The Seed Model
A mental model for early stage founders to use with untested startup ideas
Several weeks ago I met with a group of students who were studying entrepreneurship at UCLA. Each student had spent the last 6 weeks developing business plans for startup ideas they had. The ideas spanned a wide range of industries, from healthcare to social media to crypto. My job was to offer perspective on what would happen once they took their business plans out of the classroom and into the real world. I could remember vividly what it was like a decade ago when I was one of them — bright-eyed and armed with my own ambitious plan to take the startup world by storm.
I started by asking the group what they thought makes a startup successful. A young man raised his hand.
“You need a great idea that solves a problem,” he said.
It was a plausible answer; after all the first page of their business plans focused on summarizing the purpose of their new ventures.
“Anyone else?” I asked.
This time a young woman answered.
“The best startups change something fundamental about people’s lives,” she said.
Another plausible answer. I polled the class until everyone who had raised their hand got a chance to answer. Each student who responded gave some variant of the first two responses. The consensus they reached was that great ideas make startups succeed.
I considered leading with the same speech about execution that investors had given me over the years, but I stopped myself. It never really worked on me, so why would it work on them? Instead I decided to ask more questions to tease out a more important point that I hoped they’d carry with them through their journeys.
“Do you guys use YouTube?” I asked.
“What was their original idea?” I continued.
They gave each other puzzled looks, unsure where I was taking them. I then recounted how YouTube started out as a dating website before pivoting to video-sharing.
“Ok what about Instagram, how did that start?” I asked.
Again I was met with confused silence. I explained how Instagram started as a check-in app before pivoting to photo-sharing. We went through the exercise several more times with startups like Pinterest, Slack, and Android to drive the point home.
The students weren’t wrong that great ideas make startups successful, they were just missing a piece of the puzzle. Like many people, their view of startup success was shaped through the lens of scaled products rather than early prototypes. Since coverage of successful startups tends to emphasize superficial milestones like fundraising events and acquisitions, it’s easy to miss deeper insights about how they achieved newsworthy outcomes. Furthermore, early-stage founders usually don’t have the time or notoriety to attract in-depth analysis like their later-stage counterparts.
Superficial analysis of startup success is merely misleading for casual observers, but it’s actually dangerous for early-stage founders. Here’s why:
Feature creep. It leads founders to build more features than they need to test their ideas. If you’re building a photo-sharing app and you think the standard is present-day Instagram, you may end up building a bloated prototype that isn’t good enough at any single feature to stand out above the competition.
De-motivation. It causes some founders to give up when their initial idea fails. If you believe that success is built on having a singularly brilliant idea and your first idea turns out not to be singularly brilliant, you can easily conclude (falsely) that you’re not cut out for the job.
Misdirection. It misses the point of how repeated failure shapes great founders. The best founders almost never start out with the skills they need to get from stage to stage, they learn what their startups need to succeed by trying things, failing, and learning from their mistakes.
The third point is especially important because it actually applies to every function in a startup. In the beginning phase of any new venture it’s all hands on deck. Founders have to talk to customers, build the product, handle customer support, fundraise from investors, hire people to join them, and so on. Over time, specialists come in and refine the duct-taped processes that the founders stitched together so parts that work well become repeatable and predictable. But the first versions of business operations are often as shaky as early prototypes of the product. If the founders fixate too much on trying to emulate the sophisticated practices of large companies, they’ll waste time they don’t have.
A better mental model to use for untested startup ideas is more along the lines of a newly planted seed. Like a seed, an untested idea exists only under the surface. To the naked eye, there’s nothing there yet. Just as the seed needs the right amount of water, sunlight, and space to break out of the soil and grow into something meaningful, the untested idea needs feedback, customers, and a motivated team to grow into a meaningful company.
But even if everything goes right for the seed — or the untested idea — external forces can easily kill it before it grows up. A storm could drown it; an animal could trample it; a drought could starve it. So too with the untested idea. A downturn could push it into bankruptcy; a competitor could steal its customers; a chronic illness could cripple its founders. These risks aren’t always fatal, but they’re far more dangerous for untested ideas (and newly planted seeds) than they are for their grownup counterparts.
The seed model for untested ideas isn’t all that novel; it’s the theory behind the modern venture capital industry, which colloquially refers to initial rounds of funding as “seed” rounds. In fact the most storied venture capital firm — Sequoia Capital — intentionally named itself after the Sequoia tree with the seed model in mind. Sequoia invested in companies like Apple and Google when they were just seeds themselves, hoping the capital they provided would help the founders grow their fledgling ideas into the giant companies they ultimately became.
At the end of my session with the group of students, one of them asked me why the origin stories of startups don’t get more attention. If they’re so important for founders to understand, surely people who write about entrepreneurship should emphasize them more. While there some like Paul Graham who actually do, her point was well-taken. Many of the articles written about startups are little more than press releases that downplay just how long and circuitous the journey really is. They focus on trees instead of seeds. I told her I thought it was because of survivorship bias, but I’d write a few essays myself to help fill the gap. There’s clearly a big audience interested in forests, but it’s far more useful to focus on the seeds when you’re just starting up.