I wrote a blogpost last year, where I went a level deeper into my NTY thesis. In short, in what situations and in front of what kind of ideas do I ask founders: Why now? Why this? And why you?
| Plausible Idea | Why this? |
| Possible Idea | Why now? |
| Preposterous Idea | Why you? |
But let’s go a step deeper. As I’m writing another blogpost slated to come out next year, I’ve had the chance to sit down with some amazing multi-cycle investors. And a common thread across all those conversations has been that they chose to be the first check in companies that would be big, if true.
Which got me thinking…
If ‘big if true’ is for the preposterous ideas out there, then possible ideas would be ‘big when true.’ And plausible ideas would be ‘big AND true.’
Let’s break it down.
Big AND true
Not too long ago, the amazing Chris Douvos shared with me that the prerequisite to being “right and alone”, where fortune and glory lie, is to be “wrong and alone.”
Imagine a two-by-two matrix. On one axis, right and wrong. On the other axis, alone and in the crowd. You obviously don’t want to be wrong and in the crowd. But you do want to be in the right and alone quadrant. Because that’s where fortune and glory are at. Most people think that to get there, you must first start in the right and in the crowd quadrant. But it’s important to note, that once you’re in the crowd, and you get the dopamine hits of validation, it’s really hard to stray away from the crowd. So really, the only way to get to fortune and glory is to be wrong and alone. To be willing to go against the grain.
Unfortunately, for big AND true, you’re in the crowd. And while you can usually make money on the margins, it’s hard to be world-defining. ‘Cause you’re too late.
The thing to be wary of here if it is any investor’s strategy to deploy capital here is to not be the last money in. Hype and compounding are dangerous. And for many companies that exist here, they have a short half life. If you’re the last one holding the bag, that’s it.
Big WHEN true
You know that saying, “It’s a matter of when, not if…” it’s just as true in the innovation space. There are some things in life that are bound to happen. Recessions. Hype cycles. Rain. First snowfall. Summer heat. Progress. Maturity. When one’s baby teeth fall out. Wrinkles. Gray hair. Some with more predictability than others.
These ideas are defined as those with early commercial traction, likely with a niche audience or only your 1000 true fans. And that’s okay. Usually happens to be some of the toughest pre-seed and seed rounds to raise. There’s clearly traction, but no clear sense of rocket ship growth.
Timing matters. Is the larger market ready to adopt the beliefs and culture and habits of the few?
For some investors, it’s why they target quality of life improvements to the wealthy made ready for the masses. Living a wealthy lifestyle is, after all, aspirational for many. On the flip side, if you have a niche audience and are looking to expand, are there underlying beliefs and traits that the broader market has but has instead applied those beliefs and habits in other parts of their life?
Big IF true
Sam Altman put out a blogpost just yesterday, titled “What I Wish Someone Had Told Me.” And out of the 17 lessons he shares, one in particular resonated the most with me:
“It is easier for a team to do a hard thing that really matters than to do an easy thing that doesn’t really matter; audacious ideas motivate people.”
While the stories of Airbnb or Coinbase or Canva seem to suggest that these are nigh impossible ideas to raise on, anecdotally, I seem to find that the most transcendent companies with CEOs who are able to acquire world-class talent to their companies have less trouble fundraising than the ‘big when true’ ideas. But more difficulty raising than the ‘big and true’ ideas.
That said, instead of many smaller checks, you just need to find one big believer. In other words, the Garry Tan for your Coinbase or the Fred Wilson for your Twitter. One way to look at it, though not the only way, is what Paul Graham puts as the “reasonable domain expert proposing something that sounds wrong.” Crazy, but reasonable. Simply, why you?
Photo by Jill Sauve on Unsplash
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The views expressed on this blogpost are for informational purposes only. None of the views expressed herein constitute legal, investment, business, or tax advice. Any allusions or references to funds or companies are for illustrative purposes only, and should not be relied upon as investment recommendations. Consult a professional investment advisor prior to making any investment decisions.
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