Entrepreneurs can pursue an opportunity much as scientists pursue knowledge–by following a disciplined process of identifying an anomaly in the market, formulating a plan to fill the gap, testing their plan in the real world, and revising their assumptions in light of new information. Menlo Park based ONSET Ventures, a venture capital firm focused on fledgling start-ups, has codified a set of practices that increase the odds that entrepreneurs formulate, test, and revise their working hypothesis in a disciplined fashion.
Since its founding in 1984, ONSET has backed over 100 early stage start-ups, 80% of which have gone on to receive subsequent rounds of financing, a much higher success rate than the average for investments in raw start-ups. When they co-founded ONSET in 1984, Terry Opdendyk and David Kelley (who also founded IDEO) conducted a systematic study of 300 seed stage ventures, with an eye to understanding the factors that influenced their ultimate success or failure. They found that a few factors accounted for most of the variation between successful and failed start-ups, and codified these findings into a set of principles for incubating new ventures.
- Simplify the working hypothesis. When selecting potential investments, ONSET partners use a set of
In the early Twentieth Century, most people viewed scientific hypotheses as theories that had not yet been proven. The philosopher of science Karl Raimund Popper flipped this view on its head, and argued that any theory-even one as well–established as Newtonian physics–was simply a hypothesis that had not yet been disproved.
Popper viewed science as a Darwinian struggle for survival between competing theories. Every theory is an imperfect representation of reality and vies for preeminence by surviving experimental scrutiny in the real world. Rigorous testing weeds out weaker theories, leaving only the strong to survive. Eventually, further experiments expose the flaws of the survivors, and yet stronger theories replace them as well. Science, for Popper, was a permanent battle for survival.
The engine that drives scientific progress, in Popper’s view, was an unending cycle that iterated between spotting an anomaly, formulating a working hypothesis, and submitting that theory to empirical and logical scrutiny to identify defects, steps elaborated below.
- Notice an anomaly. The cycle begins when a scientist bypasses a theory’s strong points to search out its