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Unless we know how many companies looked like these and fell flat on their face, this article is useless as a predictive model. Example: Most of the successful

by IIAOPSW 11y ago

Unless we know how many companies looked like these and fell flat on their face, this article is useless as a predictive model. Example: Most of the successful ideas seemed flawed. I'm sure a great many flawed ideas also seemed flawed. Does the author really believe "this sounds stupid" is a predictor of success? Because if so I have a bridge startup in Brooklyn to sell them.

jsnathan 11y ago
> Some startups that seem poised for greatness go on to crash-and-burn, while others that are slow to get off the ground surprise everyone with their triumph. There is no formula, expectations are often wrong, and each success story is unique and unprecedented… but that doesn’t mean there are not patterns worth paying attention to. > Our analysis did reveal one clear, underlying theme: > There are large companies to be built by offering new, innovative and superior customer experiences to large markets, regardless of how competitive the sector already is or how successful the founders have been before Looks to me like the author understood the limits of his investigation perfectly well.
- edgyswingset 11y ago
  I'd hardly call it an investigation.
jhuckestein 11y ago
You can still derive some information from this kind of analysis. We can conclude that "this idea sounds stupid" or "this is a first-time founder" are not good reasons to dismiss an investment opportunity. In other words, the mentioned traits don't appear to be strongly negatively correlated with startup success.
- Retric 11y ago
  Suppose, 50% of all successful companies had first time founders (which sounds great!), but 51% of all companies where started by first time founders. Well, now being a first time founder is a small negative indicator. As to stupid idea, I think the black and white nature of the question is an issue for analysis. A scale where people suggest how likely it is to make money could be a more useful indicator. I suspect people may call long shots 'terrible' even if they think it might work, but that does not discount really dumb ideas. Google was a long shot, selling a highly toxic playdough substitute is just not going to work and may get people killed.
- minimaxir 11y ago
  > We can conclude that "this idea sounds stupid" or "this is a first-time founder" are not good reasons to dismiss an investment opportunity. No we can't conclude that. These companies are immense outliers in a marketplace where over 90% of startups fail due to being stupid ideas.
- pbreit 11y ago
  I call "baloney" on the "stupid idea" tenet. Somehow folklore has us believing that AirBnB, for example, sounded crazy at the time but does anyone really believe that? Staying in homes has been around as long as homes and vacation rentals was a mature market.
  - lberlin 11y ago
    It didn't sound crazy at the time. It sounded crazy at the time to investors - old, rich white guys (I'm generalizing, of course). These guys didn't need to or want to stay in an AirBnB, or at least didn't before it had already become commonplace. Younger folks though, traveling on a budget, interested in meeting other people while away from home - it's a no brainer. We all stay on friends couches, in guest rooms, share cars.
    - ghaff 11y ago
      Put another way, couchsurfing and ride sharing have been around forever. What wasn't obvious is whether there was enough money in intermediating these as commercial transactions to make a business that would be interesting to VCs. (And, arguably, the current valuations of these businesses is higher than the market will ultimately support.)
    - pbreit 11y ago
      Is that even true? I'm familiar with the recent story about everyone supposedly passing on AirBnB. But the real reason is that it was an odd way to try to raise that amount of money. When raising a few 100,000s pre-product you go to a much smaller circle, not cold-ish intros to "pros".
pbreit 11y ago
Also, were the ideas really that outlandish? Staying in other peoples' homes has been around basically forever. Vacation rentals was even a totally mature market.
tlb 11y ago
Even without the control group, it's not a useless observation. Many investors only invest in ideas that don't seem flawed (which seems reasonable on its face), but they should realize they're missing a large fraction of the good opportunities.
- jsprogrammer 11y ago
  What you are missing is that there is no way to determine what "flawed" means.
marze 11y ago
The whole conclusion of the article is there is no "predictive model". Why isn't this comment -4?
- jsprogrammer 11y ago
  No one read the article?
jsprogrammer 11y ago
No, unless the model has shown at least some consistency with the real world, it is useless as a predictive model.

by IIAOPSW 11y ago

jsnathan 11y ago

> Some startups that seem poised for greatness go on to crash-and-burn, while others that are slow to get off the ground surprise everyone with their triumph. There is no formula, expectations are often wrong, and each success story is unique and unprecedented… but that doesn’t mean there are not patterns worth paying attention to. > Our analysis did reveal one clear, underlying theme: > There are large companies to be built by offering new, innovative and superior customer experiences to large markets, regardless of how competitive the sector already is or how successful the founders have been before Looks to me like the author understood the limits of his investigation perfectly well.

edgyswingset 11y ago
I'd hardly call it an investigation.

jhuckestein 11y ago

You can still derive some information from this kind of analysis. We can conclude that "this idea sounds stupid" or "this is a first-time founder" are not good reasons to dismiss an investment opportunity. In other words, the mentioned traits don't appear to be strongly negatively correlated with startup success.

Retric 11y ago
Suppose, 50% of all successful companies had first time founders (which sounds great!), but 51% of all companies where started by first time founders. Well, now being a first time founder is a small negative indicator. As to stupid idea, I think the black and white nature of the question is an issue for analysis. A scale where people suggest how likely it is to make money could be a more useful indicator. I suspect people may call long shots 'terrible' even if they think it might work, but that does not discount really dumb ideas. Google was a long shot, selling a highly toxic playdough substitute is just not going to work and may get people killed.
minimaxir 11y ago
> We can conclude that "this idea sounds stupid" or "this is a first-time founder" are not good reasons to dismiss an investment opportunity. No we can't conclude that. These companies are immense outliers in a marketplace where over 90% of startups fail due to being stupid ideas.
pbreit 11y ago
I call "baloney" on the "stupid idea" tenet. Somehow folklore has us believing that AirBnB, for example, sounded crazy at the time but does anyone really believe that? Staying in homes has been around as long as homes and vacation rentals was a mature market.
- lberlin 11y ago
  It didn't sound crazy at the time. It sounded crazy at the time to investors - old, rich white guys (I'm generalizing, of course). These guys didn't need to or want to stay in an AirBnB, or at least didn't before it had already become commonplace. Younger folks though, traveling on a budget, interested in meeting other people while away from home - it's a no brainer. We all stay on friends couches, in guest rooms, share cars.
  - ghaff 11y ago
    Put another way, couchsurfing and ride sharing have been around forever. What wasn't obvious is whether there was enough money in intermediating these as commercial transactions to make a business that would be interesting to VCs. (And, arguably, the current valuations of these businesses is higher than the market will ultimately support.)
  - pbreit 11y ago
    Is that even true? I'm familiar with the recent story about everyone supposedly passing on AirBnB. But the real reason is that it was an odd way to try to raise that amount of money. When raising a few 100,000s pre-product you go to a much smaller circle, not cold-ish intros to "pros".

pbreit 11y ago

Also, were the ideas really that outlandish? Staying in other peoples' homes has been around basically forever. Vacation rentals was even a totally mature market.

tlb 11y ago

Even without the control group, it's not a useless observation. Many investors only invest in ideas that don't seem flawed (which seems reasonable on its face), but they should realize they're missing a large fraction of the good opportunities.

jsprogrammer 11y ago
What you are missing is that there is no way to determine what "flawed" means.

marze 11y ago

The whole conclusion of the article is there is no "predictive model". Why isn't this comment -4?

jsprogrammer 11y ago
No one read the article?

jsprogrammer 11y ago

No, unless the model has shown at least some consistency with the real world, it is useless as a predictive model.