Novel, but Certain (to Work)


The more one dives into startup investing, the most one finds Catch-22’s.  This post is about the tradeoff between being inventive and copying a known business model.

Novelty.  The risk-averse investors who make the high-risk investments in startups tend to like new ideas.  They are early adopters of new ideas and new technology.  They enjoy the excitement that comes with novelty and invention.

However, novelty comes with risk.  New ideas may work, or they may fail.  What looks interesting to the leading edge entrepreneur and risk-taking investor may not appeal to enough of the masses to make a successful company possible.

Certainty.  While early-stage investors are seeking novelty, at the same time they want some certainty that the business plan will work.  New ideas in new markets with new business models compound the unknowns and the risks, leading to uncertainty, scaring away investors.

Sticking with a tried and tested business model helps.  Same with a proven go-to-market plan.  And a working pricing model.  For entrepreneurs, I suggest being inventive in just one or two areas of your business plan: the idea, the target market, business model, marketing plan, sales plan, pricing.  Copy the other pieces from businesses that you know have worked before.

There is nothing wrong with copying other people’s ideas.  Few of the big successful startups invented anything new.  Ford, Boeing, Apple, Microsoft, Starbucks, Google, and Facebook were all followers into their markets, successful at delivering and operating and scaling more than inventing.

This is a lesson often overlooked by both entrepreneurs and investors alike.

By "Luni"


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