Imagine having a million dollars to invest. It’s all the money you have to invest for the next 5 years, and you can only invest it in 1 place. How much time will you spend in researching the best place to invest it?
Probably a lot of time, maybe 6 months at least, no?
Everyone who wants to start a business doesn’t think that way, although it’s the exact same thing.
Most people invest <5% in thinking through what they want to do (myself included), and then get to work immediately. I’m realizing that that’s just stupid.
This became clearer to me when I was having a chat with a friend who had this business idea stuck in her head. One of the key lessons I learned in the past 10 years of building startups is that choosing the best ‘idea’ or market can make all the difference.
If you put 50% effort into a good idea/market, you can have a $100m company.
If you put 110% effort into a bad idea/market, you can have a miserable full time job.
You may get lucky with your idea, but I for one don’t think that’s a sustainable strategy.
Here’s how that chat went:
Friend: I have this idea. I’m going to quit my job and work on it.
Me: Interesting. Did you explore any other ideas?
Friend: No, but I’m sure there are many
Me: What are you optimizing for?
Friend: Financial freedom, learning/growth, and doing something I love
Me: If I tell you that there are 100 ideas you can work on, and 1 of these ideas is going to make you the most money, teach you the most, and give you the most pleasure than all of the other 99 combined, wouldn’t you want to pick that one?
Friend: Yes, of course
Me: Okay. Well then you should explore those 100 ideas before diving into one. Maybe this is the one, but you’d only find out by studying it and comparing it against a few other ideas.
Most businesses take about 5 years to get to a decent level. If you’re lucky, the business would take off and stabilize within that period.
You’re a smart person, you can probably get paid $200K a year. That means in those 5 years, you’d be investing $1m of your own money/potential.
If you had $1m today in cash, how much time/effort would you invest in finding out what are the best opportunities for your $1m to go to?– Probably a lot, maybe 6 months to a year. In my work (VC) we spend 90% exploring and 10% deploying
– Bingo. So why don’t you give yourself that 6-12 months to explore with the intention of finding out what’s the possible highest outcome idea? (assuming money is not a problem)
You get the point.
When I left my last startup, I had enough in savings to last me about 6-12 months. I invested that period of time into nothing but exploration – thinking through, analyzing, and launching different experimental startups.
I ended up doing some consulting work that prolonged my runway, as I was also spending money on exploring/experimenting with ideas, not just my living expenses.
Let me tell you – that was the best investment I have ever made. It was an investment in finding out what was worth doing and what wasn’t. I thought X was a good idea, I launched an MVP, and realized nobody wanted it. I thought Y was also a good idea, I launched a test, and realized I hated the space. It was not only an investment in finding out what was the best idea to work on, it was also an investment in myself.
p.s. this doesn’t always work. I was this close to running out of money and having to get a job. I even had to borrow money to extend my runway, but was lucky enough that one of my experiments ended up working out and I managed to raise funding for it, so proceed with caution. That being said, the success chances can be increased drastically by experimenting and not being set on one idea as ‘the one’. Lower your ego, study it with an open mind, explore other ideas so you can compare.
Keep in mind that your first business might fail, and that’s perfectly fine in the grand scheme of things. It’s like falling from your first bicycle ride. Who doesn’t?
This reminds me of the Stockdale Paradox:
“Retain faith that you will prevail in the end, regardless of the difficulties. AND at the same time: Confront the most brutal facts of your current reality, whatever they might be”
James Stockdale
Point is: spend enough time exploring before you dive deep. Ask your friends who started businesses before, because an experienced eye can spot issues with a business model that you won’t be able to. Critical thinking is key.
The most important thing is: build something people want. Everything else is secondary.