Some Friday (is it Friday? The days blur together) night thoughts on what makes for a “good startup idea”:
1) First, it’s really in the eyes of the beholder. Investors use their life perspective to assess.
For this reason we need more funders w more varied life perspectives.
1) First, it’s really in the eyes of the beholder. Investors use their life perspective to assess.
For this reason we need more funders w more varied life perspectives.
2) Next, the way to get big fast is to get a lot of customers quickly. (Obv!)
VCs are not good at articulating this but what they are looking for are fast big sales.
How does this occur?
VCs are not good at articulating this but what they are looking for are fast big sales.
How does this occur?
3) One way this can happen is through network effects or virality.
If you can get the flywheel going here, you can get big really fast.
Marketplaces tend to have these types of characteristics. Some b2b cos do too (eg calendly or zoom)
If you can get the flywheel going here, you can get big really fast.
Marketplaces tend to have these types of characteristics. Some b2b cos do too (eg calendly or zoom)
4) But a damper on this is competition.
Competition for attn and competition on cust acq which drives cac up.
If you’re in too competitive space it’s often hard to grow *really* fast for cac and attn reasons.
Competition for attn and competition on cust acq which drives cac up.
If you’re in too competitive space it’s often hard to grow *really* fast for cac and attn reasons.
5) This is why VCs often ask about moats. To me it’s a silly q at the earliest stages because you have no moat in the beginning.
But what can it become if everything went well? How can you keep competition out?
But what can it become if everything went well? How can you keep competition out?
6) This is why in the last few yrs you’ve heard all the hype about data.
If you can make a personalized experience better & better w more data, you lock your customer in. AMZN is a great ex of that.
If you can make a personalized experience better & better w more data, you lock your customer in. AMZN is a great ex of that.
7) On the flip side this is also why a lot of e-commerce companies get overlooked. Investors are afraid there is no moat - seems too easy to spin up a copycat overseas & compete on cost. Heck, even AMZN will compete w you.
You have to explain how you will build moat over time.
You have to explain how you will build moat over time.
8) An interesting case study is Stitch Fix. They were overlooked a lot! (Still are imo)
Ppl saw them as a copyable e-commerce company. But from day 1 they collect data on what clothes customers like & what they return.
And get better at recs. This is what investors missed.
Ppl saw them as a copyable e-commerce company. But from day 1 they collect data on what clothes customers like & what they return.
And get better at recs. This is what investors missed.
9) in short, “good ideas”
-are differentiated / have little competition to keep cac low
-have a lot of room to run
-can bring in big $$ fast
-can create lock-in once you get going
It’s tough to know if a biz has these but this is the lens many investors try to look at things
-are differentiated / have little competition to keep cac low
-have a lot of room to run
-can bring in big $$ fast
-can create lock-in once you get going
It’s tough to know if a biz has these but this is the lens many investors try to look at things
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