Bedrock Capital’s founders have an excellent post up titled In Search of Narrative Violations where the authors argue that some of the best opportunities exist in areas that go against the grain of the currently accepted beliefs. Citing examples at specific points in time like cleantech as a failure but Tesla was a winner and cryptocurrency as a failure but Bitcoin as a winner, people are quick to band together and say some trend or industry focus was overhyped and not successful.
Taking the cleantech idea as an example, if you read the article Why the Clean Tech Boom Went Bust from Wired in 2012, it’s clear many entrepreneurs failed and investors lost money. Fast forward to today, one major success from that early 2000s era — Tesla — has achieved a scale, both commercially and financially ($700B market cap!), that it more than makes up for all the losses. Sometimes the power laws are so dramatic that one win makes up for tens of thousands of losses.
Similar to points in time on the Gartner Hype Cycle, opportunities emerge even after the peak of inflated expectations and the trough of disillusionment starts to set in. Prognosticators have moved on to the next shiny trend yet opportunities still exist. If you were to follow the “experts”, you’d believe all the innovation was done. Only, it takes a number of years to really understand how a new technology or industry plays out.
Finally, this is similar to Be Non-Consensus Right. If everyone is betting on the same thing, it’s noisy and more difficult to build a great business. Opportunities exist in the consensus realm, but the challenges and challengers are stronger. Find the non-consensus startup ideas.
Pardot, in hindsight, was a non-consensus idea. Investors told us marketing technology was a bad idea because no large martech company had every been built. Fact. Marketing departments don’t have technology budgets, they have advertising budgets. Fact. The consensus was that martech isn’t a good area. If we listened to the “experts”, we should have shut the startup down and moved up. Only, we were non-consensus right and martech has now created $100B+ of value as a category.
Look for startup ideas in narrative violations and non-consensus right areas.
David Cummings on Startups 