Deciding on a Venture

In pitching my ideas to people I have often complained about pessimism and negativity. Now that I have been approached by a few people about possible ventures, I find myself doing the same thing. Why is that?

I think a lot has to do with experience (mentioned above) but I think it more has to do with identifying risk, identifying holes, proper questioning, and not blind optimism. I think you get to a point when you can sense whether a project is all optimism and no homework, and when it's optimism with homework.

If I had three things to settle on it would be:

  1. Business Model - How will you make money?
  2. Financials - How much will you make for one customer? (bottom-up forecasting, not top-down)
  3. Customer Validation – What kind of research have you done to validate the number of customers, your price and your business model?

If you can't show me these things, I probably will be a little skeptical about your idea/venture.

Of all the things the most difficult is #3. It's especially difficult if you are creating a new product or service because there's no data and you need to do research, get focus groups, and really target your customer.

I personally think the ones that forgo this and make it big are just lucky. There is of course no way to prove that, since hindsight is 20-20, but I think it's generally the case.