Inventing imaginary products for nonexistent markets

Would like to echo this point from Marc Andreessen's blog:

A startup's initial business plan doesn't matter that much, because it is very hard to determine up front exactly what combination of product and market will result in success.

By definition you will be doing something new, in a world that is a very uncertain place. You are simply probably not going to know whether your initial idea will work as a product and a business, or not. And you will probably have to rapidly evolve your plan -- possibly every aspect of it -- as you go.

(The military has a saying that expresses the same concept - "No battle plan ever survives contact with the enemy." In this case, your enemy is the world at large.)

It is therefore much more important for a startup to aggressively seek out a big market, and product/market fit within that market, once the startup is up and running, than it is to try to plan out what you are going to do in great detail ahead of time.

The history of successful startups is quite clear on this topic.

We do work quite often with people looking at funding new cutting edge ventures, our approach (sorry, Methodology) is (essentially) to proxy past relevant examples, look at a "delphi view" of the future (blogs are great for this by the way), and then play with sensitivities in the models built - defining a "what do you need to believe" approach.

(OK, we sometimes do some geeky stuff like system dynamics or various operations research based prediction, but the overall process is as above)

But you always get to that stage where the Anal-ytical One (Usually a VC on the team, or some other consultant - typically ex bankers who have never run a Tech business) wants you to "prove the numbers".

And you say..."look, this is a product that has yet to be built, aiming at a market that does not yet exist, operating in a dynamic value chain and cost system that - frankly - will only evolve once it is in operation"...and you go on to say something like what Marc says above, citing Google et al, and at the end of it all you say - "look, its a punt - an option - a venture into the unknown - you are "venture capitalists", right ?."

And then they get all grumpy, and you feel like shaking them by the shoulders and saying "look, if you don't like uncertainty, go buy biscuit companies" - and then you realise that's what they'd far rather do, its just that the growth is in new markets....tough life eh

This may be more a European thing by the way....but I have had some fairly frustrating discussions with Americans too. ( And to be fair, we have had some great discussions with VCs et al too.... )

This is not to say that doing the modelling and business planning is not necessary (planning is essential, even if the plans are not very accurate) - its just that they are at best a guideline, with lots of assumptions, lots of "what you have to believes" and do require monitoring against reality in real-time. But to assume that a business plan for an imaginary product in a nonexistent market is anything more than a "best estimate at the time" is risky ( if not downright laughable.)

But anyway, I'm going to make a slide of this and put it in the pre-amble of any future report we do....you don't have to believe me, but if Marc Andreessen says it, give the view a bit of credence at least !