The Difference Between Side Projects and Fundable Startups

A few days ago i exchanged emails with an early stage VC friend about the nature of emails he has been getting from entrepreneurs. His argument was that he can respond to majority of the emails with an explanation on the difference between a startup and an idea/side project. Challenging him to draft such a response led to a great discussion on the line between an idea/side project and a potentially fundable startup.

Here are, in my view, a few of the attributes of a fundable startup as compared to a side project or an idea:

  • Team – a startup has a team with just the right skill-set to execute on the idea. Ideally they have a track record of working together for a while. After all team dynamics is the number one reason early stage startups fail. Moreover doing a startup is a rollercoaster. You want to share the load and the risk with others. Most of the ideas i hear are in the heads of sole founders.
  • Execution – Almost everyone has an idea. At least once a week a friend or a neighbor shares with me an idea. Some are even worthwhile. Mark Zuckerberg wasn’t the first one to think of a social network. Friendster was around already and aparently that the Vinklevoss brothers had crafted a similar idea. Linkedin wasn’t the first professional network. Plaxo was already around when Linkedin was established. Thinking of ideas is easy. only 1% – 2% will actually go on to build something, whether in their spare time or full-time.
    An idea, in my view, it a theory waiting to be proved. It might make sense on paper but investors are not nonprofits that will give you money to prove a theory. The devil is in the details. More than once i met two individuals with a similar idea The person who actually built something had a much better understanding of the need, a more detailed execution plan, understanding of the potential challenges etc.
    Finally many ideas might seem weak (or stupid) initially. Who would want to let a stranger drive one’s car (FlightcarGetaround) or sleep in one’s bed (Airbnb). Proof points are more difficult to argue with.
  • Commitment – Building a company requires commitment and persistence. Almost every founder has a story about sleepless nights and being on the verge of bankruptcy. The difference between an idea and a startup is the difference between talking about it and actually putting your faith (and capital and time) to go and execute on it. Building a startup is a commitment to potentially do that for a fair numbers of years.

How far one needs to be on the execution path is debatable and changes from one investor to the other (read Demystifying Traction)  but many entrepreneur expect investors to put their capital in order for them to make a leapfrog and turn their idea/turn their side project to a full-time commitment.

If you don’t believe in your idea why should an investor do that ?

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About shanishoham

After 14 years of General Management and incubating/scaling new businesses & organizations for enterprises (established a $55M mobile business and a $100M/400 employees global division), I became an investor Today I’m a board member/mentor with 5 incubators & micro-VCs and involved with many other private & public incubators around the world. I also founded a VC firm named 2020 and I'm a member with a number of angel groups so i get to see & work with many startups, innovation centers and other parties across the ecosystem. I’m an alumnus of the Stanford Graduate School of business - Sloan Master in Management program, a 10 months intensive program for 57 carefully selected experienced Executives and leaders from all around the world.

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