I don’t think I’m claiming that the value prop stories of bad startups will be low-delta overall, just that the delta will be more spread out and less specific. Because the delta of the cryobacterium article, multiplied by a million articles, is quite big, and Golden can say that this is what they’ll achieve regardless of how bad they actually are. And more generally, the delta to any given consumer of a product that’s better than all its competitors on several of the dimensions I listed above can be pretty big.
Rather, I’m claiming that there are a bunch of startups which will succeed because they do well on the types of things I listed above, and that the Value Prop Story sanity check can’t distinguish between startups that will and won’t do well on those things in advance. Consider a startup which claims that they will succeed over their competitors because they’ll win at advertising. This just isn’t the type of thing which we can evaluate well using the Value Prop Story test as you described it:
1. Winning at advertising isn’t about providing more value for any given consumer—indeed, to the extent that advertising hijacks our attention, it plausibly provides much less value.
2. The explanation for why that startup thinks they will win on advertising might be arbitrarily non-specific. Maybe the founder has spent decades observing the world and building up strong intuitions about how advertising works, which it would take hours to explain. Maybe the advertising team is a strongly-bonded cohesive unit which the founder trusts deeply.
3. Startups which are going to win at advertising (or other aspects of high-quality non-customer-facing execution) might not even know anything about how well their competitors are doing on those tasks. E.g. I expect someone who’s generically incredibly competent to beat their competitors in a bunch of ways even if they have no idea how good their competitors are. The value prop sanity check would reject this person. And if, like I argued above, being “generically incredibly competent” is one of the most important contributors to startup success, then rejecting this type of person makes the sanity check have a lot of false negatives, and therefore much less useful.
I have heard from several angel investors words to the effect of “I don’t invest in ideas, I invest in people.” Which is to say they prefer a good group of founders with a mediocre idea to a less reliable group of founders with a better one.
This seems similar to your high generic competence standard. The hitch is that the preference for a good team over a good idea doesn’t rest completely on the likelihood with which a mediocre idea will be successfully executed, but rather also on the likelihood that this good team will recognize the mediocrity of the idea and shift to a new one successfully. Quoting from Paul Graham’s essay linked above:
So don’t get too attached to your original plan, because it’s probably wrong. Most successful startups end up doing something different than they originally intended — often so different that it doesn’t even seem like the same company.
I feel like the ability to recognize and then articulate value should be included in the idea of generic competence. Likewise for things like opposition research: following the advertising example, I don’t see why we can’t just recurse on execution advantages with the same basic structure of a story. It is like a Value Sub-Proposition Story, where the specific person is the entrepreneur and the specific problem is delivering on some aspect of the Value Proposition (by getting it in front of people).
It still seems useful to the investor to know whether or not execution advantages are specific and what they may be, and therefore also useful to the entrepreneur to articulate them.
I don’t think I’m claiming that the value prop stories of bad startups will be low-delta. Because the delta of the cryobacterium article, multiplied by a million articles, is quite big, regardless of how bad Golden actually is.
Ahh, I should clarify that the Value Prop Story test I have in mind does not let you sum across multiple Value Prop Stories. It functions as an existence proof that the startup idea contains at least one specific case of a big value spike.
Indeed, one of the most common ways startups try to “cheat” the Value Prop Test is by trying to answer it with a bag of low-value-delta examples.
Consider a startup which claims that they will succeed over their competitors because they’ll win at advertising.
Hm, do we know any example of such a startup? I can’t think of one. The reason I ask is because ryan_b explained how most of these indirect advantages do also manifest as Value Prop Stories.
Being “generically incredibly competent” is one of the most important aspects in startup success, then rejecting this type of person makes the sanity check have a lot of false negatives, and therefore much less useful.
I see examples all the time of incredibly-competent founders whose startup is currently failing the Value Prop Story test. My strategy here as an angel investor is to hold off on investing, watch as they keep iterating or pivoting their idea, and invest when I see a Value Prop Story emerge.
I don’t think I’m claiming that the value prop stories of bad startups will be low-delta overall, just that the delta will be more spread out and less specific. Because the delta of the cryobacterium article, multiplied by a million articles, is quite big, and Golden can say that this is what they’ll achieve regardless of how bad they actually are. And more generally, the delta to any given consumer of a product that’s better than all its competitors on several of the dimensions I listed above can be pretty big.
Rather, I’m claiming that there are a bunch of startups which will succeed because they do well on the types of things I listed above, and that the Value Prop Story sanity check can’t distinguish between startups that will and won’t do well on those things in advance. Consider a startup which claims that they will succeed over their competitors because they’ll win at advertising. This just isn’t the type of thing which we can evaluate well using the Value Prop Story test as you described it:
1. Winning at advertising isn’t about providing more value for any given consumer—indeed, to the extent that advertising hijacks our attention, it plausibly provides much less value.
2. The explanation for why that startup thinks they will win on advertising might be arbitrarily non-specific. Maybe the founder has spent decades observing the world and building up strong intuitions about how advertising works, which it would take hours to explain. Maybe the advertising team is a strongly-bonded cohesive unit which the founder trusts deeply.
3. Startups which are going to win at advertising (or other aspects of high-quality non-customer-facing execution) might not even know anything about how well their competitors are doing on those tasks. E.g. I expect someone who’s generically incredibly competent to beat their competitors in a bunch of ways even if they have no idea how good their competitors are. The value prop sanity check would reject this person. And if, like I argued above, being “generically incredibly competent” is one of the most important contributors to startup success, then rejecting this type of person makes the sanity check have a lot of false negatives, and therefore much less useful.
I have heard from several angel investors words to the effect of “I don’t invest in ideas, I invest in people.” Which is to say they prefer a good group of founders with a mediocre idea to a less reliable group of founders with a better one.
This seems similar to your high generic competence standard. The hitch is that the preference for a good team over a good idea doesn’t rest completely on the likelihood with which a mediocre idea will be successfully executed, but rather also on the likelihood that this good team will recognize the mediocrity of the idea and shift to a new one successfully. Quoting from Paul Graham’s essay linked above:
I feel like the ability to recognize and then articulate value should be included in the idea of generic competence. Likewise for things like opposition research: following the advertising example, I don’t see why we can’t just recurse on execution advantages with the same basic structure of a story. It is like a Value Sub-Proposition Story, where the specific person is the entrepreneur and the specific problem is delivering on some aspect of the Value Proposition (by getting it in front of people).
It still seems useful to the investor to know whether or not execution advantages are specific and what they may be, and therefore also useful to the entrepreneur to articulate them.
Ahh, I should clarify that the Value Prop Story test I have in mind does not let you sum across multiple Value Prop Stories. It functions as an existence proof that the startup idea contains at least one specific case of a big value spike.
Indeed, one of the most common ways startups try to “cheat” the Value Prop Test is by trying to answer it with a bag of low-value-delta examples.
Hm, do we know any example of such a startup? I can’t think of one. The reason I ask is because ryan_b explained how most of these indirect advantages do also manifest as Value Prop Stories.
I see examples all the time of incredibly-competent founders whose startup is currently failing the Value Prop Story test. My strategy here as an angel investor is to hold off on investing, watch as they keep iterating or pivoting their idea, and invest when I see a Value Prop Story emerge.