America just voted to elect a new president. One that has never held political office, but has made some astounding promises. Don’t worry this post is not about politics, but the election reminds me of something we see in Angel Investing: the lure of potential.
When startups have no metrics, it’s easy for them to pitch the idea of a future full of customers and cash. Investors sometimes get swept up in the story of how great the company could be and forget the reality that these companies are largely just good ideas with little traction.
On the other hand, we often see startups apply for funding that do have some level of traction. They might only have modest revenue and a handful of customers. These companies sometimes have a harder time getting investors to believe they can grow exponentially because investors see the numbers and are unimpressed.
However, something that is good to remember is that ideas are worthless. I’m going to write that again. Ideas are worthless. No matter how great they are, no matter what market research has been done, no matter how many customer interviews show it will be successful. An idea without execution is worthless.
So the next time a company with modest numbers pitches your group, think about the amount of effort it takes to turn an idea into revenue. Remember the lure of potential and look for meaningful metrics instead. After all, a promise without action is just air in the wind.