The path from AI research breakthrough to commercial success is frequently charted by product development and innovation. Building scalable products around the needs of the customer can be a key factor in a company’s growth trajectory. Tomi Poutanen has built AI products and scaled product teams over the past 20 years as an entrepreneur and founder of five companies with exits to Microsoft, Yahoo! and TD Bank. Today, Tomi is a Co-Founder and Partner at Radical Ventures and is currently working to bring AI to healthcare with the new startup, Signal 1.
Tomi’s journey from engineer to entrepreneur and reflections on the mindset required to build and sell products at scale was captured as part of Radical Ventures’ AI Founders Master Class – a four week program aimed at helping AI researchers build AI products and businesses. The following excerpt of his presentation has been edited for length and clarity.
I started my first venture when I was an undergraduate at The University of Waterloo. I built a data compression software product. I had a lot of people sending me twenty dollar cheques for the premium features. It funded my tuition, but I took building a product seriously. I had a co-founder and our product was better than the competition by about 10%.
But, I learned that being incrementally better is not relevant when you are trying to build a business. To change how people behave, to change standards, you need a massive step change improvement. I believed there was a lot of value to be created. I knew I had something unique. But, I had to pivot from competing against the established standard to thinking about creating new value.
This was back in 1995. Software distribution is where data compression really mattered. Microsoft was shipping more software and floppy disks than anyone else in the world. Windows 95 had just come out and was shipped on 13 floppy disks for installation. Microsoft was spending a lot of money on these disks (about US$1 per disk). That 10% compression ability meant we could take Windows 95 from 13 to 11 floppy disks. Although that doesn’t sound like a lot, it was an innovation worth $100 million to Microsoft. So, what do you do as an undergraduate student? I got a co-op job at Microsoft and self-selected the Windows SDK team, got to know the team whose task it was to package up the operating system, and had a value proposition to save the company $100 million on day one.
That set me off on a lifelong journey trying to do innovative things through having a technical edge. It is about how you turn an “aha!” moment into a business. There are very few moments where you have some idea that completely changes things. I have had four in my life and I could express each of them in 50 lines of code. Out of all of the code I have written in my life, there are 200 lines that have really mattered and there are another 200,000 lines that anyone else could have done. But out of those 200 lines of code there was some unique innovation in there that made things possible.
Innovations can have a great impact in enabling new ways of doing things that can stand the test of time. I sold that first data compression innovation 25 years ago and Microsoft still uses the very same compression algorithm today for Azure Cloud storage and online software distributions.
The AI Founders Master Class will return in the fall with more inspiration and insights for prospective founders of AI businesses.