Ideas Are Worthless Without Execution: Why Investors Bet On Action, Not Concepts

Will investors invest in an idea? It's a question many aspiring entrepreneurs ask themselves. The short answer is: it's complicated. While some sources claim that investors primarily back people, not ideas, others suggest that ideas are important, even if they're not the be-all and end-all. Investors want to see traction and proof of concept, and they're more likely to back someone with a history of entrepreneurial success. But, ultimately, it's a combination of factors that makes an investment opportunity, and a great idea alone won't cut it.

Investors want to see traction

Traction validates the idea

When an idea meets the market, it undergoes creative destruction, and the ones that survive usually go through a process of iteration before becoming self-sustainable, growing businesses. Traction is evidence that an idea has gone through this process and emerged successful. It shows that the idea has been tested and validated by early customers or users. This validation is crucial because it indicates that the idea has the potential to grow and scale.

Traction reduces risk and uncertainty

Investors are risk-averse and want to minimise uncertainty. They know that even a good idea can fail if it is not executed well or if the market conditions are not favourable. By seeing traction, investors can be more confident that the idea is viable and has a higher chance of success. Traction demonstrates that the founders have executed their idea effectively and gained initial market acceptance. It also provides data and metrics that investors can analyse to assess the potential for growth and profitability.

Traction attracts more investors and funding options

Traction not only increases the chances of getting funding from early-stage investors but also expands the pool of potential investors. Once an idea has gained traction, it becomes more attractive to a wider range of investors, including venture capital firms and other institutional investors. This increased interest can lead to better terms and valuations for the startup. Additionally, traction can help startups access alternative funding options, such as debt financing or revenue-based financing, which may be more favourable than equity investments.

Traction leads to network effects and increased value

Traction can create network effects, where the value of the product or service increases as more people use it. This network effect can be a powerful driver of growth and can lead to increased customer acquisition and retention. Investors recognise the value of network effects and are more likely to invest in companies that have achieved traction and demonstrated this positive feedback loop. Therefore, traction can be a significant factor in an investor's decision-making process, as it indicates the potential for future growth and success.

Investors want to see a prototype or early customers

It's important to note that investors are also investing in the person behind the idea, not just the idea itself. They want to see that the founder is intelligent, competent, and driven, with the ability to manage the process of taking a startup from idea to exit and reshape their idea as they receive feedback from the market. This is because ideas are unreliable—markets are complex systems, and it's very hard to predict what will happen in the mid to long term. As such, investors want to see that the founder is able to execute on their idea and turn it into a self-sustainable, growing business.

Additionally, investors will also consider the market that the idea is targeting. If the market is too small, the business may not be investable. If the founder doesn't know the market well enough, they could get eaten alive by the competition. Therefore, it's important for founders to target investors who have knowledge and experience in their chosen market.

Overall, while investors do consider the idea when making an investment decision, they are also heavily influenced by the founder's ability to execute and the potential of the market being targeted.

Investors want to see hustle

Investors are looking for people who can execute their ideas and make them a reality. They want to see that you are passionate and driven to make your business a success. This is often referred to as "hustle".

Investors want to see that you are willing to put in the hard work and dedication to make your idea a reality. They are looking for people who are rolling up their sleeves and getting their hands dirty. Building a successful business is not just about having a great idea, it's about the execution.

So, if you're looking to attract investors, it's important to demonstrate your hustle. This could include things like building a minimum viable product, gathering customer feedback, and making adjustments based on that feedback. It's also important to show that you are resilient and can handle setbacks, as building a business is rarely a smooth journey.

Additionally, investors want to see that you have a clear plan and milestones in place. They want to know that you have a clear vision for the future and are taking the necessary steps to make it a reality. This includes setting clear, measurable goals and regularly reviewing your progress.

Newsletters are a great way to keep investors updated on your progress and to showcase your hustle. They allow you to share updates, milestones, and any challenges you've overcome. By consistently communicating with investors, you build trust and demonstrate your commitment to making your business a success.

Investors want to see a pitch

Investors will not invest in an idea alone. They are investing in a combination of things that create an investment opportunity. Investors want to see a pitch because they want to see the person behind the idea. They want to know if the founder has what it takes to steer the business through the difficult and long process of taking a startup from idea to exit.

The pitch

The entrepreneur

Investors want to see the entrepreneur in action. They want to see how they respond to challenges and feedback. Are they rigid and steadfast, or do they have the ability to pivot and think more broadly? Are they committed to experimentation and validation? Are they able to separate their idea from themselves and be open to change?

The idea

The market

The team

In summary, investors want to see a pitch because it gives them an opportunity to evaluate the entrepreneur, the idea, the market, and the team. It is an efficient way to filter through the hundreds of ideas they are presented with and make a judgement on the investment opportunity.

Investors want to see a great team

Investors are not just investing in an idea, but in a combination of factors that create an investment opportunity. A great idea is usually a necessary ingredient for a good company, but it is not sufficient for an investor to fund it. This is because there are other good ideas out there, some of which may already have been developed, tested and put into practice, thus reducing the risk for an investor.

Most investors will agree that around 70% of their investment decision is based on the team. Investors want to see a great team that can execute the idea and manage the process of taking a startup from idea to exit. This is a long and difficult process, and investors want to see that the team can steer it correctly and reshape the idea as they receive feedback from the market.

Investors want to see a team that is committed to experimentation and validation (or invalidation) of ideas, with the intent to kill them quickly and move on if necessary. They want to see a team that is flexible, open to feedback, and able to pivot and think more broadly. A team that is willing to roll up their sleeves and get things done, and that has the hustle and drive to make their idea a success.

Investors want to see a team that can execute. Ideas are worthless without execution. Execution is what will make an idea successful and investors want to back a team that can make it happen.

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