One of the most important questions for an entrepreneur is “Why is now the right time for this idea? Didn’t others try previously and fail?”
There are rarely new ideas in startups. If you have an idea, someone probably already tried it and failed — maybe they mis-executed, there was something counter-intuitive about the customer or business model, or they were too early (correlated with the market not being big enough yet). If you assume other people are smart, which is generally a good practice, then they executed well and there wasn’t anything counter-intuitive going on.
Earlier startups were likely just too early. So if you can’t point to an obvious misstep in prior attempts, “why now?” is often the critical question to answer.
There are at least 5 classes of good answers to why now:
- new technology allows products that simply weren’t possible before, e.g. battery tech and electric cars
- new regulation, e.g. Obamacare
- new business model has emerged, e.g. advertising could support free content online
- new user acquisition channels, e.g. search/SEO, FB Platform v1
- customer behavior has shifted, e.g. a desire for ephemerality once people understood the consequences of searchable, permanent identity
1 to 4 are strong answers and generally clear cut.
5 is the trickiest. Behavior change is the most common answer I hear startup founders assert around “why now” for their company. If 5 is true, then you win BIG — these are the “It wasn’t true until it was true” sorts of startups. Facebook, Uber/Lyft, and Snap fall in to bucket 5.
The challenge is 5 is the hardest to know looking forward. You can assert it’s true, but it’s easiest to know behaviors/preferences/attitudes changed looking backward.
What this means
If you can find novel solutions to problems because of new technology, regulation changes, new business models, or a new customer acquisition channel, then you can often win big and win quickly.
However, the vast majority of startups assert they can succeed because behaviors have shifted somehow. But the vast majority of these assertions are incorrect. However, the ones who are correct will win big. You can only know if the behavior shifts are real in hindsight, but you have to make educated guesses about these shifts looking forward. And that in a nutshell is one of the hardest challenges of being an entrepreneur or angel investor.