Although the HBR article bemoans the lack of "big ideas" I think it makes the fatal mistake of focusing on Valley-centric ideas. Certainly there are still some big, Google-level ideas out there to be had, but there are other industries out there in which big idea can, should, and must form for us to advance as a civilization.
Map the human genome or build the next Farmville?
Find a way to grow food 300% more efficiently to meet the growing demands of the world population or make an iPhone app?
Why must everything be internet-based and somehow have to best Google?
Additionally, I think the author is having trouble filtering out the so called "noise" from the signal. I, for one, think it's terrific that a whole new class of small or "mom and pop" businesses can now exist on the Internet. Does that give us huge advancements as a species? Usually not, but hopefully it's paying their rent, which is great for them.
Yes, we need big ideas to move forward, but don't begrudge the next generation of Internet-based small businesses. The people starting these business are probably NOT the same people who would come up with the earth-changing idea that the author so desperately wants. And if you are one of those select few, then please, stay hungry and stay foolish.
The author actually states these "mom and pop" startups are good for the economy and for the people founding them:
These founders don't want to change to world. They just want to make enough money to provide for their family, buy a car, or earn their freedom. These people are the information economy's mom and pop business owners, just more technologically leveraged and profitable than their brick & mortar predecessors. Instead of starting restaurants and hairdressers they build coupon apps that are used by thousands of restaurants and hairdressers.
This is not a bad thing for the startup ecosystem or the economy. Quite the contrary. It means instead of only having companies at the fat head, there are tens of thousands of smaller companies fulfilling demand along the long tail. And sometimes they may even find the niche was much bigger than they thought. Ever thought air mattresses in living rooms would grow into a billion dollar company that would take on the vacation rental market and the hotel industry? I know many smart investors didn't.
The human genome mapping problem actually has no shortage of companies working on it. It's a big sector which has moved very fast, and its press is probably why it comes to mind.
As for feeding the world, this is something which valley internet-model startups just don't have much power over. It isn't even just a problem of production. You would need all kinds of control of poor post-colonial countries in order to do anything very significant about it. Even if you succeeded wildly, without development there will be a lot more people, they will all need other things like medical care which are now even more scarce, and in the end you will need even more food.
Once upon a time there WERE startups in charge of such things - for example, the Dutch East India Company... the development of civilization was one of the fundamental justifications for colonialism.
If you can make money on some kind of incubator for farmers near places with hunger problems and somehow make sure that the food gets to the poor who have no money to pay for it, then there are many government and NGO aid agencies which would like to talk to you. But it's not exactly a traditional startup thing so it is probably not going to appear on the HN radar.
Also, ideas like "feeding the world" don't fire the "make lots of money before the fund term ends" neurons for VCs. =/ Execution is long and painful on a real world problem like that.
I spent my entire college career finding these ideas and I believe they will be profitable to anyone who may adopt them, and more importantly, massively humanitarian & singularitarian.
Those people doing "trivial" startups are learning important operational skills. Later on, they might go on to do greater things. It's a levelling-up process...
Is there really a decline in big ideas, or only an increase in small ones? The argument doesn't really seem to be based on any actual data.
To be honest, I really don't get this issue that journalists and other non-business people have with consumer web startups. It's as if they think that the business gods issued us all with a magic 'business voucher', and we chose to redeem it with a consumer web startup as opposed to say, nuclear fission or curing world hunger. The economy gave us this 'business voucher', and consumer web startups are the only thing the voucher is good for.
This was hilarious, yet with a grain of truth: "Now, if you throw two engineers and a designer together and tell them to come up with a new startup idea, you've got better than 50% odds they will come up with another mobile local social photo sharing app."
Reminded me of PG's comment about why people overlooked the Stripe opportunity: "For over a decade, every hacker who'd ever had to process payments online knew how painful the experience was. Thousands of people must have known about this problem. And yet when they started startups, they decided to build recipe sites, or aggregators for local events."
I've seen, in the past few years, a lot of startups websites that are just basically simple apps that does a simple task. That's fine and all. Even encouraged. Google started out as a "simple" search app.
Like the article said, this is where the focus seems to be; in the tail. What separated Google from a lot of other startups were that it expanded on its idea of what search can be. Google eventually expanded to different markets.They weren't looking to make a big buck. They were looking to change the world.
The big problem is, a lot of people would rather make the big buck and just live life. Its easier that way. You make your tech and then don't have to worry about longevity.
It is interesting, in the article the author mentions that we need to join forces with experts in other industries. That could work, but the expert has to know what he is talking about. The developer also has to know a little about what the expert is talking about. These visions have come together in a way that they can feed off of each other.
Look at Apple. Jobs and Woz both had backgrounds building things. Woz was the expert, while Jobs was the visionary. They created a great company with innovative products, because they fed off of each other(well at least the initial projects). We all know what happened when Jobs was fired from Apple. The CEO was a "guy who sold sugar water". He had no idea, really, what technology was or could do. Instead, the products were lackluster, uninspiring, generic.
As for me, this article seems inspiring to me. I'm not "genius" but I can code very well. I'm also chasing after an industry that I know pretty well and want to disrupt for the better (art and art education). I want to change the world. So, I believe I'm on the right path. If only I can code the damn thing faster. But that's another subject entirely.
Google is also unlike many tech startups in that its founders invested several years in academic research before founding a startup around it. It's a bit closer to biotech startups in that sense, a spinoff of research that was initially grant-funded. That allows for more of a focus on blue-skies research, because there's no pressure to produce any revenue during the initial research phase (their work at Stanford was NSF-funded).
Exactly, my thoughts. I can show you from my friends list how many young college kids setup an Android app or Wordpress blog with high hopes of becoming TechCrunch or Mashable someday and update their current working positions to 'CEO at <insert blog /app name here>'. CEO because they run a Wordpress blog/ Android app? Wow, that is now ridiculous!
This mentality has to change. Entrepreneurship is surely more than just about creating stuff like this, in my opinion.
There are so many people building some little thing. Similarly, for millennia businesspeople have just done something like running an inn. (CEO, Ye Olde Fysh Shoppe.) But somehow now even the little things are culturally also supposed to pretend to be big and to try to get big as possible.
I wish it were more supported and respected for people to build and sustain themselves on such businesses without trying to become world-dominating, VC-backed or publicly-traded, always-growing behemoths.
I guess not that many people can resist a lottery.
It applies equally well to innovative business ideas as to other creative fields - it's hard to "see" into the internals of entrepreneurial activity, but if you don't, you're going to be a "CEO" that copies the surface.
I don't think we should criticize so much as seek ways to educate past this problem.
The comparison of thinking small to mom and pop shops is dead on accurate. And there are probably more small-visioned entrepreneurs relative to big-visioned entrepreneurs than there have been in the past.
However, there are are a lot of people with enormous visions right now that are simply in such early stages that they appear to be small. You have to start somewhere.
There are also two reasons that many big industries are not appearing to be disrupted right now. The first reason is that many of the huge industries are backed by so much money, poltics, and legality and so ingrained into society that they are virtually impossible to disrupt. That said, there is still a slow but steady disruption attempting to take place in education... Open Courseware, Khan Academy, etc.
The second reason is that much of the "low hanging fruit" of the economy has already been picked. This one is controversial. 50 years ago, we were doing really hard things, but things that did not necessarily require as deep of an understanding of an industry or science as we do today.
There are people trying to pick the "higher up" fruit today, but their pickings are not as obvious or exiting as they may have been 50 years ago. We are not seeing startups for flying cars or capital-intensive projects, however, small, simple software startups can sometimes solve incredible inefficiencies in the economy. Example: craigslist has revolutionized the rental market simply by making information easy to transmit and access.
The problem I see with startups is that they have become the "cool kid table" and only hire "their kind". I can't believe that I'm seeing job listings with the phrase "top tier / ivy school only please". If startups keep pulling from the same diluted pool of talent they aren't going to get new ideas or any type of domain expertise.
Ths isn't about rewarding your 5 best friends from MIT anymore. Building a business and changing the world is about hiring the best people with the broadest backgrounds who want to accomplish a common goal. Your education should be a bonus not a prerequisite.
Find people who want to change the world and you just might do it.
People tend to think in very small boxes nowadays. Partly because they are more interested in getting rich quick than in changing the world, partly because they have their nose too close to tiny details to see the big pictures.
There is a word for people who only focus on big ideas: crackpots.
The truth that every entrepreneur has to face is that it takes big resources to pursue big ideas, and very few people have big resources at their disposal. Even Elon Musk had to blow up PayPal before he could pursue truly big ideas.
The vast majority of giant corporations come from executing well on a series of progressively larger operational goals. The trick is figuring out how much you can actually bite off successfully at each stage, and then doing it several times in a row and scaling accordingly. The big ideas can come when you have the money and the influence to execute on them.
Edison, Ford and the Wright brothers were crackpots, I guess.
There is a difference between something that may lead from here to there and something that is definitely never going to lead anywhere.
An example of the former:
You write some software that re-orients an array of solar panels to make the most of weather conditions in real time. It's not going to crack the "energy production and storage" enigma, but it's a step in the right direction. Next, you may want to study how panel geometry influences energy collection.
An example of the latter:
You set up a Web site that allows teenagers to compare their gadgets.
Internet can be an enabler or a catalyst for big changes. "Another social website" is likely the first step in rethinking the government. Social online education sites can push more people to physics and chemistry to solve energy production and storage problems. They might be even instrumental in that they allow e.g. smart sw entrepreneurs or hedge fund analysts to learn new skills and domains and apply their capabilities where it is most needed.
These are extra hard problems which have no guarantee of ever paying out, let alone raising money in the near term. This isn't a matter of getting rich quick - even just researching big issues requires sustained cash flow... if you can't provide that out of your own pocketbook then you are going to need to become self-sustaining pretty quick.
What about scientifically minded philanthropists like the Gates Foundation? E.g., they funded a genetic engineering project to dramatically lower the cost of the antimalarial drug Artemisinin by producing it in yeast instead of the original tree.
You are right, the presence of a Gates Foundation will create that. Although, I like your example because while it is an important problem, it is also a reasonably sized and quite specific problem.
And it shows that "important" and "big" work is being done by companies that just aren't on the HN startup radar because, well, it is a different sector. I think people in the internet sector make facebook-things rather than antimalarials because they are in the internet sector.
- myostatin inhibitor gene therapy as an OTC cosmetic procedure -- would solve obesity
- cheaper rockets
- VR telepresence to eliminate the massive petroleum waste of the workday commute
- self-driving car (great open hardware + source project)
- "brain backup" using high-res MRI + in-depth biographical interview + DNA sample
- seasteading
- "bio lab on a chip" using microfluidics, flourescence-assisted cell sorting, nanopore sequencing, and phage-assisted directed evolution
If you read this list and say you lack the necessary skills -- bullshit. In the age of Wikipedia and Google Scholar you can learn anything you try to. The only limit is your courage.
Downvoter -- I don't normally let stuff like this get to me, but you better explain yourself.
It took me 4 years of manic polymathic learning (at the expense of my actual schoolwork) to come up with this list. I've worked in a genetic engineering lab (Drew Endy), AI, robotics, and now AR, so I speak firsthand that these ideas are all possible now.
> It took me 4 years of manic polymathic learning (at the expense of my actual schoolwork) to come up with this list.
I'm impressed that you independently came up with those ideas, but it seems like an average news day on HN. Those problems are regularly being discussed.
I think that highlights that, even in our inter-connected social media world, our biggest problem is still one of communication. You are quite right that anyone can easily gain the skills necessary to work on those projects. Maybe you can even find the capital necessary.
However, you are going to really struggle to catch up with what people already know. If you want to build a driverless car, for example, you are going to spend years reimplementing what Google has already figured out because there is no good way for the average person to build atop their existing technology. By the time you finally get to new problems, someone will have already figured them out too.
The first startup who figures out how to solve that communication gap will provide the most transformative technology to date.
Haha "come up with the list" meaning agregating the list; I'm not taking credit for first thinking of them all! The problem domains where I've thought of / sometimes written about original solutions are just these ones:
- camera drones to provide a "real-time Google Earth"
- genetically engineered supercrops for the developing world that provide protein, fiber, and every vitamin
>>> If you read this list and say you lack the necessary skills -- bullshit. In the age of Wikipedia and Google Scholar you can learn anything you try to. The only limit is your courage. <<<
I down voted you not because of the swiss cheese holes in your ideas but this sentence. Sorry but given that some of your ideas assume a lot of basic research and the devil is in the details such a remark didn't jive with me. Your ideas have been clearly based on extrapolation and well that doesn't always equate to actually implementing the system. If someone achieves the harder items on this list then I would be pleasantly surprised, but until then those items are just science fiction. I've talked about the ones that have caught my eye below.
>>> - camera drones to provide a "real-time Google Earth" <<<
You're forgetting the costs associated with maintaining a large fleet of drones, every drone takes up energy to not only stay aloft but to beam down pictures using whatever radio gear is being used at the end, drone by drone those costs will add up and the total cost of keeping an entire fleet in the air will be prohibitive. Of course one way around would be to use balloons, but then you have to make sure that drift in either scenario is as little as possible and you can correct for it. There are day-to-day variations in weather patterns and building something that can stay aloft and provide a steady picture within storms is quite challenging indeed. If you solve all of the issues then you run into the issue associated with manipulating all of that video and stitching it seamlessly to specific geographic locations. Remember your balloon etc. might be swaying so there won't be an exact match between what the video camera is recording within a certain set of pixels and what you think that area is. You'll have to geotag sets of pixels to figure out that this is the live stream of street X and so on, that's really really hard to do and imagine you have a city of these things and you're trying to do that in real-time. The sheer number crunching involved will be huge and again impractical. Then you have the optics themselves, you'll have to put up a very special camera indeed to cover a maximum possible area per drone while maintaining a usable level of resolution. Perhaps you will decide to use multiple cameras or something, but either way creating something like that within weight, costs constraints is simply difficult.
Then there's that other tiny thing, all of this needs to produce enough value to pay for itself... Given all of the costs that have been sunk in what economic use could such a thing find that couldn't be done in much more cheaper and pragmatic ways?
>>> - camera satellites for same purpose (see DARPA SEE-ME challenge) <<<
I don't know enough to comment on the practicality of this, but I do know enough to whistle at the amount of cost this will require. Either you will have to launch a satellite into geostationary orbit or launch a lot of satellites into overlapping orbits so that each area gets covered all the time... Then again there's the problem of achieving resolution in the video and having something large enough that could actually store all of the content and then beam it back to earth in real time. All of this sounds prohibitively expensive and doable only with military funding.
>>> - cheap laser scanners for self-driving cars and robots <<<
Agreed. Personally I think that sooner or later people will start forgoing laser scanning and use something cheaper such as an array of webcams to do hyper-stereopsis and then interpolate that with other data to get a good enough idea of the world.
>>> - genetically engineered supercrops for the developing world that provide protein, fiber, and every vitamin <<<
That's a nice goal and the world needs it, but aside from the difficulty of creating the crop there are tons of pesky real world issues that need to be overcome including the fact that few countries would allow such a crop to grow at all it would be probably banned until further "testing" which would again inflate the cost dramatically. There are lots of real world schleps over here, which can be overcome but will necessitate significant backing.
I think that solving the problem of multi-storey stacked farms might be a better bet. (but it will be really challenging as well)
>>> - "brain backup" using high-res MRI + in-depth biographical interview + DNA sample <<<
Given how little we know about intelligence and the way the brain truly functions and that this is still in the basic research stage, I would be shocked if anyone could create a "brain backup" from just these 3 datasets. There are several non-trivial challenges that need to be resolved before doing anything like this. How do we know that what we relate as consciousness isn't implicitly a certain configuration of synapses in a very specific manner that is influenced by environmental factors as well? Clearly DNA alone does not explain everything, you have several epigenetic factors within the womb that makes the person who s/he is. Just the timing of a few series of hormones at specific intervals can radically alter the end result. Then outside the womb you have day to day factors which take this really complex system and push it into oh so many directions. Each factor leaving a mark. How can you capture that with just an MRI, an interview and a DNA sample? Within the next 5 to 150 years we might develop some hypothetical technique that allows us to do this, but clearly until then this is unpractical.
>>> - seasteading <<<
Energy. Aside from the resource issues related to creating a seastead there are tons of issues stemming from energy, currently the plan is to just boat in diesel, but to create a truly independent and self sustaining system there needs to be a way to capture and efficiently store energy on the seastead itself. That is much harder than it looks and it will take some time to make that possible. This will get done sooner or later, but this tiny detail will bog down a lot of progress due to the usual mix of costs, quality, and last minute issues.
---
Most people's view of the future is off because of the tiny details and the things that they tend to overlook. We all tend to do that and forget the real world is a harsh master capable of bringing down the wrath of economics as well. Some of these things ought to be implemented, but whether or not they actually are at the end of the day is another matter.
I don't mean to deflate you or anything, but the truth is that you need to be cognisant of the challenges and do a reality check if you ever want to implement something like this at all. A lot of these systems are possible technologically, but actually doing them is another thing. I hope that you go on to achieve this list. It would be amazing.
>>> That ways to learn line should include getting subject matter experts to explain their field to you. E.g., many professors reply to a cold email. <<<
I wasn't actually aware of that. I'll keep that in mind. Thanks for the heads up. :)
>>> And yes, I'm only 22 and filled with naive optimism :-). <<<
I'm 20... I realised at some point that optimism doesn't always need to be naive. To get anything done you clearly need a mix of just the right amount of naiveness and soul crushing insight.
>>> But I'm channeling that energy into doing an AR glasses startup instead of some web thing. <<<
That's great to hear. :)
>>> I'll help the world with my research even if I have to spend my every penny doing so, and I wish more people would attempt the same. <<<
That's even better. :D Trust me you aren't the only person who wants to do so.
tl;dr -- We started with the dynamic duo of the businessman and the engineer. Recently we added the designer. Now if want to continue to create products that scale into billion dollar companies, create thousands of jobs and transform society, we need to add domain experts to the founding DNA of Technology Companies.
A bunch of us were talking about this over the table at the Chez JJ Hacker Hostel. Apparently, there are a lot of horrible medical apps. This is because domain experts can't communicate well with doctors. So some doctor with minimal programming experience writes some software. By chance, it takes off and gets huge, growing into spaghetti code in the process, adding to the reasons why the best hackers dont' work on medical software.
You can apply this to any number of disciplines.
> These founders don't want to change to world. They just want to make enough money to provide for their family, buy a car, or earn their freedom. These people are the information economy's mom and pop business owners, just more technologically leveraged and profitable than their brick & mortar predecessors.
Does that mean that such people will be as vulnerable to economic and social change as mom & pop businesses of the past?
> I believe the decrease in big ideas for software companies is the result of homogeneous founding teams in the Valley.
It does seem to me that people are looking for a few specific scenester types, and rather quickly throw you into the "not applicable here" bin based on rather shallow signaling.
Pardon my 6am-still-haven't-slept-rant but this feels like a cycle:
- Invest in bullshit.
- Find diamond rings in one or two piles of bullshit after a heavy rain.
- Expect all bullshit to have diamond rings in it.
- Get angry when you find out 92% of bullshit has no return.
- Demand bullshit of a better quality from cattle farms.
I get why internet based businesses are so attractive, they can scale up very well. But easy come, easy go.
Also, the internet's great and all and VCs are what make Silicon Valley happen and thrive, but there's an entire world outside of it. Real needs, real solutions, real products, real customers. As an indie inventor of real products I'm pissed off. Many of these "Lets help American Small Businesses" seed funds, incubators, grants, and tech-hubs ONLY invest in web based startups. I'm disqualified from many of them. No offense, but I want customers, not users.
After seeing how Silicon Valley companies are run. I don't want to work my ass off for half a decade using someone else's money, be their bitch, watch my equity get pocketed by someone else, sell out or IPO, lose all my top talent after they bank their shares, and finally quit or burn out. I want to be happy, I want to work at my own pace, I don't want to be someone's financial slave, and I want to actually own my company. I'd rather create a company like Valve, not Facebook.
So I'm left out of the funds and stuck with KickStarter. And Kickstarters mostly like Apple/hipster/artsy projects, not products that could be sold in normal stores.
===== What TechCrunch, VC Blogs, Reddit, & HN taught me about Venture Capital =====
1) A VC's idea of "Big Ideas" like Facebook, Twitter, & Zynga is a normal person's idea of a "Ponzi Scheme". (really think about this one.)
2) Ignore real companies that sell real products because they're "boring" and not "hot shit" while investing in companies like Color.
3) Start incubators, tech hubs, and funds that focus on internet related startups and ONLY give funding to internet related startups. Then complain when the only companies that come out are more: mobile ad platforms, social media analytics, team based project managers, reward program sites, online store builders, or subscription services. Especially team based project managers, everyone and their grandmother has one.
Plus, how many internet-related life-changing companies do they want? We can't built one every month just so investors can cash in. The bigger the idea the less likely an entrepreneur is to start it due to it's massive upfront costs in R&D. Investors want us to work our asses off for 2-3 years by ourselves, build something that works, so they can fuel our gravy train with their money, scale like a lunatic for 10 years, and have them get their bonuses and us get our diluted equity.
No thank you. I want to be like Gabe Newell, NOT Mark Zuckerberg.
I have no problem with anyone following the silicon valley startup dream, supporting that ecosystem, or working their ass off on another social media analytics company or reward program. Follow your passion. But that's not my place. And a lot of entrepreneurs are finding out it's not what they want either.
Instead of selling RentATrashCan.com you should just let that one expire. I found many of the domains I owned were not even worth the annual registration fee.
There are so many industries ripe for technology startups to disrupt: Education, Health Care, Business, Art and Government just to name a few. But where are the domain experts ready to be paired with a team of rockstar engineers and superstar designers? Most of them appear to be wandering around attempting to spread their ideas through books, speaking engagements, university lectures and consulting gigs, unaware of the possibility now available to them to integrate their ideas into software applications.
I'm more of a domain expert. Someone should build a startup that makes it easier for us to meet engineers.
Seems like a slight false dichotomy. Founders can work on on frivolous businesses initially, but later on, once they've acquired the acumen and resilience to be a proper CEO, they may turn their hands to grander projects. Incubators like YCombinator are training legions of entrepreneurs to be better entrepreneurs (as a side effect of finding successful exits occasionally).
Two other thoughts: shouldn't we be looking at big, wealthy companies to do the major, game-changing R&D anyway?
And secondly, maybe the world has changed in such a way as to allow big breakthroughs to be dominated by mega corporations.
"Many venture capitalists are up in the arms because their returns are down, their funds are drying up, and there appear to be a declining number of entrepreneurs pursuing big ideas."
It's easy to believe all of this except the last part:
"Many venture capitalists are up in the arms because there appear to be a declining number of entrepreneurs pursuing big ideas."
That part I don't believe.
Why don't I believe? My view of venture capitalists (VCs) is that they don't look at ideas, or big ideas, or the anything at all detailed about a proposal from an entrepreneur. So, if VCs don't bother even to look at ideas, then it's tough to believe that they are
"up in the arms"
about what they don't see!
Of course, the author gave no list of his "many" VCs! I, however, have a long list of VCs who, receiving a proposal for a "big idea", e.g., along the lines of a company worth $200 billion, just quit reading and, maybe, start laughing. My list is long enough that the author's "Many" becomes improbable!
Instead, I've long since concluded that VCs look at a few simple criteria and then, for their first serious effort, in one word, look at 'traction'. Given some significant traction, all the rest is nearly irrelevant.
In one step more detail, the VCs have no serious methodology for evaluating anything about a proposal except just traction. I gave a longer explanation in:
"Many venture capitalists are up in the arms because their returns are down, their funds are drying up, and there appear to be a declining number of entrepreneurs pursuing big ideas."
I will try to give explain how to reverse "the decline in big ideas":
First, I should state some context:
(A) The goal of a VC investment is to make money within a few years for the VCs and their limited partners which are usually pension funds, university endowments, and a few others. Here I stay with this goal and set aside other goals such as 'improve society', 'save the planet, environment, rain forest, farmland top soil, coral reefs, whales, genetic diversity of flora and fauna, and poor people'. I am willing to leave these goals to Bill and Melinda Gates.
(B) As VC Mark Suster has reported on his blog, in the past 10 years VC returns have been poor, that is, commonly negative and on average low compared with other 'asset classes' or with history in finance. Maybe as few as 20 VC firms in the US now have a good 10 year track record for their limited partners. Returns have been so bad that
"Many venture capitalists are up in the arms"
is easy to believe.
(C) US venture capital concentrates in just two broad areas (a) 'information technology' and (b) biomedical technology. Here I concentrate on (a), 'information technology'.
With the VCs concentrating on 'information technology', I agree that they should do that. That is, broadly, computer hardware, infrastructure software, the Internet, and, now, mobile devices are enormously powerful and not yet nearly fully exploited, and, net, the big opportunity to make money.
With this context stated, I move on with two points.
First, What the VCs Are Doing
I believe that what VCs are currently doing is close to just silly and fully explains their poor financial performance. So, here is what they are doing:
Yes, a current joke is that VCs (and their entrepreneurs) are concentrating on mobile, local, social, friending, liking, linking, sharing of text, still images, and video clips.
More generally, and not just a joke, it has become clear that VCs expect that there is a 'business idea', to parody, 'Facebook but only for single cat lovers' or a 'matchmaking site for employers and job hunters'. Such a 'business idea' is to be expressed in just a few words, and everything important about the idea is supposed to be just obvious.
It is such ideas that have led to the contemptuous remark "Ideas are easy and plentiful. Execution is everything.". Well, with only such simplistic ideas, of course, execution is all that's left and has to be "everything". Bummer. I will argue that with a 'good idea', at least with good planning before execution, execution should be routine. The need for routine execution and the ability to do it are common on Main Street all across the US.
Then for the 'barrier to entry', in the words of Fred Wilson, that is supposed to be from a "network of engaged users".
All the rest of the work is supposed to be routine user interface design, software, publicity, and, in the case of major success, server farm engineering.
Then VCs evaluate such a project based essentially on just 'traction' that they want to be significant and growing rapidly. I.e., they want another Facebook.
But here what the VCs are doing is just silly: The VCs are asking far too much from the 'business idea' and its short description and from just 'traction' and are ignoring any more solid evidence of a good project and good investment. Moreover, in the sense of the HBS article of this thread, what the VCs are doing gives no real promise of identifying with any significant accuracy the coveted "big ideas."
In blunt terms, the VCs are lacking any more solid means of project evaluation.
Maybe with such processes some entrepreneur can find another Facebook, but I believe that the good opportunities are elsewhere.
Second, Much Better
Here is my suggestion for something much better that I believe is so far neglected by VCs (and their entrepreneurs). I suggest the following broad steps:
(1) Market. Pick something big. Identify a market where can get a lot of money from each of a few customers or a little money from each of hundreds of millions of customers. Something of high interest to, say, 80% of all the Internet users in the world should do nicely!
(2) Problem. In this market, find a problem where a much better, or the first good, solution clearly promises to achieve the goals of money in (1) -- a lot from each of a few or a little from each of a lot. Here "clearly" has to be quite solid and not just some intuitive guess and not just early traction.
So, e.g., what's wrong with another mobile, social, liking, linking, friending, sharing Web site is that it is just not clear that such a site will get tens of millions of users. It just isn't clear. Instead, it's a long shot, a shot in the dark.
Note: If in the market selected in (1) can't find a suitable problem, then return to (1) and pick another market. However, if the market is a significant fraction of all the Internet users in the world, then there MUST be a suitable problem somewhere in there, so keep looking!
(3) Research. Do some research to enable, in the sense of 'secret sauce', the desired solution as in (2).
There are some business advantages here: First, the research can enable a much better solution, that is, one the customers like much more. Second, the research can create a technological barrier to entry.
Note: If can't find suitable 'secret sauce', then return to (2) and pick another problem.
(4) Software. Implement the solution in software on a Web server, and deliver the solution via Web pages over the Internet.
Note: If the solution needs more than just such software and a Web server, then return to (3) and find another solution.
(5) Execution. Go live, get publicity, users, and revenue.
Note: Here the crucial work, and the work to be carefully planned, executed, and evaluated, is supposed to be in steps (1)-(4), and step (5), execution, is supposed to be routine. This situation is in wild contrast with the usual VC view that "Execution is everything".
Well yes: When the start is just a simple 'business idea' with nothing more to recommend it, then, yes, "execution" is all that's left and "everything". But such execution for "big ideas" is just vast goals with half-vast planning, a long walk on a short pier, ready, fire, aim, and sloppy work that explains the poor financial returns.
Where the VCs get off track is failing to take seriously (1)-(4).
Here's where the entrepreneurs get off the track: They don't know how to execute step (3) Research.
What can we say about such research? Well, after the research, the rest is just routine software and routine use of computing, software infrastructure, the Internet, and server farm engineering. So, basically the software just takes in some data, manipulates it, and puts out results, and the research is for the manipulations.
Well, the manipulations are necessarily mathematically something, powerful or not, understood or not. There are various ways to do the research:
(A) We can hope that the data manipulations to be done could in principle be done manually; so, the software is to implement manual operations that are well understood.
(B) We could use intuitive or heuristic methods.
(C) We could use some well known, somewhat general techniques in artificial intelligence, semantic analysis, natural language processing, data mining, machine learning, etc.
(D) Or we could proceed mathematically. Here we start with some assumptions that appear to hold well in the real problem. The assumptions become hypotheses in theorems. The conclusions of the theorems direct the data manipulations. The software performs the manipulations. The 'research' is for these connections and hopefully for some new theorems (that, of course, need solid proofs).
Via (A)-(C), it's tough to know that have powerful manipulations and to know that they are powerful early in the planning.
Where entrepreneurs get off the track is following (A)-(C) and neglecting (D).
Another place the VCs get off track is ignoring (D).
I'll make one more point: Since VCs are lacking good means of evaluating projects, they have been using poor techniques and information instead. Net, the VCs have been in a small 'echo chamber' quite distant from powerful techniques and valuable information.
E.g., apparently the VCs get their understanding of what good projects should look like mostly just from recent successful companies and what they find in their e-mail in-box. So, they are trying to learn how to select "big ideas" heavily from copying old examples and looking at small ideas. By analogy, they are trying to learn how to evaluate new directions in medicine by reading labels on bottles of snake oil. Hopeless.
In strong contrast, major parts of our economy have long been quite good at good plans for being new, better, and/or first and, given good plans, executing with low risk.
My suggestion to reverse "the decline in big ideas": Entrepreneurs, develop solid plans for projects that have much higher potential. VCs, learn how to evaluate such plans accurately.
Map the human genome or build the next Farmville?
Find a way to grow food 300% more efficiently to meet the growing demands of the world population or make an iPhone app?
Why must everything be internet-based and somehow have to best Google?
Additionally, I think the author is having trouble filtering out the so called "noise" from the signal. I, for one, think it's terrific that a whole new class of small or "mom and pop" businesses can now exist on the Internet. Does that give us huge advancements as a species? Usually not, but hopefully it's paying their rent, which is great for them.
Yes, we need big ideas to move forward, but don't begrudge the next generation of Internet-based small businesses. The people starting these business are probably NOT the same people who would come up with the earth-changing idea that the author so desperately wants. And if you are one of those select few, then please, stay hungry and stay foolish.