The essential question for any venture capital and the key answer for any entrepreneur... And yet a question that the vast majority of entrepreneurs find an answer to after having created the wrong startup...Naval Ravikant It has a focus which I think is particularly useful for entrepreneurs: "There is no single, magical answer, but in reality I do have a series of criteria that I have arrived at based on my own ventures, after analyzing what worked and what didn't.” I am looking for two things that are of the utmost importance, above all:
- A great team: It's obvious. It's a tautology. Everyone says so. You have to work with some of the best professionals in the industry in question.
- A huge market: Niche markets don't work, because the idea never works right the first time. You always have to make changes to the idea, so you need space to maneuver in a large market.
“Then there are three more factors that I analyze. It's not necessary for startups to meet all three, but I prefer a company to meet at least two of them:
- A complicated technology that becomes more complex over time.
- A proprietary distribution channel. A very clever viral marketing strategy, or SEO, or a partnership, or whatever strategy gives them a significant advantage over their competitors.
- A direct monetization model. More than just launching the classic banner at 10 cents CPM.
“There are a small number of companies that are very good and highly qualified and get an embarrassingly large number of offers from VCs. And there are a large number of companies that don't have one or two of these dimensions and therefore don't receive any funding.” This makes sense when you think about it, because this is a business driven by 'hits': a small number of companies are made with all the benefits. So when VCs recognize what they think will be a winning company, they'll pay for just about anything and do whatever it takes to invest in it. And when they look at what they think will be a losing company, they will simply say “goodbye”.” It's a lot like Hollywood, where there are few box office hits and lots of indie movies. Everyone has a camera, but the odds are on the side of them making an indie film. So go back to these five criteria and think about making a blockbuster.”
