I'm writing this from a sunny sand dune in Wrightsvillle Beach, North Carolina.
Every summer, I spend a long weekend here – with my folks, my sister, and my better half, Cynthia – to celebrate my dad's birthday.
The town might sound familiar to you. It’s named after two entrepreneurial brothers, Orville and Wilbur Wright, famous for their feats of aviation.
But contrary to popular belief, their fame didn’t come from building the first flying machine…
Plenty of folks before them sent gliders and airships into the sky.
So why did the Wright brothers get all the glory?
What did these guys actually do – and what can their success teach us about early-stage investing?
Doing Something Better
As it turns out, Orville and Wilbur did something better than create the airplane:
They made it usable.
They invented a control system that allowed a pilot to steer the aircraft without it toppling over and dipping into a nosedive.
This innovation enabled flight as we know it today – and it gave the brothers a permanent spot in the history books.
But how can we use this insight to become better investors?
Let’s take a look.
Pushing Ideas Forward…
James Watt didn’t invent the steam engine. Instead, he embraced its novelty and pushed it forward, eventually helping to shape the Industrial Revolution.
Similarly, Bill Gates didn't create the first computer operating system…
Larry Page and Sergey Brin didn't create the first search engine…
And Mark Zuckerberg didn't build the first social network.
Each of these men spotted an existing but forward-thinking product, and then modified it or built on top of it to create something that was better than the original.
They weren’t inventors, per se; they were innovators.
And these innovators went on to create some of the most successful companies – and successful investments – the world has ever seen.
I saw a more recent example of this type of innovation last week.
I’m a “mentor” for a start-up accelerator in New York City called DreamIt.
Accelerators are hands-on “boot camps” for early-stage start-ups. As a mentor, I try to help young companies think through their business model, their marketing plan, their fundraising strategy – that sort of thing.
One of the companies I work with is called Slidebean. They’ve developed an easy way to build beautiful presentations.
Their main competitor is a Microsoft product called PowerPoint.
Despite the fact that it’s incredibly difficult to use, PowerPoint has become the industry standard and a massive business: people use it to create a truly shocking amount of presentations: an estimated 30 million of them every day.
But PowerPoint presentations aren’t just painful to make; most of them are painful to watch. To use the Wright Brothers as an analogy, the presenters do the equivalent of a nosedive; many crash and burn.
Slidebean figured out a way to make the process of building beautiful presentations fast and easy. It leads to more compelling presentations – and fewer crash and burns.
That’s a stunning innovation – and the type of early-stage investment it makes sense to pay attention to.
Make The “Wright” Investments
What can we learn from innovators like the Wright Brothers, Bill Gates and Slidebean?
As an early-stage investor, you might see products or companies that seem familiar.
Ask yourself the following questions:
1. Do you (or people you know, or millions of people you don’t know) use a similar product already?
2. If so, do you love it? If “yes,” pass on the investment. If “no,” ask a final question:
3. Is the new product far, far better than the old one?
If the new product is far better than the old one, you might have an interesting innovation – and a blockbuster investment – on your hands.
Play A Little Game
Want to play a little game to try out the “Wright” investment strategy?
Here are a couple of real companies raising money:
The first is called Liquidity Nanotech.
They’re aiming to solve the world’s drinking water crisis with an innovative purification system: pour any non-salt water through their cartridge and it becomes safe to drink.
And the second is called Terrafugia.
They’re starting with the foundation that the Wright brothers built – and they’re taking it to a whole new level:
Email us at email@example.com and let us know what you think of these innovations as potential investments.