Paul Singh talks about why traction is the most important thing when evaluating web startups. IP shouldn't matter to investors since it is difficult to defend, and mimicking functionality is relatively easy. In this decade, investors in web startups should never have to put in money based solely on an idea, they should be able to see a prototype that they can evaluate for themselves.
Paul Singh is an experienced entrepreneur and investor at 500 startups. Check out his blog at Results Junkies
It used to be that intellectual property was what investors looked for as being defensible. I actually don’t think that’s true anymore, and the fact is – at least for Internet startups – in this decade, traction is the only thing that’s defensible anymore. If you really think about it, if you view source on my web site, and generally copy the functionality. I think there’s been half joking studies done out there about what it would take to rebuild Facebook’s infrastructure, but the reality is that we can build anything we want…. But if no one is using it, it doesn’t matter. So traction, for investors right now – especially the new crowd funders – there’s no reason to be investing in early stage startups that are still at the idea stage. There’s just no reason. If the team can’t get a prototype up to kick the tires with, I’d be kind of leery of that.
