People usually get the really big ideas wrong. That's why you can't crowdsource signals to invest in venture capital--because most people don't see big things coming. Few people ever thought that there would be a need for a personal computer in the home. Yet, the Segway was supposed to change our world as we knew it. Lots of people thought Twitter was a pretty dumb idea, too.
We seem to do a pretty terrible job predicting the nature of big ideas--over and over again. Yet, that's what VCs are supposed to do, right? Pick out the big idea that returns the fund. That's pretty hard to do when you've got two layers of people to explain your choices to--your partners and your own fund investors. The more people you need to make a reasonable argument in front of to support your decisions, the less likely you're going to be early to the next big thing. The next big thing will seem completely unreasonable at first. Sign up to have strangers live in your house? Crazy!! Get a group of people to throw money at a creative project with no financial return? Sounds pretty small.
The first time I saw a Makerbot, I thought the market for it was about 300, total. Not surprisingly, the first investor in, Jake Lodwick, is a guy who has naked pictures of himself on a tractor up on the Internet--ie he's not exactly a boxed thinker. The next set of investors, "people with balls" according to another VC I know--Shana Fisher, Kal Vepuri... Individual investors who didn't really need to talk it over in a Monday morning partner meeting before investing. It wasn't until the third layer of cash came in that an institutional fund "got it".
That's why I'm so excited about my investment in Windowfarms, along with Joanne Wilson and Charles Smith--because a) other professional investors don't totally get it and b) people love the product. It's a way for every apartment dweller with no patch dirt to start participating in the sustainable agriculture movement. I don't see why everyone in the world in a city couldn't be one day be using farming hardware connected to an online community of other indoor food growers.
Crazy, perhaps, but every single person in the room thought Makerbot was incredibly cool when I first saw it. In fact, I don't know anyone who doesn't think it's cool. I don't know anyone who doesn't think Kickstarter does something great or who didn't find AirBnB to be a great experience. Not everyone saw their investment potential though--even though there weren't a lot of things that would stand in the way. The common thread among many of the big ideas today are that they didn't really overcome a lot of big hurdles--it's just that nothing great ever seems like that much of a sure thing. It all just seems really hard--but when it's a little crazy and hard at the same time, it seems too risky. If anything, crazy is just a measure of potential return--because when crazy works, it's game changing. If something is going to be hard (risky) it's probably not worth it unless it is, in fact, a little crazy.
I hope to do a fair amount of crazy stuff out of my fund--because a diversified portfolio of crazy has a better shot at great returns.