There are two main reasons, as Jure explains: Firstly, the agency is like the laboratory for the product part. The ideas come from the agency and can grow into products. The second reason is revenue – another revenue stream makes everything easier.
But there’s more to it, Dan stresses:
People who are part of the industries that are disrupted at the moment have the knowledge to attack the industry. There is no prejudice against service people – as Jura said they already make revenue and are familiar with the client – service relationship. Product people sometimes overlook the importance of this.
Just The Product Or The Whole Package?
There are two ways to invest in a startup that springs from an agency: you can either invest in both the agency and the product, as RSG did with Degordian (ex iStudio), or in the product exclusively, like it did with ShoutEm, a self service mobile app platform.
So why the different approach?
Vikotor (ShoutEm cofounder) was much better at negotiation and convinced us to invest in ShoutEm and not in Five as well, which might be a mistake on our part, as it seems at the moment. We have a good investment in ShoutEm too and it’s of course much more scalable.
But mostly, RSG invests in thick-skinned, relentless people, as Jure says:
ShoutEm started as a very different idea and it took a few pivots to get to where they are today. Those of you who know Viktor know that he’ll never give up. That’s what we’re looking for.
Hit The Market – Now!
Some startups, however, are not comfortable with pivots and want to take their time to make their product just right, as they see it. One of the big questions is whether to wait until the product is (pitch) perfect or to get out there – but both investors agree on this one: take the shortcut and get out there.
Most times, developing a product for a year or a two is not even an option, as Jure stresses:
In many industries it’s not possible to develop a product for two years. The market changes so dramatically that something that’s hot today will be forgotten in a year or so. Go to the market as soon as possible.
If you take your sweet time, someone can come up with the same idea and you’ll have to change something you’ve been working on for years, Dan added. That said, don’t isolate yourself from the world not to have your idea stolen.
Whether you’re an agency or a free-standing startup, focus on the execution, not the idea.