Why I prefer boring businesses in a market obsessed with the next big thing

In a market obsessed with groundbreaking ideas, the startup world often favors novelty. New technologies, large markets, and transformative stories grab attention easily. However, the author, an investor and operator, has found more interest in businesses that address straightforward problems. These companies, whom the author calls "boring businesses," operate in industries that are often fragmented, inefficient, or overlooked.

Although they may not seem exciting at pitch competitions, they can generate durable demand and clear cash flow.

The author emphasizes the importance of starting with a problem that already has financial backing. Many startups struggle because they have to create new categories and persuade customers to change their behavior before they can generate revenue. In contrast, a boring business starts from the position where customers already have the problem, and the existing solution, though imperfect, has an established budget and demand. This shift in approach reduces the number of ways the company can fail.

Cash flow is another critical aspect of boring businesses. Founders and investors often focus on valuation as the primary measure of success. However, the author prefers to focus on the amount of cash a business can produce and how reliably it can produce it. This cash flow provides options for the company, such as hiring without waiting for another funding round, surviving slow quarters, and investing in automation or acquiring competitors without placing the entire business at risk.

SMEs, which represent about 90% of businesses and 50% of employment worldwide, often struggle with outdated systems and limited access to capital. This gap creates opportunities for boring businesses to improve economic efficiency without inventing a new consumer behavior.

The author acknowledges that technology can be beneficial but warns against using it as a substitute for a solid business model. The best opportunities involve combining a conventional business with a technological advantage. For instance, a media company can use automation to speed up the process from receiving an article to publishing it, while a healthcare consultancy can use software to identify revenue that a provider is failing to collect.

In both cases, technology enhances the economics of an existing process, making it a more powerful tool.

The author cautions that a straightforward business model does not necessarily mean an easy one. Boring businesses often involve intricate execution, such as obtaining licences, building relationships, acquiring physical assets, understanding regulations, and making hundreds of small operational improvements. These complexities can become advantages, as they create switching costs and deepen relationships with customers.

By focusing on businesses that bridge technology and the real world, founders can create defensibility that software alone may not achieve.

Finally, the author advises evaluating opportunities based on concrete evidence rather than speculation. Questions about who pays, why they pay, how frequently they pay, the barriers to switching, and what must go right for the company to become profitable should guide the decision-making process. While early-stage investing always involves uncertainty, the author prefers to concentrate that uncertainty in execution rather than in the existence of a market.

In Southeast Asia, for example, there will be plenty of opportunities for technology companies to disrupt industries, but many ordinary, essential problems will also remain unaddressed. Founders should not overlook these markets, as even unglamorous businesses can produce extraordinary results if they solve existing essential problems efficiently.