I was on a panel last week with some friends in the VC and angel ecosystem. One thing that gets repeated often (that I generally agree with) is that ideas are a dime a dozen. As investors, we tend to value the grit and tenacity of a founder and their commitment to solving a problem more than the particular idea.
The typical sound-bite from this type of discussion is something like “Having the right idea is not that important.”
But this does not sit entirely well with me. I’ve seen lots of terrific entrepreneurial teams pound their heads against a brick wall because they had the wrong idea. Even founders who are very scrappy and nimble can sometimes struggle to find the right opportunity for them to pursue.
As an investor, I do know that chances are, any idea I invest in is going to change substantially during the life of a company. But I have almost never invested in a company where I didn’t believe that the idea was right. As I like to say, most companies I invest in pivot in some way, but I don’t like investing in a pivot. I also never want to invest in a company where “I love the founders but don’t love the idea”. I think this does a disservice to everyone.
Ideas will change, but they are important. I believe that although it’s often not critical that a founder come up with the right idea, I think it is quite important that there is something right ABOUT the idea.
What may be right about an idea is the identification of a non-obvious problem, a deep customer insight, a bet on the evolution of the market, great founder/market fit, or something else. Some examples:
Groupon is famously a pivot from ThePoint, which was a fundraising platform for causes. ThePoint wasn’t successful, but what was right about it was the mechanic around aggregating buyer demand towards a tipping point, and how powerful that can be. It’s no surprise actually that Kickstarter and other platforms like it actually aren’t that far off from where ThePoint started nearly 10 years ago. It wasn’t the right idea, but quite a lot was actually right about the idea.
Paypal was a merger of two companies, one of which was focused on mobile payments. It took a few iterations for the company to settle on being a way for online merchants (largely on Ebay) to accept credit cards or payments from a Paypal balance. The original idea wasn’t exactly right, but what was right about the idea was that the financial industry is going to shift towards much more frictionless, digital payments. Billions of dollars of value (and billions more to come) are going to be created in pursuit of this goal.
More recently, Houseparty rose from the ashes of Meerkat. Although the products are very different, what was right about Meerkat was the idea that one to many live video was a missing medium for consumers. Periscope/Twitter and Facebook have executed on the specific idea more successfully, but the seed of that continues to live on in Houseparty and a number of other group video chat competitors.
I think there are many more examples like this. But, I’ll also admit that not all pivots or restarts have this attribute. I’d probably be hard pressed to connect the insights behind Slack to those of its predecessor gaming company Glitch (if someone has ideas, please prove me wrong). But often, any successful shift or pivot will be connected to something about the original idea that is very right. Which is why I do spend a lot of time thinking about whether or not an idea is a good one for a talented team to pursue.