Business models hide in history. They are obscured by pivots, course corrections and failures. Many live in startup graveyards. A smaller but equally important proportion live on.

These business models provide clues to the decisions their founders made as they navigated towards product/market fit. And because I subscribe to the notion that there is no such thing as an original idea, I look for those clues to short circuit the time it takes to build and grow a business.

The history blind spot

Blind spots emerge with the excitement of business building. This is because when focus increases, peripheral vision often decreases. Founders invest a lot of time convincing others of the value they want to create and while this is the right thing to do, it shouldn’t happen at the expense of learning from the past.

I’ve seen history blind spots grow under two circumstances. One is more prevalent than the other. However, both effect first-time founders.

The first, less prevalent circumstance is when a founder’s self-belief overrides their self-awareness. This can be at odds with the perception that entrepreneurs are in perpetual learning mode and usually manifests as ‘blind faith’.

Not being able to see history is the second and more prevalent circumstance. This comes as a consequence of founders avoiding or not knowing how to go look into the past. In other words, they don’t search Google Patents, ignore feedback and comments like, ‘Your product sounds like [insert similar product]’ and don’t spend $50 to get a bias-free list of companies who might play in the same arena.

The nuance here is that ‘the past’ doesn’t just include a time when an idea or venture lived and then died. It also includes more modern history, when a venture started and continues to live on today.

These two circumstances also affect investors. Their incentives may differ from those of a founder but the thesis still holds true: the probability of an idea being completely novel is highly unlikely.

Question: What’s the history of this idea?

When I’m being pitched a new business I ask this question. I also prepare a response to this question when I’m pitching for investment or partnership.

The reason I prepare for this question is that the consumer internet has been around for more than 20 years, some would argue longer. There is a high probability that the idea or business model has been thought of, patented or tried somewhere in the past. It might not have been successful but that’s not the point.

Founders stand to learn an enormous amount from those who walked before them. They also stand to benefit from demonstrating their curiosity and showing how open they are to de-risking their business using lessons from the past.

But perhaps the most important benefit is that the founder reduces the chance of being blindsided, now or in the future.

Instead of being asked halfway through a pitch about a company that shares similar characteristics, which a prospective investor or customers know about, the founder can engage in a considered conversation instead of looking sheepish and underprepared.

And just to be clear, when I talk about history, I’m not talking about competition or how to determine if a market is crowded. Other slides in a pitch deck will tell me that. I’m looking for a slide with four bullet points per company whose history has a significant bearing on your business, like this:

[Company Name]

  • One line company description
  • When it existed
  • Why it failed (if it did)
  • Key learning(s)

By way of example, Theranos features in my pitch deck on the Business Model History slide.

One last thing…

Some entrepreneurs believe they can convince investors that what they’re building is novel. There are others whose conviction stems from capturing value by evolving an existing model or reorganising components to create a new proposition.

Regardless of which camp you fall into, expect investors to know more about history than you. Be prepared to discuss history and how you plan to leverage it.

I continue to ask after the history of business models. I encourage investors to do the same and for entrepreneurs to be prepared to engage in a conversation that can only earn you respect from the other side of the table.