? If you are counting on some angel swooping down and saving you, that is not a strategy — it is a fantasy.

Most likely, if you are stubborn and don’t give up, you will be bootstrapping. You will be making CEO-level sales, where you personally talk to the prospects using your knowledge and enthusiasm to try to convince them to try your new idea.

As a technical type, this too is probably outside your comfort zone. But other than moth-balling your technology and wondering for the rest of your life whether it could have changed the world what choice do you have? Working on getting those first clients is probably far more productive than spending countless hours chasing investors. Investors who don’t really want to talk to you because you don’t have what they want.

As a side note, another common fantasy of technology innovators is that they can hire a senior sales/marketing person who will wave a magic wand and clients will be lined up outside the door. I have seen this tried more times than I can remember and it never works. For one thing, most senior marketing/sales people make really good money — will they work for equity when they have mortgages and kids in college? Doubtful. And can you convey the wonders of your technology to them? After all, you couldn’t to the investors. Most marketing people need something of substance to work with — like a product that is already receiving a favorable reception in the marketplace and a budget that allows them to do a proper sales/marketing push — and you have neither. I have seen small technology start-ups hire senior executives with great track records in large organizations. These senior executives just can’t adjust to the lack of resources and the frantic volatility of small organizations. It’s usually a race to see if the funds to pay them to run out before they run away.

Eventually, with enough customers, you may prove your idea and become more interesting to investors. Of course, by that time, you may not need them. Which just demonstrates how difficult and contrary all this investment stuff is too technical innovators.