There is a widespread myth that the most important part of building a great company is coming up with a great idea. This myth is reflected in popular movies and books: someone invents the Post-it note or cocktail umbrellas and becomes an overnight millionaire. It is also perpetuated by experienced business people who, for the most part, don’t believe it. Venture capitalists often talk about “the best way to pitch your idea” and “honing your elevator pitch.” Most business schools have business plan contests which are essentially beauty pageants for startup ideas. All of this reinforces the myth that the idea is primary.
The reality is ideas don’t matter that much. First of all, in almost all startups, the idea changes – often dramatically – over time. Secondly, ideas are relatively abundant. For every decent idea there are very likely other people who’ve also thought of it, and, surprisingly often, are also actively pitching investors. At an early stage, ideas matter less for their own sake and more insofar as they reflect the creativity and thoughtfulness of the team.
What you should really be focused on when pitching your early stage startup is pitching yourself and your team. When you do this, remember that a startup is primarily about building something. Hence the most important aspect of your backgrounds is not the names of the schools you attended or companies you worked at – it’s what you’ve built. This could mean coding a video game, creating a non-profit organization, designing a website, writing a book, bootstrapping a company – whatever. The story you should tell is the story of someone who has been building stuff her whole life and now just needs some capital to take it to the next level.
Of course a great way to show you can build stuff is to build a prototype of the product you are raising money for. This is why so many VCs tell entrepreneurs to “come back when you have a demo.” They aren’t wondering whether your product can be built – they are wondering whether you can build it.
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..just as we're getting ready to put together an Angel Investor network in Palm Coast, FL, this advice will totally come handy. Thank you.
Though I completely agree with you for a person starting off after atleast one successful startup as he has already established himself. But then the person starting for the first time has an interesting dilemma. He is full of confidence, and knows for the fact for himself that he will be able to pull it off. But how does he convince the VC?
>Of course a great way to show you can build stuff is to
>build a prototype of the product you are raising money
Yes this solves the problem for him at certain level. But what if he is looking to raise money for the MVP itslef?
I personally find myself in this spot. Not with respect to raising money as such, but to prove that I can do it.
in parallel, speak to the person, not to the question
I agree. I've been part of three four different start-ups, and what investors want are *good people*. This was stated in almost those words in a business class I took this fall at the Kenan-Flagler Institute (Launching the Venture). Chris is quite correct about there being many good ideas. Good people are harder to come by, and therefore more valuable.
Great Blog. Everyone wants a slice of the pie but not everyone willing to do what it will take to make it a success. Just watch the movie “startup.com”. Just because you have a programmer friend, does not mean he or she will be a good partner for a startup.
As always: inspiring !
“If you put [the brightest managers] to work in a buggy whip company, it wouldn't have made much difference. When a management with a reputation for brilliance tackles a business with a reputation for poor fundamental economics, it is the reputation of the business that stays intact” – Buffett
VC need Good People but so do startup like mine. I want to strenght my startup with Good People but they are hard to find.
Any idea when I can network with Good People (fit your profile, web programmer) that want to join a startup?
Investing in public companies and seed stage startups are very, very different. That said, I agree industry matters, but good people find good industries.
Economics is economics, large or small.
All I'm saying is that the idea, and most importantly the business model, count too.
Better to maximize both idea and execution.
I agree the *eventual* idea matters, but one of my points is that the early stage the idea is often not the same as the eventual idea.
Mayanks,
A demo / proof-of-concept goes a long way in getting meaningful attention from your target audience (angels / VCs / partners). 'Am speaking from very recent personal experience @ Althea Systems.
When you build a demo, at least a couple of +ve things happen. 1. Your idea takes a wireframe shape and in the process lets you discover new challenges / solutions / associated ideas.
2. Your words suddenly become more credible.
If I were you, I'll build a demo of the MVP you are talking of. If it is an expensive silicon/box idea, a s/w model of it might be good enough. I've no clue what people do when their MVP involves next-gen space transport (ask SpaceX
.
Good luck.
Well said. We've seen this happen to us when we were raising angel money. The angels were evaluating us primarily as a team (while definitely being interested in the demo we were showing).
That said, pitching one's self doesn't come easily to tech guys / geeks, unlike MBAs who come out of biz schools who at a minimum master the fine art of selling themselves
.
Did you hear Derek Sivers on this?
———
The most brilliant idea, with no execution, is worth $20. The most brilliant idea takes great execution to be worth $20,000,000.
That's why I don't want to hear people's ideas. I'm not interested until I see their execution.
—Derek Sivers, president and programmer, CD Baby and HostBaby
———-
More than your idea, pitch also the problem. Convince your VCs/investors that there is indeed something wrong and that YOU of all people are working hard to solve it.
As you said ideas have no value. Yet, I am always surprised when, in that industry specifically, people tell you : “my startup was doing that in 2000″, “what makes you think you'll do better than XXX, who failed at it”, “we already financed somebody with the same idea”.
This whole thread has touched on building a demo, and proving yourself. In our experience, we met with investors who said “great idea, let's see the demo.” Came back with a demo… “cool, now get some traction…” Got some traction, “great, now get someone to pay you.” People are paying us, “great, now why do you need money?”
Interesting (and sometimes frustrating) process, but we're creating value with every step. Now we're poised for take-off, and we just need that little chunk of capital that will light the fuse…
Lucky for us, we can prove ourselves to investors with our commitment and the work we've already done.
Agree to that one. and thanks for the good luck
Out of curiosity, how did you guys come up with the idea for Hunch? Was it the idea with which you start building or did it start with another idea and lead the Hunch? Thanks!
I can vouch for this by personal experience – It took us a working prototype to be able to even have meaningful conversations with customers and investors. I think customers are the better set to focus throughout, but definitely in the early days.
We went with ideas, sketches, proper creatives and then hacked up prototypes to our target customers & it got us to understand a number of things we would never have figured out otherwise. Having said that, its still an uphill climb cause now its not about hypotheticals but real dollars and the team's mettle is tested every day. Folks I didn't think would drop out did and we ended up attracting another set of people who are better prepared for the work at hand anyway.
Great post. Ideas come, go and change- but the people behind the ideas- and how they execute, are what matter. Finding good people is the trick. Venturehacks had a great post about finding the right cofounder:
http://bit.ly/vm4FJ
I think it's both, just that the idea will change but the management team is the shepherd and creator of the evolved idea. But team without idea is as bad as idea without team.
Maybe Goethe had it right way back when–”Thinking is
It always comes back to building a solid foundation of ppl for your team. The idea won't carry you.
great post
I think it's both, just that the idea will change but the management team is the shepherd and creator of the evolved idea. But team without idea is as bad as idea without team.
Maybe Goethe had it right way back when–”Thinking is easy, acting is difficult, and to put one's thoughts into action is the most difficult thing in the world”.
I think Derek has overvalued the idea. My firm opinion is that each idea is worth exactly the same as its best implementation.
What do you say to Sequoia capital's thesis of betting on markets and taking risks on product and team. That seems to work pretty well for them. I am not saying that they don't care about the team, but they care mroe about the market. As an entrepreneur I have the same philosophy about evaluating ideas.
I would say pitch your market that has a huge problem and how YOU plan to solve it in a differentiated, defensible way. So I see the 'idea' being evaluated as more about the market and less about the product.
Does that mean you would buy a poor Facebook clone for millions of dollars?
Ideas are very difficult to buy and sell. What you tend to buy and sell are implementations of ideas. The value of a startup directly correlates with the quality of their implementation.
It is also rather common to see successful products that have no new big ideas, just fantastic execution of existing concepts.
Take for instance Google and their search engine ideas. Those were worth hundreds of millions of dollars (see Google now) but did not even fetch a million before a fantastic execution was complete.
Tom, I never said “a clone of the best implementation of an idea is worth the same as the said best implementation”. My point was actually similar to yours, that an idea is inseparable from its implementations, or in other words that an idea doesn't really exists until it's implemented at least once. But now we're moving too close to Zen territory.
Great point re: discussing with investors AND customers.
Before we even considered investments, we went to a convention for a niche subset of our market and pitched our idea to them. We didn't have a product/demo, hell, we didn't even have a booth – we just made a banner, business cards and wrote down email address (literally by hand) and tested our hypothesis in conversation with our (eventual) early adopters.
Great way to learn a lot about your product before you write one line of code.
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Crikey! Was this post really necessary? All ideas have to be translated into a prototype or model or whatever is required to demonstrate that it will work in the large. You can't build a prototype of nothing ie. you need an idea first.
Think you missed the point.
I agree with a lot of this – particularly the parts about ideas changing over time and execution being the differentiator. But I'd caution that this not be taken to imply that ideas don't matter. I strongly believe in what Andy Rachleff – of Benchark – said a while back that “when a great team meets a lousy market, the market wins”. No matter how great the entrepreneur or the team, it can't fix a market where you can't make money.
Chris
Not really. The statement “The reality is ideas don’t matter that much” bugs me a lot. Ideas do matter. They matter a lot to everything we as humans and particularly what entrepreuners do. What you're talking about is execution of an idea to bringing it to fruition. And, the entrepreuner and his/her team that does this is the team that you want to work it. I understand that completely. But, ideas matter – they matter a helluva lot.
Dinesh
I am an MBA and a tech geek. I know how to sell myself. However, I would take being a somewhat awkward tech geek pitching a VC any day over being a woman MBA. You have no idea how few women founders VC's see….and they just don't know what to do with us when they do. VC's give you guys some benefit of the doubt for being good at what you do (and don't underestimate your ability to bamboozle an investor with tech speak). We just look like scary aliens, from what I hear from virtually all female founders. But you won't see this honestly discussed much in public by women entrepreneurs because we need capital like anyone else and can't risk pissing off VC's.
Why am I breaking ranks? I guess because it's Saturday night, I am still working after a very long week, and I guess I am feeling wild and crazy.
[...] post by @cdixon reminding us that pitching yourself and your team is more important than pitching your idea. Ideas are all over the place but the credibility of a team with a track record is significantly [...]
@Julespieri
MBA and tech geek. Hmmm I'll talk to the tech geek in you
> we need capital like anyone else and can't risk pissing off VC's.
Yes. It is hard for women to raise VC money. So, you don't lose too much by discussing it aloud
More seriously: Entrepreneurs don't ever say “can't risk”. Be prepared to wage everything you have on your gamble and then go tell the VCs that if they don't open their wallets to someone like you, it is going to be their loss and not yours. Good luck with your risks.
> I think Derek has overvalued the idea.
Did he? I re-read his words many times and couldn't find anything to that effect. Unless you are hinting that an idea w/o execution isn't even worth $20
Hinting?
Well does my once writing a blog post titled “Seeking Investor with Balls” qualify as taking sufficient risk? I am pretty open about this issue, but sort of intermittently. I find it distracting, honestly, and a waste of my energy. I'd rather focus on my business than on what VC's do and don't do. And I still believe there must be a VC or two out there who can get over his history of never funding a woman Founder and change things up. Ever the optimist! You have to be, as an entrepreneur.
Jules Pieri
Founder, Daily Grommet
And yes, mere talk about discrimination is indeed a waste of your time & energy.
Another free and unasked for advice: Look at what cdixon did. He launched Founder Collective to address some issues that he would've faced when he was probably looking for VC money in his formative days. So, you too can bring together successful women folks who share your angst and start a angel/VC fund, with a publicly stated goal of funding women entrepreneurs. Start off with a small corpus. Look for small exits. Keep iterating.
Didn't Gandhi once tell as of us to “Be the change that you wan't to see in the world”?
Founder,
Althea Systems.
I think that is a great idea for someone who is passionate about getting the best possible returns from funding startups. Look at the Third World microloan records…women have a 99% repayment rate. Men are far lower. Women create 60% of the new businesses in the world, and will soon control 60% of the wealth. Women are a great investment.
But….my passion is building companies. I am on my third startup. I once worked in a VC office helping an incubating portfolio company for a few months. I am deeply grateful for the people who do that work, but I would go nuts in that environment. Way too quiet. Not enough tangible evidence of my work. Not enough diversity. I need to be in the fray, forming the future.
Beyond that I have found that the best way to fight professional prejudice is not to create segregation but rather to just deliver the goods. Sales, profits, customers, meaningful ongoing enterprises, great products. I am proud that my first startup is top five in its industry, 20 years later, and going strong.
I can do more for women entrepreneurs by doing that than anything else.
Dinesh,
I ideas don't matter as much as you think.
http://www.danmartell.com/startups-its-ok-to-ch...
Any great entrepreneur will “pivot” if there's no traction until it works, sometimes outside of the original industry / customer type they were trying to address.
Thanks Chris. I agree with you – people are more important than ideas. Love the story of how Sony started hiring scores of smart engineers after WW2 even when they had no idea what to do with all of them. They bet on “First Who – Then What.” And did very well.
But at the same time, I think judging people's worth is very inaccurate. I mean – you can't go by that person's history at all – can you? Case in point: Abe Lincoln. He failed. And he failed. And he failed. He had a total of 8 election losses and 2 business failures. Before suddenly he surprised everyone to become the president of USA (using a very very smart strategy of focusing himself to be the #2 choice of every body out there when the fight for #1 was intense).
So how do we make sure that we don't miss the Abe Lincoln's of this world? Or do you just evaluate people based on the attempts they make – and not on their successes and failures?
Microloans and women: Yes I agree. It has been a consistent pattern across the world. Which is why, it is generally believed in the developing world, that educating & empowering a woman in the house yields the best possible results.
> I need to be in the fray, forming the future.
Great thing to say and to hear. Yes, if creating companies is what you do best, I wish you keep doing it for a long time to come.
for what it's worth, Founder Collective made 2 investments in the last month where the founder/CEO's are women
http://foundercollective.com/companies/20×200
http://foundercollective.com/companies/Giiv
Chris…That's worth a heck of a lot. Good on you!
[...] From cdixon.org [...]
Chris, any investment in 1 founder startup?
[...] “Many VCs tell entrepreneurs to ‘come back when you have a demo.’ They aren’t wondering whether your product can be built – they are wondering whether you can build it.” – Chris Dixon. [...]
I understand the 'scary alien' look. Like you, I too believe in my business and not in the elevator pitch – which btw I have owed never to practice.
Totally agree with you!! Is hard for new entrepreneurs to really get it though.
[...] Pitch yourself, not your idea (cdixon.org) [...]
A VC can assist the entrepreneur in many ways when the entrepreneur rolls out new products: Positioning of product, (ii) Working with channel partners (iii) Direct sales. The measure of VCs¡¯ contribution is their value creation. The entrepreneur can spend 99 hours on product development while the VC spends only 1 hour introducing the product to customers-and nonetheless, the VC has created more value than the entrepreneur.To understand the pulse of the market, a VC cannot depend solely on industry surveys (just as you cannot judge would-be employees by the resumes they send in). Any industry survey is a representation of the past, and the window of opportunity is apt to have narrowed by the time there is clear data. Surveys may be marginally useful for long-term trends but have limited value for short-term trends. Finding the right people to talk to is critical. A VC cannot be an expert in every field.
Tan Yinglan
The Way Of The VC – Top Venture Capitalists On Your Board (Amazon: http://www.tinyurl.com/wayofthevc)
Blog: http://www.wayofthevc.com
A VC can assist the entrepreneur in many ways when the entrepreneur rolls out new products: Positioning of product, (ii) Working with channel partners (iii) Direct sales. The measure of VCs¡¯ contribution is their value creation. The entrepreneur can spend 99 hours on product development while the VC spends only 1 hour introducing the product to customers-and nonetheless, the VC has created more value than the entrepreneur.To understand the pulse of the market, a VC cannot depend solely on industry surveys (just as you cannot judge would-be employees by the resumes they send in). Any industry survey is a representation of the past, and the window of opportunity is apt to have narrowed by the time there is clear data. Surveys may be marginally useful for long-term trends but have limited value for short-term trends. Finding the right people to talk to is critical. A VC cannot be an expert in every field.
Tan Yinglan
The Way Of The VC – Top Venture Capitalists On Your Board (Amazon: http://www.tinyurl.com/wayofthevc)
Blog: http://www.wayofthevc.com
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