How to Tell if You Have a Great Idea
There’s plenty of funding if you have a good idea.
Somehow, a bunch of entrepreneurs got it into their heads that good ideas go unfunded. It’s just not true. Because part of what makes something a good idea is the fact that the founder can convey that it’s a good idea. And in the world of funding, there are rules about how one conveys a good idea. You need an addressable market. You need to solve a problem for that market. There needs to be a way to make money. A lot of it. And there needs to be a barrier to entry.
I’m blown away by how many founders think they can get away with not having one of these things. You could have a weakness, sure. But you have to have the essential components of a good company, or you don’t have a good company.
There are plenty of people who will give you feedback on your idea. It takes very little knowledge of the startup world to recognize a crappy idea, because most ideas are so crappy in so many ways and you only need to be able to see one of them.
Here’s how founders get good ideas for companies. You start with an idea, and you tell a friend. Your friend immediately tells you why it’s a bad idea. You do this 20 times until your friend says, hmmm. That’s a good idea.
Then you tell your idea to a serial entrepreneur or an active angel investor. And that person tells you why your idea is terrible. This happens 30 times. You will have to find a bunch of different people to harass in this way. A friend will put up with 20 bad pitches. Someone who is not a friend can deal with five to 10 ideas before they start to find you annoying.
Eventually, someone who is active in the startup world says, “Hmm. That’s a good idea.” Then you make a deck and pitch to a few investors who could actually put money into the company. Only pitch to a few, because after three there will probably be a consensus about your weak point. Maybe you can’t make enough money to warrant investment. Maybe the barrier to entry is really weak. Maybe you know the market to address, but you can’t quite get to it.
After pitching three times, you’ll know which part of the pitch will stop investors in their tracks every time. Decide if you can overcome that. You need a new plan to overcome it because right now, you look weak.
This is a really hard moment for an entrepreneur. You have pitched 50 ideas. Met with ten people. Researched the hell out of this market. But maybe it’s still not a winner. You are way better off dumping the idea now than in two years. So if you need to, dump the idea now. It’s okay. It takes most entrepreneurs years to come up with their next fundable idea.
What I mean by fundable is that everyone says, “That’s a good idea.” No one likes to believe this, but there is general consensus about what is a good idea. That’s why investors look like sheep. They are not sheep so much as they are looking for the obviously good idea. If it’s not obviously good, it’s not good.
You know what? Sprout Skincare approached me a few weeks ago. The CEO, Adina Grigore, told me about the idea. Beauty products with a very short list of ingredients that are sourced locally, from family farms.
Right away I knew Sprout was a good idea. The pitch is one sentence and it’s clear and it rings true. I can immediately imagine the company growing to be huge. Sprout is one of those great ideas that make people excited after a very basic, straightforward pitch.
So I called the Grigore, and guess what? There is widespread interest in Sprout from investors and retailers. She is figuring out which will offer her the best path to get what she wants. And you know what? I’m not surprised. Because there’s a lot of funding out there for a good idea.
So to all of you who think that getting funding is complicated, or political or arcane: You’re lying to yourself. If you ask one person for help, and it’s a good idea, you’ll get the name of someone who can help you. If you don’t have a good idea, you don’t get help.
Funding is not difficult. Finding good ideas is difficult. But the most difficult thing for an entrepreneur is to spend time becoming personally invested in a new idea and then tossing it to the wind. Dumping an idea you love is as brave as running with an idea you love. They’re two different types of bravery that get you to the same goal: A great company for you.
PENELOPE TRUNK | Columnist
Penelope Trunk is the founder of three VC-funded startups. She is the author of the bestselling book, Brazen Careerist: The New Rules for Success, and her blog, penelopetrunk.com, receives about one million views a month. Earlier in her life Penelope played professional beach volleyball, which, believe it or not, taught her just about everything she needed to know about marketing.