NFX’s James Currier: Where unicorn ideas come from and why founders need to ‘keep spinning’

Are you seed stage a founder 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 defense.

• Network effects: Your product becomes more valuable when more people use it.
• Embedding: Integrate your services so deeply that customers “can’t rip them out.”
• Data loops: collecting, processing and acting on data in real time.

“It’s really just talking about big, world-changing, high-impact companies that could be worth a billion dollars or more,” he said at Root Devices Early Stage last month. “That’s what we’re investing in. And what I’m talking about today is just for people who want to build these kinds of businesses.”

Following a presentation he has previously shared at Harvard Business School, Stanford and MIT, Currier outlined the mental models adopted by unicorn founders and offered candid advice to early-stage entrepreneurs.

“This idea that it’s 99% sweat and 1% idea is not correct, because a real idea has power in it,” he said. “The right idea at the right time will attract you the right talent, it will attract you capital – OK, it will attract you press, which will then attract you more talent, more capital.”

Pop culture and tech journalism glorify founders who shoot for the moon, “so most people think they have ideas,” Currier said, noting that unicorns like Lyft, Meta and Alphabet simply “copied” existing companies. In doing so, market risk was replaced by execution risk, which is much easier to manage.

“Don’t take market risk – find the things people want and do better at them. This is the most common way to get to a unicorn company.”

According to Currier, who has been an angel investor in Lyft, DoorDash and Patreon, NFX reviews about 8,000 deals each year but only invests in about 30. “Sixty-five percent of the ideas we see are in what we call some sort of ‘ dead zone’ — this zone will waste your life energy if you pursue bad ideas.”