Peter Diamandis recently joined Founder Institute CEO Adeo Ressi for a livestreamed interview to share his thoughts on how radical startup ideas today can get built and funded.
As Founder the XPRIZE Foundation, Peter Diamandis is uniquely qualified to discuss the topic of funding radical innovations. He is a New York Times bestselling author, and has been named by Fortune Magazine as one of the “World's 50 Greatest Leaders.” A serial entrepreneur himself, Diamandis is notably the founder or co-founder of Singularity University, Space Adventures, Planetary Resources, Human Longevity Inc., and BOLD Capital Partners, a venture fund with $250M investing in exponential technologies. Diamandis notes a fact of today's investment world:
We are in a period of capital abundance.
As technology advances at an exponential speed, there are amazing opportunities for entrepreneurs to build radical businesses that positively impact society. Investors are now increasingly seeking out these kinds of opportunities, wanting to scale businesses that create meaningfully positive social and environmental impact, as well as pay back dividends. In fundraising however, credibility and trust are critical factors, which Diamandis and Ressi discussed in detail.
Watch the interview with special guest Peter Diamandis and Adeo Ressi to learn how radical startup ideas are funded, how to build a following, how first steps lead to moonshots, and the importance of credibility.
In addition to the interview, we have broken out some of the key takeaways from Diamandis.
Defining, and Becoming, a Radical Founder
There are founders, and there are intense founders, the perception of which plays into how investors and followers react to their ideas.
“No one wants to back a great idea with a shitty entrepreneur as the leader. You really want to care about that individual and what they want to do in the world.”
Diamandis offered tips for becoming perceived a radical founder:
- Have passion for your idea
- Be trustworthy
- Be able to tell a story
- Be good at networking
- But most important, be credible
There is more capital flowing than ever before. It’s a matter of how do you as the entrepreneur, as the founder, really create the vision, the case, the team, the story, to attract that capital. Because ultimately, capital is a conveyance of trust and energy. Someone has to trust you and your idea, and want to support you and your idea, and it’s both of those things.
The Importance of Credibility
Radical ideas that can impact the world may be moonshot. That’s why entrepreneurs tend to dial it back, break it down into stages, and build their way to the platform they are developing.
A great example is what Jeff Bezos did with Amazon. Amazon was built on selling books. It was a brilliant first product.
After books? Amazon:
- Started selling products
- Created a marketplace for other sellers
- Offered a streaming video and music platform
- Launched AWS
- Began experimenting with drones
- Recently launched its own shipping fleet
It all started with sales, users, and the necessary virality to demonstrate a building of momentum. Each step shows value, but the company had humble beginnings.
When Diamandis launched X Prize, which the initial offering was $10 million, they hadn’t actually raised the full amount. In fact, within the first year they stalled at half a million, with numerous backers pitching in $25 thousand each, but pushed forward regardless.
It had to be announced in a way that people believed it was possible. So in all of our minds we had this line of credibility, and if you announce an idea below the line of credibility—in other words, if announced in a way that is not credible in people’s minds—people dismiss it out of hand. If you launch above the line of credibility, they are going to wait and watch and see: is this happening or not happening.
To push beyond a norm, a venture needs 'super credibility.' XPRIZE built this by:
- Bringing in 20 astronauts
- Bringing in other NASA leaders
- Announcing under the St. Louis Arch
- Having the backing of a series of investors
- Having a team with a history of success
It was the components in this list that resulted in a form of super credibility, or the development of a movement that pushes people to act upon a radical idea. They were all feeding off of Diamandis’ credibility, trust, and energy.
You make it credible by who is by your side, who your board of advisors are, where you announce it, what elements, what partnerships you announce, how you convey your message, how you even look when you’re announcing it.
Credibility derives from:
- Who is by your side (co-founders and team)
- Who is on your board of advisors
- Where you make the announcement
- Elements and partnerships
- How you convey the message
- How you and your venture look or present publicly
He goes on to say that even if you have a crazy idea, you may need a great pitch to seem more subdued. As a more edgy person, even the most normal idea, such as selling books online, can become a standout concept.
Like it or not, people are judgey. They make an instant judgment, and it’s hard to regain that if you’ve lost it.
Build Credibility Begins to Build a Following
First impressions are lasting impressions.
Regardless of the successful ventures in the world, occasionally scam artists and founders who get ahead of themselves make headlines. Two widely publicized recent examples that come to mind are Fyre Festival and Theranos.
Fyre had all the components needed for credibility—but when it came time to execute, lack of preparation resulted in a pure disaster. Theranos, too, had a similar scenario, and amplified its early problems by deceiving both the public and its investors.
There is no question that for every super credible ideas, there are going to be a few that are scams, or start off super credibly, but fool people—and then you are digging a hole.
Whether or not Theranos was a case of following a moonshot and not coming to terms with reality, or simply creating vaporware to deceive and defraud investors, the initial credibility led to their initial virility and success. This all starts with the announcement of an idea.
Going public gives you instant feedback.
Prior to announcing:
- Do your homework
- Make sure you feel strongly about your idea
- Have passion and conviction in the story you’re telling
Then it’s time to start building a following. You need to build believers in your idea (in this order):
- Team members and cofounders
- The general public
Finally, you get people to trust you and your idea, and have them join your cause:
- Believe in yourself, you can’t be bullshitting anything
- Be a good storyteller, convey your idea clearly
- Become a great networker
Diamandis and Ressi both suggest using social media as an early barometer of success around an idea, too. If there are negative indicators, consider refactoring it before fully launching.
Radical Startups Need Balance
On one hand a radical idea can positively impact our world, which can have humble beginnings. On the other hand, if something sounds like a moonshot, it can sometimes be off-putting. A serious player, as Diamandis puts it, can find the balance between the two.
What is your Massive Transformative Purpose (MTP)? What is the thing in life that you want to do more than anything else? What keeps you going at night, wakes you up in the morning? What is that gives you purpose and meaning? Not on a small scale, but a massive scale.
So, should you tell investors about your moonshot or the smaller idea?
- Investors invest in entrepreneurs that have a plan to get there.
- Focus on how to generate revenue to start the journey
Your MTP can’t be a small thing, it needs to light you up, it needs to be a big thing.
Funding Your Radical Idea
Once credibility, trust, energy, and your MTP is set, it’s time to pursue investments.
You’re ready when:
- You are personally fully committed to the idea
- You’re at a place you’d invest your own dollars
- You’ve built a circle of believers first: advisors, team members, etc.
You’re pitching yourself for funding at the very beginning. If you are putting your time and energy, nights and weekends into your idea, that is ultimately a pitch for funding.
Asking for capital is a truth barometer. They may say nice things upfront, but when it comes time to give you money, they have to actually believe in you and your idea.
My friends tell me how great things are, my best friends tell me how shitty things are.
Graduates of the Founder Institute are creating some of the world's fastest growing startups, having raised over $950M in funding, and building products people love across over 200 cities worldwide.
See the most recent news from our Grads at FI.co/news, or learn more about their stories at FI.co/journey.