Every idea or opportunity is exciting when one first thinks, sees or hears of it. It makes one think that “this is it”, it’s the right idea or opportunity one has been waiting for a long time. It makes one to start taking action on it right away. That action might mean researching on it, talking to people, visiting places and markets, studying competitors if any, studying the target customers etc….
Also, in terms of action it might also mean at times, for us to make an immediate investment, either small or big, either out of fear that we may not get this opportunity if we wait, or that someone else may act faster on that idea. If one is lucky to succeed with the idea or opportunity after making the investment, then that’s great, but it is risky to depend upon luck, or even to go with the flow and take on challenges as they come. And it does not mean that the investment is risk free if one has properly researched the idea or the opportunity.
The best way to deal with ideas and opportunity is to work backwards. Asking oneself what is the end result one wants from the opportunity or the business idea. It is obvious that one looks at a gain of some percentage over the investment one has made. This is where my theory of Proof of Fund comes in. It is a basic, simple and a fundamental return on investment. No matter how small or big an investment is, or how much or how little research has been done on an opportunity or the business idea, does it justify a satisfying gain as a result.
At the idea stage there is always a scarcity of funding to invest in the idea, and even if we do have the funding to invest irrespective of the size of investment, we need to work out the end result first, and that is the proof of fund that we will make from the investment in the opportunity or the business idea. Entrepreneurs and investors talk about proof of concept to gain funding and to make an investment respectively, but I think proof of fund is much better strategy to go with to succeed with any idea or investment.
Ideas and opportunities will always look especially good when they are presented with the profitability as a result. But that’s on paper, and one must ask or look for the same result in a realistic scenario. I personally came across couple of very good business opportunity / idea in the past and I was extremely sold out on the concept, but failed to do much research or ask and look for the realistic results from the business activity. I ended up investing a big sum and hardly recovered that money, not because of any flaw in the idea or concept, but it failed mainly because the team behind it failed to execute it successfully.
Whilst we can take away a lot of learning from such failures, and I surely did, but there are also good things that came out from that experience, in terms of thinking, mindset and skills. It could be even better if the team had succeeded in executing the concept. But not all things are in one’s control. That opportunity cost me Rs. 90000/- but that has not hurt me, as what I gained is far more valuable, and I can happily say that this post is worth Rs. 90000/-. Hence the idea or opportunity may be great, the funding might be available to invest in it, but the more important matter to validate is the proof of fund creation from the particular business activity.
We live in the times where one long career in a single company or expertise is a rarity. We are constantly flooded with information, ideas and opportunities via the internet on our smart phones and laptops. We are constantly seeking new business opportunities, but seeking them with the Proof of Fund methodology will surely result as a better approach at succeeding in the business opportunities or ideas.