Investors are more interested in funding terrible ideas from people they know than great ideas from people they don't know.
The market is monopolized on every side and good ideas can't compete against sheer capital.
Part of being a good management team (which is what VC's are looking for after all) is being able to sell. Selling the concept to investors, selling the product to customers, selling benefits to partners. People's history, credentials, contacts, etc. are all part of how you sell.
Just think about how hard it is to determine if someone can do a specific, relatively narrow, job when hiring. Then imagine how hard it is to determine if a team can work together, be persistent enough to see things through but flexible enough to roll with the punches as needed. To assess if the team can deliver a product, manage their finances, hire a good crew, craft a compelling marketing message, sell to customers, sound good to the media, etc, etc. This is not easy. Is it any wonder that VC's put great stock in past successes of any kind?
Maybe this isn't fair. But it's how the world works. Sorry for rambling this morning :-)
This is post-hoc justification.
Google, Facebook, Reddit, and Twitter have been worth billions (Reddit the exception) for more than a decade. They've collectively innovated how much since 2005? They have a bunch of small improvements that anyone could have anticipated and purchased many of the good ideas that have come along (Occulus). Some are floundering in spite of having massive reach (Twitter), some can't anticipate uses of their platform until after it happens (Facebook). Some are dead and their founders have joined the VC game (Digg). Did Kevin Rose not look like a pretty sure bet in 2006? Whatever happened to Milk?
Yet according to the "they know how to deliver" logic, they should be knocking new ideas out of the park. Where are they? Of course they have some successes but you could have some successes too if you have billions of dollars to subsidize yourself and an existing social network to support yourself and advertise your success. You throw ideas at a wall and the ones that work are evidence of know how. It's a broken metric.
Honestly, there is no evidence these companies are well run except for the fact that they won, but they effectively won a lottery at which point money starts flowing in. And that's the entire VC game - you'll have some moderate successes, mostly failures, and some unicorns. As long as you hit jackpot a few times you are ok. Meanwhile, part of the VC job is selling the idea that they know what they are doing, too.
And with hundreds of thousands of the world's smartest kids being funneled through the top colleges each year, you've got a lot of lottery tickets.
I think it's interesting that all of these authors are at Stanford or MIT. Seems similar to the backgrounds of a lot of tech talent:
Gates (Harvard), Zuckerberg (Harvard), Brin and Page (Stanford), Reddit guys (Cambridge area) you could go on and on.
Maybe there would be more diversity of ideas if the people behind them weren't all coming from similar backgrounds and self-selecting to certain locales...
A successful founder is usually good at execution, so the next logical step is to bring the idea to fruition. OTOH coming up with a new and worthy idea by oneself is much harder: most good-looking ideas do not survive a contact with the reality.
This is why Google came up with Maps and Android, both hugely successful, by acquisition. This is why Facebook got its iconic "Like" functionality by acquisition.
As you noted, coming up with an idea and following it through to making millions off it is a lottery. Acquiring a good idea in a semi-product shape and making millions off it is also a lottery, but with much better odds. Guess what an intelligent person would choose more often, given the choice.
I don't remember seeing this anywhere, but it might as well have happened. And if it did, it's weird how we can forget that Facebook didn't always had a like button, seeing as how it's a fundamental part of their platform.
A lot of that is of their own doing. Github is a great business; they just got greedy. Interesting if they should fail, their failure will be cited as evidence that you can't make money hosting code (you already are).
If they didn't take on millions and keep hiring engineers like crazy, they'd be doing just fine. They wouldn't be losing $66 million hosting a code repository anyway....
Amazon was/is greedier and look at where they are now. My central point is that great businesses are just a small set within great ideas with lot of value. One simple example is what happened with software tools in Windows. There are great tools that provide a lot of value for the users but people are use to free software and almost nobody is buying them.
Everyone buys into the same illusion; that because someone succeeded before, that means they must have the secret sauce for success. In doing so, they forget the thing that actually matters; the product/service.
Nonsense. In the U.S., if the idea is worth anything, then it's surely worth spending ~$1500 to file a Provisional Patent. That Provisional Patent gives you 1-year to determine whether the idea is feasible. Talk to investors, see if there's interest. Nothing proves interest better than an investor willing to invest real money. If no interest, take that as an indicator and move on.
> Investors are more interested in funding terrible ideas from people they know than great ideas from people they don't know.
Nonsense. Investors are looking to make money. Give them an feasible idea that is somewhat backed with a guarantee that the money they fork over for you to spend on developing the idea won't simply be copied - and the investor will take that over a terrible idea with someone they know.
> The market is monopolized on every side and good ideas can't compete against sheer capital.
Nonsense. Even if the biz ends up collapsing, the patents can still be sold or retained. Many here will not like that idea - but the reality is the patents provide the investor with some comfort especially if the idea is worth anything.
If you approach an investor with the idea for a "bridge", they won't fund it because there's no proof people would use a bridge, and you can't prove it until you're funded. End of story. No bridge.
Give them an feasible idea that is somewhat backed with a guarantee that the money they fork over for you to spend on developing the idea won't simply be copied - and the investor will take that over a terrible idea with someone they know.
Please, point me to this investor. I think your hope of what it should be masks the reality of what it is. I'm with you; I wish it was that way too.
But, let's assume he did mean a complex, expensive bridge. If it truly was worthwhile location to build a new bridge, then why would it be hard to show that people would use it - it's more a matter of measuring existing traffic on other nearby bridges etc...
I'm specifically talking about this Catch-22: that you often can't create something revolutionary (e.g. build the first bridge) without investment and you can't get investment until it's built and demonstrating its worth.
Your initial statement seems to indicate that it's relatively easy to raise funding if you have a 'good idea', yet a good idea is usually considered the modification of an existing idea ("Facebook with Twitter, but for dogs"). A revolutionary idea won't be as accessible (in terms of understanding) by investors or even initially consumers, and won't get funding for that reason. The irony is that it's the revolutionary ideas that everyone is seeking, yet the way funding works often precludes it, rather than encourages it, from happening.
So implement it then. In the context of this site, we're talking software or hardware - what's it going to take - a weekend, a month, or a few months - nothing impossible or out of reason if it's a good idea and worth it.
Something revolutionary? No. Software like that would take more than one person over a few weekends. And that's the catch.
You said, "Investors are looking to make money," and you're right. The problem I'm trying (and failing) to articulate here is that true revolution in software or hardware is not always something you can do over a weekend, and it's not something the customer might request (that works better for variations of existing products).
Governments and large companies used to have bigger budgets to fund such research; they don't do as much of that anymore, so it's left to private investors, who understandably expect a clear return on their investment, but that precludes a deeper type of innovation in favor of shallower innovation.
We would rather gather fruit than plant seeds. Gathering fruit is where the money is, so it seems to make sense. But that's short term borrowing from the long term. We're facing barren trees and scratching our heads. We're not out of ideas -- we just haven't invested in them.
Really... Nothing? You know, like customers willing to pay you money...?