Unconventional approaches to conventional markets: what Boulton & Watt looks for
I can describe Boulton & Watt’s process of vetting ideas, but I think in practice that is less interesting than it seems. It’s a bit like asking how to make a great movie.
We certainly haven’t discovered a coin-operated machine that spits out good ideas. Instead, we know what great looks like and combine a creative and analytical process that you can’t hire Mckinsey to do.
I once asked a well known investor, known for their rigorous thought, where they had sourced one of their best investments: the founder lived next door.
Instead I’ll share some important attributes we look for:
Can we take an existing behavior and reduce friction? If so, we should increase the size of the market. We don’t try to invent new behaviors.
Pockets of profit. We don’t care very much if housing market is $4 trillion if the available margin is a few cents on each transaction. We look for pockets of protected profit that we can disrupt. Your margin is my opportunity.
High competitive aversion. We like categories where there will be less competition because it’s regulated, awkward to share at a dinner party, or just damn hard.
Analogies are working. This isn’t so much ‘uber for x’ but some core business mechanics analogy, sometimes seen in a wildly unrelated businesses. We built Moxie using seven or eight different analogies, which allowed us to take an approach (now copied) that no one else had.
Disruptive trends. These are the fundamental enablers of startups: they create a small moment in time for a startup to win a previously unimportant segment against an incumbent. If the world didn’t change, startups wouldn’t exist.
Must have a business model from day one. We start businesses that happen to be startups. We don’t take flyers on business model: we need to know that a customer will exchange money for our services.
Keep it simple. As someone who likes thinking, you can contort yourself into a brilliant twenty three step plan. But you create way too much path dependency that way. Find a simple thing that’s really working, where each subsequent step unlocks an even bigger opportunity.
Good for the world. It’s easier to go to work and more fun when you’re doing something that helps others.
P.S. we’re currently hiring for a Chief of Staff.
Good framework!