If you ask me, the big idea is LESS important than good execution which obviously includes staff training. Most of my students think that the big, NEVER BEFORE TRIED, idea is more important but there are lots of companies that do very well with good execution of fairly mundane things.
I am pretty sure that the only thing that is in infinite supply is ideas; numbers, for example, represent an idea and they are infinite. There are probably more than 25 million smart Americans in their basements at any one time trying to come up with the next bid idea (like, say, Google). They are generating a huge volume of new ideas; that tends to suggest, in economic terms, a surplus of ideas while the skills to implement them are in much shorter supply and, hence, the latter will generally attract a higher price.
The market for new ideas, such as it is, tends to put a low price on them (just try to sell your BIG IDEA at a business model stage and you will see: a) how hard it is to do that and b) just how little you will get for it). Obviously, a startup that combines some type of innovation with good execution is better off than one with just sound execution. Fred Smith, when he started Fed/Ex, brought the hub and spoke system to the overnight package delivery business, essentially creating that industry.
Before that, it was thought to be an impossible challenge—if you had 60 cities as both origins and destinations in the network that meant 3,600 overnight flights, an obvious impossibility. If you had instead five hub airports within easy trucking distance, you could get by with 25 overnight flights…
However, most successful startups do not create new industries or are not necessarily first movers. Google wasn’t the first search engine; however, they did bring significant innovation to the table including: neutral search rankings, search rankings that reflected traffic loads on and links to a site, paid search links and auctioning off of paid search links. GradeAStudent.com, now GradeATechs.com, was not the first at home computer repair service but their execution was good and they used a back end system (GASnet) to automate their appointments and their billing systems.
I have felt for a long time that VCs are heading in the wrong direction; they should NOT fund startups. Rather, they should wait until startups have proven themselves in the marketplace. It’s kind of like watching for tall shoots in a field of grass. Those are the ones they should fund. It’s better for VCs, better for the national economy and, interestingly, better for startups too.
It’s better for VCs because they will fund more winners and fewer losers and generate better returns for their investors. This, in turn, will attract more capital to the industry which is good for innovation overall. It’s better for the national economy since careful rationing of scarce capital will provide higher overall growth rates. And finally, it’s better for startups, in my opinion, to focus on: a) building a sound business model, b) self (bootstrap) capitalization, c) using smart (guerrilla) marketing to capture customers inexpensively and d) generating real cashflow from real clients and customers. The founders of these businesses will find it much faster and much less frustrating to find customers first rather than spending nine months or more hoping to attract VC funding or going after government grants. They will also get help from clients in other ways such as designing the final product or service. It’s like a war plan—as soon as your contemplated business model comes into contact with customers, it will change; they will force changes that YOU CAN NOT PLAN FOR.
Finally, the founders of these businesses will get to keep more of the equity in their businesses if they do a deal with a VC firm later when their business is more mature and, frankly, they are more mature. Nothing gives you more leverage in negotiations with VCs than the fact that you have enough cashflow to fund the business without them.
Dr. Bruce M. Firestone, B.Eng.(Civil), M.Eng.-Sci., PhD.