Swimming Naked


This post is by Jason Preston from Alsop Louie Partners


Warren Buffet famously quipped: “only when the tide goes out do you discover who’s been swimming naked.”

Every startup is a skinny dipper slipping into the ocean while swimmers are looking the other way. The hope is to find a suit before the tide goes out.

It’s fashionable among investors and many entrepreneurs to claim that being early in a really big market is better than trying to be profitable, or indeed that being early in a big market is all that really matters. Like many popular ideas, this one has lost it’s nuance: big ideas are not the same thing as business ideas, but they sometimes overlap.

As a result of this simplification, there’s a lot of money looking for startups with big ideas. The thinking goes: “Big idea? Big market? Might be a really big outcome!” And for many investors, that’s where the thinking ends. Anyone can — and some people do — get lucky this way, but great investors understand that there is a way to tip the scales in your favor by looking for big ideas that are underpinned by a real business proposition.

One idea in a big market that turned out not to be a business was MoviePass. The idea was very big: what if people could go to a movie in any theater, whenever they wanted, for a simple $10 monthly subscription?

Unfortunately, people who subscribed to MoviePass mostly went to more movies than could be purchased by their subscription fee, which (Read more...)