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If you thought it was only entrepreneurs in the process of executing on a startup idea who spend sleepless nights tossing in bed …think again! So far we may have covered a lot on the challenges they face in setting up their ventures and managing the often challenging process of finding the funding they need but that isn’t to say the only drawbacks of the current way of doing things come from venture capital firms and early stage private investors. Entrepreneurs have also been guilty of certain “not so good” practices for which investors have to spend sleepless nights tossing and turning in bed thinking about where their investment is going next. One such practice by entrepreneurs is playing the idea lottery.

Investors may buy into a startup with a good idea but what they really like to see is passion, focus and execution on the idea with a single minded aim to make it work. Some entrepreneurs on the other hand believe it’s all about the ideas and the ideas only. Their objective becomes coming up with the next big idea they can sell ….till the next new idea comes along that is. In search for the next Google it becomes a process of selling one idea and then flipping to the next in hope that “this” is the one that will create instant success. Those random situations where the idea is an immediate success, are dream cases for all parties involved. But this is a one in a million scenario and even Google didn’t happen overnight. Playing the idea flipping game or the startup lottery, where the startup is killed with the old idea and new startup is created around another idea, is an investor’s nightmare. It’s something they would rather not see. In fact, every investor would like to see their investment create some real tangible value.

While completely flipping ideas altogether is a bad idea, startups have to be able to adapt and “pivot” their idea, while keeping the startup alive. The next Google’s are seldom the first idea from that team, but maybe it will start to form once they’ve had more interaction with customers, developers and have tweaked it all over. So the idea being pitched counts, but it’s not as if that idea will be unchanged after six months, of three years. Contrary to complete changes in the main idea, investors actually like to see this kind of adaptability and insight in the people they invest in. That’s right….investors like to invest in people and not into the idea. All things being equal, a good team and an average idea is what an investor would bet on rather than a great idea and an average team. Also, they would like to see that their idea/team is in the right position within the overall market growth that is tied well to megatrends that will impact everything. That is the path to the BIG potential.

As investors the secret formula you’re looking for is

Great Team + Great Idea + Right Positioning In The Market + Market potential + Tied Well To A Megatrend(s) Which Could Effect Big Changes

This is also where Grow VC fits into the equation helping ensure one goes through a process where they can ready themselves for “going BIG”.

A veritable checklist to equip entrepreneurs:

1. Great team? – OK!
2. Great idea? – OK!
3. Early enough? – OK!
4. Market? – (approaching big growth curve or extreme disruption/reorganization etc.) – OK!
5. Mega-trends? – (globalization, Internet changes everything, etc.) – OK!

As an entrepreneur you have be able to put yourself in the investors shoes and ask yourself “would you be willing to invest in your team?” and if so, “why?”. If your answer is “because it’s a fantastic idea!” then remember, investors don’t like to play the idea lottery. It’s their worst nightmare. If you answer “because you have what it takes to stick to your plan and build real value”, then you’ll find people willing to back you up all the way.

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Tags: challenges, community, entrepreneurs, funding, idea, lottery, startup, venture, Venture capital

This entry was posted on Monday, June 28th, 2010 at 4:01 pm and is filed under Business Education. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.