Ideas don't matter | #4

Friends,

If you google the terms “startup, idea, execution”, the results on the first page will lead you to headlines such as “the idea of a business has no value”, “it’s not about the idea”, “why execution and not ideas can make all the difference” “you’ll know that ideas are worth (almost) nothing”.

I think this is completely absurd.

The idea is the basis for your execution. Your startup idea gives you the direction. That’s particularly important when operating in a context of limited resources. Ideas are key to success.

Shallow vs. profound ideas

If we assume that the value of an idea can be easily captured in words and disseminated, then we limit the notion of an idea to the notion of what I would call a shallow idea. If that’s the premise then I agree: the idea won’t make the difference between success and failure. The best proof that shallow ideas have no value is that lists/directories for startup ideas never took off.

Profound ideas on the other hand are the result of deep, complex and convoluted thinking. If a founder has a profound startup idea he looks at the whole chain of effects, impacts, and outcomes. When you dig deeper, you understand better. You analyse, dissect and make informed judgments based on different mental models. It’s not easy to derive a profound idea. A founder needs to be smart, has learned in-depth about the problem space and is willing to engage his mind in first-principles thinking. It’s not possible to codify a profound idea on a paper as it’s inseparable from the founder.

Let’s look at three mental models which can be helpful guidance for developing profound ideas: (i) The idea maze, (ii) good ideas that look like bad ideas and (iii) the acts of your startup idea.

The idea maze

The maze is an excellent analogy for thinking about a startup idea. Balaji Srinivasan introduced this notion of a bird’s eye view of the startup idea.

A shallow idea gives you the entrance to the maze. A profound idea is the map of the entire maze.

Chris Dixon expanded on the idea maze model. He suggested some thoughts on how to map out the maze

1. History. If your idea has been tried before (and almost all good ideas have), you should figure out what the previous attempts did right and wrong. A lot of this knowledge exists only in the brains of practitioners.

2. Analogy. Look for analogies to similar businesses. If you are building “API-first”, it can be useful to look at what Stripe did right. If you are building consumer social, you should understand TikTok’s beginnings.

3. Theories. There are now decades of historical data on startups, and smart observers have sifted through them to develop theories. Some of these theories come from academia (e.g. Clay Christensen) but increasingly they come from investors and entrepreneurs.

4. Direct experience. A lot of good startup founders figure out the maze through direct experience, often at work. The key here is to put yourself in interesting mazes and give yourself time to figure it out.

Good ideas that look like bad ideas

The first time Peter Thiel spoke at YC, he went to the whiteboard to draw the following Venn diagram (see Black Swan Farming from Paul Graham).

The best ideas often look terrible in the beginning.

Why is that?

(Big) companies are already working on good ideas which look like good ideas because they’re obvious. Entrepreneurs are in the business of leftovers.

Google was very late to the search engine business. The dominant notion at the time was to optimise for the stickiness of the user. A search feature to attract the users, then optimise for them to stay as long as possible on the portal. Google’s idea of being so good at search that users left the site ASAP because they found what they were looking for seemed bad at this time – hard to believe in hindsight.

Facebook: The tenth social network, and limited only to college students with no money? Also terrible. MySpace has won and who wants college students as customers?

To discover ideas at this intersection you’ve got to know the secret. A secret in Peter Thiel’s view is what you believe that few other people believe. There are three ways to come up with secrets

• Know the tools better than anyone else (“software stack”)

• Know the problems better than anyone else

• Draw from your own life experience/background

The acts of your startup idea

Founders often succeed in explaining the starting point of their company and the vision of their idea. However, they fail at filling the void in between.

Great founders with a profound startup idea in mind can walk you through a thought-out journey connecting today’s wedge in a certain market and tomorrow’s big vision.

This third mental model is nothing else than a simple, yet effective framing of this journey: Think about the sequencing of your business. What is the act 1, act 2 and act 3 of your business? I stole this from a feedback session given by a Sequoia partner to the teams of their Arc program.

Here is the example of Revolut, the no 1 neobank in Europe: Act 1 was a prepaid debit card that would enable users to spend multiple currencies at the interbank exchange rate. From there, Revolut could go to everyday banking as act 2 and further own act 3 by offering crypto, insurance, and credit as the financial super app. With each act, you should increase the probability of unlocking the next phase.

Closing thoughts

Ideas are worth nothing unless executed says Steve Jobs.

Based on the thoughts of this article I would say:
Ideas are worth nothing unless they are profound and executed.

Or you could say that success is the multiplication of both.

Founder’s view: Georg from Wandelbots

It’s great to have Georg, a Series C robotics founder, join me for this newsletter. We know each other from The Operator-Angel Collective I’ve been organising in the past few weeks in Berlin.

How did you come up with the idea for Wandelbots?