You Need a Model If You Are Going to Help Someone

“If you don’t have a model, how can you help someone?” my therapist asked me.

He said this because I made a sarcastic comment. It seemed when I described a problem I was dealing with and asked for his advice, it came in the form of a list. I started to believe he had a list of solutions for everything. My comment at the time was, “Here comes a list!”

His question stuck with me. He speaks the truth. I couldn’t stop thinking about it. “If you don’t have a model, how can you help someone?”

I realized I have a model I follow when advising early-stage startups. It is focused on the achievement of product-market fit and sustainability. It took me a few years of angel investing to synthesize my model. Years of evaluating potential angel investments, followed by many bad investments, and finally arriving at why my investment successes were, well, successful.

Armed with this model, I became a better angel investor. More importantly, I became an effective advisor to “back of the napkin” startup entrepreneurs. Using my model, I knew what to look for and how to ask the right questions to help the entrepreneurs focus on what was important to move them ahead.

When thinking about the need for models to help people, the first place I went was startups. But shortly after, I began thinking of the other models I have in life. Models focused on marriage, raising kids, getting along with difficult family members, angel investing, managing wealth, philanthropy, and growing closer to God, to name a few. Each contains elements that make them models.

7 Attributes of a good model:

1. The model is able to help someone.
2. The model must focus on a problem you are trying to solve.
3. The model must have a desired outcome, an objective.
4. The model must have multiple elements to be satisfied in achieving the objective.
5. The model must be simple and connect with deep truths. When you hear the elements, they sound obvious.
6. The model’s elements should be measurable so you can’t rationalize the achievement of each element.
7. The model must focus on a problem you are trying to solve.

In the case of a very early-stage startup, the problem that needs to be solved is simple. How do I get started with this idea? Entrepreneurs are usually drawn to an idea. We often hear of the “lightbulb” moment when considering a startup. And this may be true. But the idea does not result in a new company, no matter how wonderful, inspiring, and unique.

This leads us to the objective…

The model must have a desired outcome, an objective. The desired outcome for a startup is to generate cash.

An entrepreneur may simply be thinking he’ll make millions from this idea. Or, if he is more socially minded, he will improve the lives of millions of people. Maybe he is idealistic and wants to build a company environment where people are excited to work. Or he is practical and desires to create a better life for his family.

In all these cases, the idea must morph into a business if they are to be achieved. And if it is a business, it must be sustainable. And to be sustainable, it must generate cash. It is that simple.

The model must have multiple elements to be satisfied in achieving the objective.

Now that we know what we are trying to accomplish, we need a list that gets us there. It is as simple as trying to accomplish any complex to-do. There are steps involved. Each step gets you closer to getting the to-do done.

The model must be simple and connect with deep truths. When you hear the elements, they sound obvious.

My startup model lists five elements to be satisfied to achieve the objective.

1. Define the problem you are aiming to solve.
2. Design and build the solution to this problem.
3. Know who has the problem.
4. Decide what they will pay to solve their problem.
5. Determine if you can make money doing this.

When all five elements are satisfied, the entrepreneur is out of the startup stage and on to growth. At least, that’s my experience. And it takes time to satisfy these five elements. And this is where in my business as an angel investor the art begins and the risk skyrockets.

Yes.

It takes time to work the list. And time is money. Sometimes the entrepreneur can work the list successfully. But sometimes he can’t. If he can, we have a business. If not, we have a wind-down.

The model’s elements should be measurable, so you can’t rationalize the achievement of each element. 

A subjective measurement of an element's achievement must be in a model’s list. You can’t explain it away. You have to prove, without assumptions, that you fully satisfied that element on the list. You either did it or you didn’t. Progress doesn’t count.

A startup’s paying customer is the ultimate proof of achieving each element. If your big idea is solving a problem, people will pay to solve it. Then you may have something. Those are steps one through four. Making money doing it, well, that’s step five.

Summary

My therapist was correct. To help someone, you must have a model. I shared my model of how to help a startup as my example. More importantly, I described the steps necessary to develop a model to help others.

Caveat Emptor

One more example...what’s that model for raising kids? It seems everyone has a model for this, including people who don’t have kids. And this is the final lesson. Models built from experience are valuable and will help you. The other models are simply opinions drawn from observations. Not so valuable if you ask me.