As a follow up to the previous post Every Spreadsheet Shared Shared is Another SaaS App, there’s an important point that needs to be made: not all good ideas can be good companies. I’ve met with hundreds of entrepreneurs over the years and heard their pitch. Truthfully, on the surface, most of the ideas made sense (I don’t have the domain expertise to assess the quality of the ideas). Only, 99% didn’t become good companies.
Here are a few reasons why all good ideas can’t be good companies:
- Timing – Many ideas are too early such that that market isn’t ready yet. Some ideas are too late such that the market has already matured. My preference is to be slightly early to a market so that when the market crosses the chasm, the core foundation is already in place.
- Cost of Customer Acquisition – Some ideas don’t provide enough value relative to the cost of acquiring and onboarding a customer. In fact, this is often the case and a root cause of startup demise. And, it’s also a common indicator of a nice-to-have product (especially vs. a must-have).
- Competition – Competition is good. Markets are fairly efficient. Many ideas need some amount of scale to be a good company and most markets don’t support having a number of companies with scale.
Not all good ideas can be good companies, and very few ideas can be great companies. Consider these ideas and more when assessing a startup opportunity.
What else? What are some more reasons why not all good ideas can be good companies?
David Cummings on Startups 