NFX’s James Currier: Where unicorn ideas come from and why founders ‘have to keep pivoting’
Are you a seed-stage founder who’s building a unicorn?
NFX Founding Partner James Currier would like to save you some time: Startups that grow into billion-dollar companies have three basic forms of defensibility.
- Network effects: Your product becomes more valuable as more people use it.
- Embedding: Integrate your services so deeply, customers “cannot rip them out.”
- Data loops: Gather, process and act on real-time data.
“This is really only talking about world-changing, big-ass businesses with a lot of impact that could be a billion dollars or more in value,” he said at TechCrunch Early Stage last month. “That’s what we’re investing in. And what I’m talking about today is only for the people who want to build those types of businesses.”
After giving a presentation he’d previously shared at Harvard Business School, Stanford and MIT, Currier outlined the mental models unicorn founders adopt and offered candid advice for early-stage entrepreneurs.
“Don’t take market risk — find things that people want and just do a better job at it. That is the most common way to get to a unicorn company.” James Currier, founding partner, NFX
“This idea that it’s 99% perspiration and 1% idea is not correct, because the right idea has power in it,” he said. “The right idea at the right time will attract you the right talent, it will attract you the capital — OK, it’ll attract you the press that will then attract you more talent, more capital.”
Pop culture and tech journalism lionize founders who shoot for the moon, “so most people think of having ideas,” said Currier, noting that unicorns like Lyft, Meta and Alphabet simply “copied” existing companies. In doing so, they swapped market risk for execution risk, which is much easier to manage.
“Don’t take market risk — find things that people want and just do a better job at it. That is the most common way to get to a unicorn company.”
According to Currier, who was an angel investor in Lyft, DoorDash and Patreon, NFX reviews about 8,000 deals each year, but only invests in around 30. “Sixty-five percent of the ideas we see are in what we call sort of the ‘dead zone’ — this area will waste your life’s energies if you pursue the bad ideas.”
I’m a journalist who specializes in investigative reporting and writing. I have written for the New York Times and other publications.