If you want to build a startup into a success, it seems to me that there are two basic plans you can follow:
- Develop a feasible business model, launch and market a desirable product, and collect the profits.
- Develop a business/technology/userbase/story that another firm believes can feature in its efforts to execute plan (1).
Least Resistance
There’s an old saying to the effect that “ideas have no value — it’s the execution that matters”. I think that this is sort-of-true. Raw ideas, indeed, have very little value, but often value is added not by execution that delivers success, but by execution that suggests that success is attainable.
I propose that while both of the plans listed above are difficult to put into practice, plan (2) may well be easier. I further cynically propose that plan (2) is not necessarily just an abbreviated version of plan (1); there may be a good deal of tension between the ideas and execution that yield a strong business, and the ideas and execution that yield a shiny acquisition target.
Valuation
So, when handicapping startups, it might be a good idea to ask not just whether they’ll succeed (in the massive VC-sating returns sense), but also whether they’ll offer that idea+proof-of-concept goodness that attracts acquirers.
Editorial note: In case you’re wondering, this post is more about me thinking out loud than offering actual advice. I’m frequently astounded by the startups that have big exits, and am trying to better understand the relevant patterns.
