Venture Generation as a Process — Introducing the “Bowtie”
There’s a mythology about the process of creating a new venture. Entrepreneurs — perhaps a founder, or two or three — have an idea and decide at some point to start a new venture. And, presto! A new venture is born!
But what really happens? How does this work? How does a founder or group of founders decide to start a venture? Where and how do founders get the ideas that become their next new ventures?
Shifting the Focus: the Bowtie
Most of what has been written about startups over the past 10 years has focused on what happens after the new venture starts. I want to focus, instead, on things I have learned over the past 20 years about how new ventures are begun and some things I have learned over the past 5 years that might help us become smarter about the new venture generation process.
Imagine a bowtie. There’s a knot in the middle. It flares out to the left and to the right. The lifecycle of a startup is like a bowtie. The formation and initial funding of the venture itself is like the knot in the bowtie. Over the last 10 years, the right side of the bowtie has gotten all the attention. The right side of the bowtie is about all the things that need to happen after you’ve created your new venture. You need to raise capital. You need to build a team. You need to develop and launch a product or service. You need customers. You need revenue. And if you’re growing, you probably need even more capital. So you repeat this through additional stages of capital — Series A, B, C, etc. — until you reach a point where you provide investors with a liquidity event — the sale of the business or an initial public offering (IPO), which is really just a sale of a part of the business to the public.
What’s the left side of the bowtie? This is where the magic happens. The left side of the bowtie is the experience entrepreneurs have as they create a new venture. You may think it begins with ideas. It doesn’t. It begins with problems. And it has its culmination in the start of a new venture. I called this an “experience.” It is certainly that. For some entrepreneurs its a once-in-a-lifetime thing, while for others — serial entrepreneur s— this experience will be something they revisit on multiple occasions. It is an experience, but it wants to be a process — a model, method and approach that yields better decisions and better outcomes. I have written about this in another post — “A Startup Founder Brings a Knife to a Gunfight — why this needs to change.”
What Looks Like Starting with an Idea Is Something Else . . .
The “lightbulb moment” is a popular myth about the genesis of a new venture. An entrepreneur thinks to herself, what if . . . . ? And, as if by magic, an idea for a new venture starts her on the path to creating the next Facebook, Google or AirBnB. A young Bill Gates wakes up one morning, thinks to himself, “Wouldn’t it be cool if the whole world used the software I create?” And soon afterward, Microsoft is dominantes the world of personal and business software.
An idea is a problem wrapped in whatever solution you’ve chosen to address the problem. As an idea, Facebook started out with a problem a kid discovers at Harvard University — the “getting to know you” problem. This problem that had previously been wrapped with a different solution — a paper “facebook,” that provided photos, the names and some information about fellow students. But Mark had enough experience with online services to know that something very different, something much better, was possible. How did he describe the thing he and his college roommates built and called “Thefacebook” — “Thefacebook is an online directory that connects people through social networks at colleges.”
Most people don’t see Mark Zuckerberg as starting with a problem, but he did. He was solving a problem he had experienced. (Despite what you’ve heard, “The Social Network” movie you may have seen, or the “Accidental Billionaire” book you may have read, he did not do this to “get laid.”)
This is not how most entrepreneurs create successful companies. Instead, Paul Graham lays things out nicely in a 2012 essay, “How to Get Startup Ideas.” Wait. Didn’t I just say that it isn’t really about ideas? I did. Here is the first sentence in Paul Graham’s essay:
The way to get startup ideas is not to try to think of startup ideas. It’s to look for problems, preferably problems you have yourself
The next thing Paul Graham says in this essay is magical, and if you are a startup founder, you should take this to the bank:
The very best startup ideas tend to have three things in common: they’re something the founders themselves want, that they themselves can build, and that few others realize are worth doing. Microsoft, Apple, Yahoo, Google, and Facebook all began this way.
If every startup entrepreneur or founder actually read and understood this, many more successful companies would be created. After you read this, go read Paul Graham’s entire essay. If you haven’t done this yet, you need to.
Two Mistakes Founders Make When Starting
If it is true that many startup founders follow a different path, a path that leads to nowhere, to squandered time, energy, and capital, how and why does this happen? I’m going to focus on two of the most common problems I’ve seen over 20+ years as a serial entrepreneur and mentor.
Many founders begin with an idea. Not a problem. An idea. They’ve skipped a step. And they believe in skipping this step, they’ve cut to the front of the line. Instead, they’ve increased the likelihood they will fail.
An idea is a problem wrapped in a particular solution.
It’s helpful to remember that the solution you fall in love with is often one of many possibilities. And because they have already fallen in love with their solution, many entrepreneurs forget this. This solution, the one you love, the one you’re thinking about and working on, may not be the best solution to the problem.
Beginning with an idea is amateur hour. Instead, take Paul Graham’s advice (and mine): start with a problem. And if you know what you’re doing and you’ve done at least one or two startups before, start with a wicked problem — a problem whose solution would deliver far more than just ROI, a problem that once addressed would make you glad you’d sacrificed all those years to create a new venture because your venture actually made the world a better place.
A second mistake I see all too often: entrepreneurs begin with a faux problem. They start with something that isn’t a problem for anyone and turn it into something resembling a problem. If the problem isn’t real, the pain it is supposed to cause isn’t real either. Faux problems beget faux markets. And faux markets beget failure.
How do you avoid this? Paul Graham suggests beginning with a problem you have and suggests that many of the most successful companies have started this way, but in the excerpt I referenced above he adds three qualifications. He says founders should create (1) something the founder wants; (2) something the founder can build; (3) something few others realize is worth doing.
What Do You Want?
One of my friends, Joel Wishkovsky, started Simple Contacts because wanted to be able to order his contact lenses online. (He had a hunch others might want to do this too.)
…he wears contacts himself and launched the company out of frustration of going to the doctor to get his contacts renewed each month. Simple Contacts applies telemedicine to the process.
Simple Contacts was something Joel wanted, something he (and a team) could build, something few others had realized was worth doing.
Elon Musk wants to go to Mars. Of the entrepreneurs who want to go to Mars, very few have the ability to build the technology or the company to turn that “want” into a real opportunity.
What do you want? Do you want to make sure the Flint water crisis never happens again, anywhere in the world? Do you want to see auto-free cities? Do you want to create the market-based solutions that address wicked problems in health, energy, food, infrastructure, water, waste, learning, security or climate change? How will you, a serial entrepreneur with startup experience, turn your knowledge and passion into something that matters to you and to the world?
What Do I Want?
Here’s what I want. I want you and other serial entrepreneurs to take on the problems that matter. I want you and other serial entrepreneurs to be a little more like Elon Musk. I want you to start with problems that matter, wicked problems. And I want you to create the new ventures that can make these dreams a reality.
If you are a serial entrepreneur who plans to start a new venture in the coming year and this sounds interesting to you, consider requesting an invitation to participate in our next 10.10.10 program. If you know someone who could benefit from reading this, please forward a copy of this post to them. And to learn more about the program itself, click here.