Why Now?
One of the most common questions we debate when evaluating a start-up is "Why now?"
I used to think it's a pretty lazy question, but the more I do this job the more I think it's probably the most important thing to spend time on (other than the founder themselves).
It is a brutal reality that ideas are cheap. Particularly nowadays, where entrepreneurialism is a much more common and viable path than it ever has been, there are literally millions of entrepreneurially-minded people across the globe encountering problems and dreaming up ideas all at the same time. I can almost guarantee that for any given business idea, someone, somewhere has had the exact same idea and by definition - if there continues to be a gap in the market that your idea can fill - hasn't executed a solution in a compelling enough way to make it work as a venture scale business.
Sometimes that shortfall is a lack of executional capability on the part of the people that have tried it before. But that answer doesn't quite scratch the itch for me as an investor. Instead, the most compelling answers come from some change - some inflection point - that makes an idea viable and market-ready in a way that it wasn't before.
The canonical example is Uber. The concept of hailing a taxi easily to a user's location required lots of precedent technologies to be in place: GPS, mobile phones, mobile payments, and so-on. When Uber was founded, in March 2009, it was at the birth of widespread adoption of essentially all of those things. Uber seized the opportunity to apply the new technologies in a specific application around transportation, and the rest is history.
The triggers behind a "Why now?" answer fall into a few buckets:
- Technology: Per above, sometimes precedent technologies enable new user experiences that simply weren't possible before. Mobile was one example, AI is another. When there are 'platform shifts' or general purpose technologies that come to market, there is a sort of macro "Why now?" that fires the starting gun on a Cambrian explosion of innovation. This is what gets VCs excited and inevitably ends to bubbles.
- Regulatory: Sometimes the answer is a government action that creates (or removes) rules, and in that change there is an unlock for entrepreneurs. Much of the FinTech innovation across the UK and Europe throughout the 2010s was contingent on Open Banking regulations that mandated easier interoperability and data sharing between banking providers. And some of Europe's greatest venture-backed companies (Revolut, Monzo, N26) were born as a result.
- Consumer: People vote with their wallets, and so if and when there is a mass change in consumer behaviour, it can be lucrative to build into and alongside that change. As a "Why now?" this can be harder to build conviction around because the change often happens more slowly, rather than a clear inflection point around a moment in time. That matters because building a start-up is essentially a race against time (and runway) and being early can be as bad as being wrong altogether. There are examples, though, such as the consumer kickback against plastic seen in the UK following the screening of an episode of Blue Planet II, a nature documentary, that showed a turtle trapped inside a plastic bag, which led to a surge in interest in plastic alternatives.
- Black Swan: This is a lazy catch-all for massive changes that come out of the blue. They can manifest as economic, social, political, cultural, etc. changes, but the key thing they share is their inherent left-field-ness. The Global Financial Crisis, Covid, natural disasters, etc. would all fall into this bracket. The main 'watchout' here is that even though a clear "Why now?" can be articulated, what can be less clear is the durability of that change. Covid is a good example here: it triggered a plethora of "Why now?" businesses (e.g. Covid testing) that found out they had no role when the world went back to normal.
I'm sure there are more, and I'll aim to add to this post in future to keep it up to date. Needless to say the best possible answer is to have multiple of the above converging at once: that's when things get really interesting.
It also creates an interesting frame for entrepreneurs to use when deciding what to build next. Rather than simply looking at problems or opportunities, look at changes in the world around you/us that open up unique possibilities that didn't exist before. It's in the cracks and tears of the world as it is that new opportunities are born.