We’ve talked a lot about the anti-stealth movement here and on the nextNY list, and the topic has resurfaced again recently thanks to Brad Burnham’s post about the advantages of being open.
I noticed that, at least anecdotally, there was a correlation between how open entrepreneurs were with us and their ultimate success. Simply put the entrepreneurs who are aggressively open in describing their plans seem to do better than the ones who are cagey. There is absolutely no data underneath this observation. It is just my sense after meeting hundreds of entrepreneurs over 15 years as a VC. If it is true, it could be for lots of reasons. The more experienced an entrepreneur, the more likely they are to understand that ideas are rarely unique, but the ability to assemble a team and execute against that idea is rare. Perhaps they are just more confident, and it is confidence that is correlated with success. But recently, I have started to think that there might be something more going on.
[In] the markets we invest in, there seems to be a real advantage to being open. The best entrepreneurs in those markets cultivate huge networks of knowledgeable people and engage them actively to refine their ideas. The companies they build seem to share this characteristic, opening themselves by publishing source code and APIs: betting that they can thrive in an open ecosystem by being able to absorb, process, and capitalize on relevant information better than their competitors.
It has also become a common refrain that ideas are nothing without execution. As Evan put it on the AngelSoft blog,
Anyone can have an idea, but it takes a lot of effort, commitment, ability to execute, and brute force optimism to launch a company and succeed. People in a position to compete with you are few and far between, so if you're the right entrepreneur for investors to bet on, then have confidence and don't waste time worrying about who steals your idea. Its very likely that many other people already had the idea, but just didn't have the skill to act on it.
There may be more to it than just that, however. Malcolm Gladwell had an interesting article in the New Yorker that suggested that not only are ideas not unique, but showed that they are often “discovered” simultaneously by multiple parties (emphasis my own).
This phenomenon of simultaneous discovery—what science historians call “multiples”—turns out to be extremely common. One of the first comprehensive lists of multiples was put together by William Ogburn and Dorothy Thomas, in 1922, and they found a hundred and forty-eight major scientific discoveries that fit the multiple pattern. Newton and Leibniz both discovered calculus. Charles Darwin and Alfred Russel Wallace both discovered evolution. Three mathematicians “invented” decimal fractions. Oxygen was discovered by Joseph Priestley, in Wiltshire, in 1774, and by Carl Wilhelm Scheele, in Uppsala, a year earlier. Color photography was invented at the same time by Charles Cros and by Louis Ducos du Hauron, in France. Logarithms were invented by John Napier and Henry Briggs in Britain, and by Joost Bürgi in Switzerland.
For Ogburn and Thomas, the sheer number of multiples could mean only one thing: scientific discoveries must, in some sense, be inevitable. They must be in the air, products of the intellectual climate of a specific time and place.
Curiously, Corey and I had this exact situation about Notches. Only days I met him to discuss his idea, I was sitting around with Alex and we had the exact same idea. On the nextNY list, David Rose also gave more evidence of this phenomenon:
Indeed, at New York Angels we've seen that things tend to come in waves: one month we'll get THREE plans for premium rums, then then next month will be two real estate sales web sites and four social networks for creative professionals, and so forth.
Think about what this means this for a second: Not only are your ideas not unique and special, but it is likely that others had the same idea. Even if you hoard the idea, your competitive advantage is tenuous at best. Brad theorized that successful entrepreneurs are open (or open entrepreneurs are successful) because “every time they describe their ideas, they learn more than they reveal, no matter how much they reveal. And, as a result, they are able to concentrate insight in a way that creates a defensible advantage for them.”
Perhaps there is another element at play. When determining whether an invention satisfies the obviousness requirement of patent law, one of the key tests is whether it has been done before. One reason for this is that, by and large, nearly every invention seems obvious once revealed – so the argument is that if it were truly obvious, someone would have done it before.
So, if you operate under the assumption that the idea itself is not unique, then making it freely available may in fact discourage others from executing on it because it creates the impression that the idea itself is in fact nothing special.
Thinking back on when I laid out the reasons that we were not anti-stealth with Notches, I think this was a big part of it. We never though of the idea as the key asset, but we didn’t want to make the idea freely available until we were in a position to be able to execute on it. We weren’t quite ready in November when I wrote that, but we are now – and thus we’ve been a lot more open about the vision.