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Crain's New York Business

The Endless ‘Disruption’ Eruption

By Judith Messina

Talk to an Internet entrepreneur or attend a tech conference, and sooner or later (probably sooner), someone talks about being a “disrupter.”

“We’re viewed as a disruptive company, bringing trust and transparency back to public markets,” Barry Silbert, founder and chief executive of SecondMarket, told the audience at a showcase for startups a few months ago.

“We’re really being disruptive here,” said Josh Rochlin of his company, Xtify, which produces opt-in, location-based advertising and last year won an award for having the best mobile platform.

The TechCrunch Disrupt conference, held annually in San Francisco near the heartland of disruption—and lately, in New York City and Beijing—awards prizes to would-be disrupters that have yet to even launch.

It all begs the question: Is all this disruption really possible?

For starters, the definition of disruption is vague, seeming to apply in the minds of entrepreneurs to companies that change the way people relate to each other (Facebook), as well as to companies that change the way business is done in their segment of the world (SecondMarket).

“When you’re at a point when people can’t imagine what it was like before you, you have disrupted things,” says Josh Green, president and co-founder of Panjiva, a young Manhattan-based company that, with its technology platform, hopes to transform the way companies buy and sell goods and supplies globally.

Of course, it’s often hard to discern which companies are real disrupters until after the fact.

Remember WebVan, a company founded in 1999 that aimed to revolutionize grocery shopping? After spending $1.2 billion, going public and hiring 4,500 people, it fizzled into bankruptcy two short years later.

In New York’s technology community, there are a handful of companies that are frequently referred to as disrupters-in-the-making. Among them are Mr. Silbert’s SecondMarket, which provides a platform for trading illiquid assets; online education purveyor Knewton Inc.; and social media platform Foursquare. They were three of 31 companies from around the world named technology pioneers for 2011 by the World Economic Forum.

Venture capitalists, who hear the word “disrupt” a lot, say there’s no shortage of ideas about ways to use technology to change the world. But they don’t matter nearly as much as the ability to follow a business plan.

“We will always take a world-class entrepreneur with great execution skills over a great plan with somebody who can’t execute,” says angel investor David Rose. “There are relatively few ideas that are so brilliant that nobody else has thought of them.”

In fact, said Michael Brown, a general partner at Battery Ventures, an investor in Panjiva, “We pass on a lot of investments where the founders are passionate and think they are going to disrupt an industry.”

The fact that the word “disrupter” is used so frequently that it’s losing its meaning hasn’t stopped entrepreneurs from employing it. Disruption seems to be serving as a sort of tech shorthand for the desire to change the world—a common entrepreneurial motivation, and maybe more common in technology than in other industries.

That belief in their mission keeps entrepreneurs upbeat as they slog through months or years of midnight angst, maxed-out credit cards and dismissive VCs, not to mention mothers who constantly push them to go back to law school.

Jonathan Stein, for one, spent two years building a system and overcoming steep regulatory hurdles before he was able to launch Betterment, an online bank and investment company that last year won the TechCrunch Disrupt best New York City startup award and a best-of-show award at Finovate, a conference that showcases financial technology innovations.

“It’s very important to be building something that will help people, help them manage their money better,” said Mr. Stein.

Disruption potential also helps attract talent. Ari Jacoby was able to bring to Solve Media many of the people he worked with in his previous venture, a direct-response company that he’d sold to a Seattle marketing company.

“When creating a disruptive technology, you become a magnet for talented people who fantasize about doing the same thing,” said Mr. Jacoby, whose Solve Media has turned Web captchas—the squiqqly letters and numbers websites use for verification—into a marketing tool for major brands.

For all their enthusiasm about their capacity for disruption, entrepreneurs are also surprisingly down to earth about what it really takes to change the world or even just their small slice of it.

“Being disruptive is moving a pile of money from one place to another,” said Mr. Jacoby. “Turning the knob from 1% to 2% is hardly disruptive. You want to crank the knob up to 5 or 6. That’s how we’re going to make money.”

Indeed, disruption can also be code for another age-old motivation of entrepreneurs: making money. One thing that true disrupters have in common is that they made their founders very, very rich.

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This article originally published February 16th, 2011 on Crain's New York Business


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