[Builds upon my previous essay: “(Don’t be) a one-page playbook startup”]
A founder’s vision needs to be big. It’s not about whether it can work, but about how big it will be if it does work. This actually drives a lot of near-term valuation.
Expected value = probability of an outcome X value of that outcome
The probability of a startup succeeding is already small. A thousand things need to go right, and of the million things that go wrong, nothing can wipe out the company.
Investors are projecting into the future, so the term sheets they give are a reflection of the expected value of a startup.
Since the odds of success are already so small, and so full of uncertainty (there are objectively too few data points in the early stages to validate any values here), that vision becomes the main lever of a founder. You can increase the expected value of your startup by aiming for a larger value of outcome.
That vision of the future needs to be just that - it can’t be a vision of the past.
It’s not “be like Mike” - the next giant company will not look like the last one. It’s “be like Steph Curry - change the game.” That means the founder needs to be angling for a version of the world that does not exist today. The specificity of that vision will probably turn off a lot of people on the way - most humans aren’t hardwired (nor would it be evolutionary advantageous) to diverge from the past.