Early stage startups don’t need a perfect idea, they need a great thesis

Investors are frequently asked what they look for in a good startup and most good ones answer “Great team, great product and great market”. With early stage companies team is paramount because that’s just about all there is in the company. The product and market can be changed (with pain) but if you take the team out the business is unlikely to survive. Later stage companies have the reverse situation. They have released products to a market and have built a brand. In these businesses changing market or product destroys a lot of value but it is possible to bring in new managers (with pain).

Josh Miller, co-founder of Branch has a good post up on Medium today which examines what we should look for in early stage companies in a bit more detail. He notes that most early stage investors look for a great team and a strong idea about a product and a market. However, as we know, many successful companies happen across their killer product somewhat by accident. Twitter was a side project for Odeo. Instagram was a pivot from Burbn. Fab started as social network.

Josh’s idea is that early stage investors should look a great team with a great thesis about how the world is changing and back them to experiment with different products that leverage the change.

I buy into that. As I explained in the first paragraph the team is paramount at the early stages, but it’s obviously important that they have some ideas, not least because discussing their ideas is one of the best ways to understand whether they are indeed a great team. However, whilst too much work on a product idea early can make it difficult to change tack if/when reality turns out to be different to expectations, a well thought through thesis will be more durable.

  • Craig J Willis

    This is interesting, I’ve long argued that it’s not the idea that is important but how well the team generate and develop ideas. It’s why I have a problem with people that think they have a great idea but don’t want to share it in case someone steals it. My view has always been that an idea is not a static thing, if someone steals your idea today, that’s all they’ve got, the idea that existed at that specific point in time. They don’t have the history of how you got there, nor do they have the team that got you there. Unless they are the team, in which case they haven’t stolen the idea they’ve just got rid of you.

  • Hi Craig – I agree. Thinking of an idea as a point in time instantiation of a body of thought captures it pretty well.

  • Richard Kelly

    I’ve turned down Stanford, Oxford and Cambridge educated candidates before now because they have lacked creativity. My Startup needs a team who can think with ambition but has the skills to make their ambition into reality. It’s very important each member of the team has this aspect because they need to be able to communicate their ideas and elaborate together. Their intelligence should be matched by their creativity.

    ” Intelligence without ambition is a bird without wings” – Salvador Dali.

  • ‘Intelligence without ambition is like a bird without wings.” Love it.
    You must tell me what your startup does.

  • Richard Kelly

    The last 24 hours has been very exciting for us. We have stumbled across something rather spectacular.

    If you can wait a little longer for our presentation website to be uploaded (approximately 48 hours) I will send you a link and reveal all 🙂

  • That works for me. Thanks Richard.

  • Richard Kelly

    No problem Nic 🙂