Saturday, 23 November 2013

Thoughts for startups (no. 4)

Maybe this is more one for the investment community than startups as such, but here goes.

The problem with elections as a way of choosing who should lead is that eventually those who get elected will be skilled in the art of getting elected and little else

That is loosely what Plato argues in The Republic - that those skilled in the art of persuasion are best at persuading others to vote for them, and hence that becomes the key skill for those who want to be elected. The skills that would make someone valuable as a political leader post election are irrelevant, because that is not how they are selected.

There is the same risk with this focus on selecting which startups to learn more about based on a 3 minute (or shorter!) pitch. It is hard to say anything really informative in 3 minutes, and hard to select what of all the things you could say about your disruptive startup[1] you will include. The best pitches will be delivered by those who have become good at pitching, good at choosing which things to say and good at saying them in a way that gets people's attention. The startups that deliver the best pitches become the startups the investors talk to.

But being good at pitching is not the same as having a good idea, being good at solutions, being good at people and project management, being good at building a business; so the selection criteria is wrong. Using this as a filter means investors can't expect to get to talk to the great startups, the next Google; they should expect to get "like Facebook, but for people who drive red cars" and other non-disruptors, with a team that don't have the right skills mix to deliver a high performance company, but can pitch better than a professional standup comic delivers one-liners. And then don't complain that the "quality of startups" that are coming through the filter is poor; fix your filtering process.

I don't know what a good filter looks like. The accelerators could be, but they too are limiting their entry based on pitches, as well as other very limiting criteria (age range and geographic location, for example, for any of the residential ones). But for sure 3 minute pitches are only a convenient, time efficient filter; they are not a good filter.

[1] Obviously it's far easier to choose what to say if you have a non-disruptive startup, but those are not the ones that make the big returns, are they?

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