IDEAS FRAMEWORK FOR VENTURE OUTCOMES

December 2023

︎︎︎ Interactive version as a customGPT. 

Note: this is a very prototype. Please use at your own discretion. 



I'm creating this for someone new to, or someone who needs a new perspective for entrepreneurship, with a focus on how to identify great ideas. There’re many definitions of great ideas, but here, great ideas refer to those that have the potential for venture outcomes. 

Execution is crucial for bringing ideas to life. Thus the risks of execution is heavily priced in. Without execution, even a brilliant idea can result in a mediocre outcome. I could conceive a brilliant idea like launching low-cost satellites into space, but without the right team, it would remain a daydream.

Part I: Idea

15 questions total

(+1) for each “kind of yes”, (+2) for each “Yes”

The esoteric part about the framework is that rather than looking at “market” more abstractly, the concept is broken down more specifically to narrative, incentive, and consensus, which are much more specific ways to understand “market” mechanisms than focusing on pretty meaningless calculations like TAM. The best ideas’ TAM is typically a bit obscure in the beginning. 

Narrative

• Does the idea align with the zeitgeist and culture of the time?
• Does the idea resonate with the repressed aspects of people's identities during that period? For instance, during peacetime, these repressed aspects might be change, disruption, and innovation, while during wartime, they could be compassion, stability, and unity (Jungian framework).
• Does the idea establish a sustainable lore that continuously draws in talent, customers, and investors, simply because they desire its existence?

Technology

• Does the technology enable something that was previously impossible? (1 point) Could the technology be the catalyst for new value creation? (1 point)
• Does your team have exclusive access to this technology?
• Does the technology provide a solution that is significantly better than the previous one, primarily in terms of speed and cost?

Incentive

• Are the stakeholders (including your customers, your employees, friends, etc.) in your ecosystem sufficiently incentivized to grow the idea? To be more direct, does the company have potential flywheel where the more nodes in the network, the better the service becomes? Even more directly, does your thing have network effect potential?
  • Note: a simpler way to ask the question is does your idea have the potential for network effect?
• Does the idea make all potential stakeholders involve much better off? (happier, wealthier, etc.) If the idea makes one of the stakeholders much better off, but everyone else has just marginal benefit, you get 1 point rather than 2 points.
• Does the idea change the way that an established incentive design system AND make all potential stakeholders much better off? (if the answer is no to the latter, then you get 0 point; if the answer is no the the first, and yes to the latter, you get 1 point)
  • Note: essentially, the 1 point scenario is that you make what already works better. For example, you can build an AI app to do graphic design for much cheaper to enterprise customers, and the business model remains the same as the previous paradigm. You are not changing the incentive structure meaningfully, but you are making everyone better off besides the otherwise hired graphic designer(cheaper service, faster fulfillment, etc.)

Consensus

• Is the idea one where you could be build a monopoly, albeit small in the beginning? (if the many people are pursuing the same idea, then you automatically get a 0 here)
• Would friends and family raise an eyebrow slightly if you share your idea with them? (2 points immediately) Or would people nod slightly and say “that’s smart and it makes sense.” (1 point). If people’s reaction is: “I know x, y, z companies doing this.” You get 0 point.
  • Note: this question is slightly different from the one above because of the qualifier “F&F”. F&F here strictly refer to people that don’t have an intimate understanding of the market
• Do you have at least 100 potential customers ready to pay for the stuff you build? (1 points) Can that be a 10000? (2 points)
  • While consensus among mainstream may be a bad thing, consensus among your potential buyers is an extremely good thing.

Spirit (this is meaningfully underrated when people pursue new ventures)

• Does the idea makes you, or the founding team, feel better about yourselves everyday you work on the idea? Does the idea put spring to your steps?
• Does the idea make humanity (according to your own belief) better in the long-term?
  • Note: typically, the idea that works best may not be making the impact “directly,” but more “esoterically.” For example, Tesla made a huge impact on EV adoption, but wasn’t really advertising themselves as part of the green energy movement. It was EM’s subjective belief that building a sexy sports car is the best way to get to mainstream EV adoption. Other people may find that approach repulsive and pretentious. Thus the “subjective” part of the question really matters.
• Is the idea sexy? Would your employees be proud to be in a slight reality distortion field?
• Some examples:
• Apple → absolute secrecy and dedicate to craftsmanship
• Stripe → not a payments company, but increasing the GDP of the Internet

Total score: _____
The highest possible scores is 30.

Part II: Execution

12 questions total

(+1) for each “kind of yes”, (+2) for each “Yes”

(-2) points for each “No”, (-1) for each “Probably no”

Risks
Execution risk

• Can you recruit a world-class team with the right expertise to work on this idea? (expertise doesn’t have to be industry focused! young and driven generalists with expertise such as software engineering or design count)
• Do you have differentiated access to the potential buyers of your ideas? (if you do, you get 2 points, and if have access but not differentiated access, you get 1 point. Limited access get -1 point, and no access at all gets -2 points)

Timing risk

• Is the industry you are in growing very fast (min. 20% growth YoY, anything below that gets negative points)?
  • Note: if you become a monopoly in a slower-moving industry, you could also build something tremendous. The faster and “hotter” the market is, typically the fiercer the competition is, which means the two are typically inversely correlated, but not always.
• Are your potential buyers ready to commit now and have their problems solve ASAP?

Product & technology risk

• Do you have a clear path of sustainable unit economics for your product once adoption stabilizes.
  • Note: in the beginning, without any scale and product, definitionally you will be losing money on each customer, but can you see a path where once the viable product is completed, the unit economics is now positive.
• Do you have access to the right talent to create the best solution in the market?

Reward
Cosmos reward

• Would working on this idea attract more positive energy to your life?
  • Note: This is what the universe considers to be "good" for you. You can't pretend otherwise if you don't genuinely feel it. It's when people begin to want to contribute to your mission. Most startups involve struggle, even if the mission is noble and the results are promising. Therefore, responding negatively to this question is actually the norm, not an exception.
• Would working on this idea make your surroundings better immediately?
  • Note: This is different from the question in the idea section above. Instead of focusing on the long-term contribution to humanity, this question highlights immediate impact on your surroundings. A satisfied customer or creating something that your friend enjoys would both make positive contributions.

Financial reward

• Would working on this idea provide asymmetrical financial outcome for you, your team and your investors? 
• Would working on this idea provide more wealth in the industry? (+2) Or would it take away other people’s business? (+1) If neither is true, then you get (-2).

Personal reward

• Would working on this idea make you proud to talk about the idea at parties and family gatherings?
• Would NOT working on this idea make you regret for the rest of your life?

Total score: _____
The highest possible scores is 24, and the lowest -24.

Part I + II Total score

The highest theoretical score is a 54; it's close to humanly impossible that any idea in the world has ever achieved this score. That is intentional by design. The exercise included many tradeoffs that a founder has to make. For example, an extremely niche and potentially monopolistic idea is unlikely to follow the zeigeist of the time, at least not apparently. Ideas that are very obviously “good” are also unlikely to differentiate meaningfully outside of a clever initial wedge.

If your idea has a score above 50, I will join your company as a contributor and help in any way I can.

Interpreting the score

• Anything above 45 would involve either some truly spectacular secret (a breakthrough in tech, a differentiated distribution channel, a changing regulation/macro environment), minor (or severe) founder delusion, or a mix of all of the above. Irregardless, you should drop everything else and just focus on executing on this idea.
• Anything above 40 is a very good idea that would be worth refining and pursuing.
• Anything above 30 is a good enough of an idea, and has the potential to be great, but think carefully about throwing your life into building a company. It’s hard.
• Anything below 20 has sparks of potential, but you probably have a LOT of work to be done.
• Anything below 20… just think of another of idea. The world is full of ideas.
• Anything below 0… something may be missing about the way that the idea came about, maybe need to examine that first. Many ideas (even funded by venture) can fall into this category, surprisingly.