I used Steve Blank's formula he described in "The Startup Owner's Manual". Steve is a legend and the process works. I spent 12 months working on a variety of startup ideas, testing them in the market, pivoting and moving on to the next one. Eventually we found one that got traction (paying customers). Two years later, we just closed $13M in series A funding and have dozens of happy customers.
For my part, I think the partners are much more important than the idea. Good companies can pivot to find a good market. Bad partners will sink you, or never get off the ground to begin with.
Select for team, not for idea. The best idea is the one that can attract and motivate a great team, or one put forward by people you want to work with.
FWIW, I recall Paul Graham writing something that explains how he screens YC applicants. The upshot is that he doesn't devote consideration the idea unless he's first intrigued by the team. Whether you're a spectacularly successful investor in many startups or the potential co-founder of just one, that's probably a good place to start.
Except there's a great caveat with this approach. People that are highly productive and self-motivated often don't give a pleasant impression because they are fascinated with the idea and don't care for the looks. And vice versa, those who will look like a great friendly team, will be passionate about, well, looking great and friendly. They will spend time getting together, having endless pleasant talks about the latest news and their favorite TV show and couldn't be bothered to get out of the comfort zone and actually deliver something measurable.
I think this is fine for excusing the social quirks of individual contributors. If you're talking co-founders, though, I'd consider this "caveat" a red flag. If a person can't bring himself to make a positive impression to other human beings because he's too enamored of the "idea and doesn't care for the looks," he probably doesn't have the requisite maturity to co-found a business that will employ people.
Of course, some people really are all talk and no action. But I suspect you're assuming too strong a correlation with social skills. The fact is that there are plenty of brilliantly social people who can and do execute, and plenty of smart introverts who can't. I'm not saying, "go into business with your friends!" I'm saying go into business with people you trust and respect.
The corollary is to become someone who is trusted and respected by people who don't share the same skills and biases you have. Good places to start: seriously consider whether "the looks" have merit, and practice carrying friendly conversations.
I agree with your point, that a certain level of social skills is a must, although in my experience, when people start competing over making the best impression, many choices that improve it would be disadvantageous when it comes to execution.
The simplest example I could think of is typically being relaxed and simply agreeing with everything that your opponent says gives better surface impression than being focused on understanding your opponent and actually trying to defend your point (the classical salesperson vs engineer case). Except that approach would deadlock your execution, but nonetheless I see many people successfully using it to gain one's trust and get preferred over someone who pushed back too much.
I disagree. I've met a lot of super productive, obsessed people. Many are very nice. Though like Ben Horowitz put it, you have your peace time people and your wartime people. The ones you're describing might be wartime people, obsessed with making a company survive. A company like Google would want more peace time people. They're still damn good engineers but not so stoic.
(1) Annual revenue if successful. So, it's number of users/customers times average revenue for each.
(2) Ease of getting first users/customers before virality, a marketing/sales effort, etc. can work.
(3) Some form of lock-in. E.g., once a company has all their important data in database manager X, they will be reluctant to change to Y. E.g., once all the office is good with office suite software X, they will be reluctant to change to Y. Once all your friends are on Facebook, you want to join Facebook and won't want to leave all your friends. And there are more cases.
(4) Various barriers to entry to keep out competitors. Technological secret sauce can be one such. Also some proprietary data. Sure, have to count some forms of lock-in as possible barriers to entry.
(5) Ease of developing the product or service to get to good profits, e.g., your wife is pregnant, your three year old needs braces on her legs, your nine year old needs braces on her teeth and wants to ride horses, your 11 year old wants to be an Olympic figure skater, your 16 year old wants his own car and to go to a private high school that will let him race ahead in computing, and your 18 year old has done really well in violin, e.g., much as in
[October 27, 2017 will be exactly 100 years since he did that, fresh off the boat, at Carnegie Hall and got a remark from a violinist in the audience "Isn't a little hot in here?" and a remark "Not for pianists!"]
has been accepted to Julliard, and wants a $500,000 violin (down from th $15 million he really wanted). And, by the way, you need a larger house and want an enclosed, Olympic pool. So, you want profitiability. Oh, yes, everyone in your family over the age of 5 wants the new iPhone for Christmas. Your wife needs a new SUV, bigger than the last one. You want a Corvette, e.g., just to save time driving to work you understand. Oh, yes, the new house needs a four car garage.
(6) Technology is your friend that helps you make money and not your enemy that threatens to run you out of business.
People don't like to say it because they're afraid of sounding lazy, but you should do whichever is easier. Is building one of them going to be easier than the other? Is marketing/selling one of them going to be easier? Does one of the ideas require raising money?
Building a sustainable business is hard enough in and of itself. If you can avoid having to woo investors, or dealing with Chinese factories, or months long sales cycles, do it.
In addition, this will force you to think realistically about the skills and deficiencies on your founding team.
There's a natural tradeoff here though: the easier a business is for you to build, the easier it is for others to copy it. If you're a skilled practitioner doing something near the limits of your abilities, it in no way guarantees that you'll find product-market fit, but when you do, the market is more likely to be yours for awhile. There will be fewer people out there who are capable of competing with you and it will take them longer to get up and running.
Agreed. If something is too easy it gets too competitive and you're working for scraps. But if one is a skilled practitioner, pushing the limits of that skill will be "easier" than learning a completely tangential skill.
Easy also means that people are less willing to pay high prices for the company. But sometimes it's safer because you're not competing with people like Rocket Internet, who can hire a thousand people overnight capable of working 12 hours/day on some idea.
Don't want to hijack the thread, but even more basically, how do you get startup ideas? I've read what PG has to say and others, but nothing is clicking.
It's a good question. I received some advice about this young-- and it wasn't about startups, it was about careers generally. If you don't know what you want to do, but you know the general area, proximity is your solution. Get as close as you can, and watch carefully. The example cited was Cornelius Vanderbilt. He sailed goods around and dabbled in ship building for decades before he got into the railroad and steamship business that built his empire. He became deeply familiar with the skills and problem space: market economics, securitization, transportation, cost competition, steam engines. Eventually, he became the first person to use a limited liability corporation to accumulate private wealth by offering services that transported goods and people, at brutally competitive prices.
Go work in something that interests you, and watch for opportunities. Uber and Flexport are proving that Vanderbilt was right, and transportation is still sexy. For myself, I like finance. There's plenty of room in healthcare, especially senior care, education, security... I think for the best ideas, you have to know something. The lightning bolt out of the clear blue sky to twenty-year-olds with no life or work experience is probably played out.
I have the same problem! I'm quite good at thrashing ideas (both others' and my own). Currently happy as an early employee at a startup whose idea I don't find rubbish :)
When you find common/repeated gaps, problems, and frustrations, stop and look at them. If you care about the problem, find out who else has it, what alternatives there are, what it takes to get a MVP to solve the first 80% of the problem.
Here's my issue: as a software engineer in the Bay Area that spends most of my day coding and then commuting for two hours, I am having this exact problem of watching and listening. Maybe I don't interact much with my environment, but nothing seems to jump out at me that could potentially resemble an idea.
I have had some ideas in the past that would have solved one of my problems, but they are very rare.
Try having less of a routine, not in terms of schedule but of habits --
Entropy is the crux of creativity.
I've considered making a "life randomization" app to add perturbations to my own habits. So if you solved your own problem, which is also one of mine, you'd have at least one user.
Find a domain expert and ask them to walk you through their day or shadow them. Also, ask them what sucks. I could literally throw ten ideas at you right now of fixable things of various complexity in my domain (academic bioengineering).
Another strategy is to look for large problems in your industry that have been solved and then try to find analogous problems in other industries where the same or a similar solution could work.
For our startup, my co-founder and I went and talked to friends and contacts of mine in medicine and generated a list of 15 or so things we thought were everyday pain points for many individuals. We then shelled out some money and went to an industry conference to field test them. It turns out that all of them were being actively worked on, but while we were exploring them we stumbled upon another idea which is now the basis for our startup.
I always hear about this abstract guidance to get ideas but haven't had a chance to find a domain expert willing to spend time on sharing the thoughts. What are good examples of when ideas generated this way formed a startup in the past?
For me, this started with some broad knowledge about a few industries. E.g. I have experience building connected devices and visualizing / analyzing data from those devices. I tried to meet as many senior managers as I could (think execs or experts) in my network. I knew I was interested in life sciences, energy management and robotics, so I sought out people in those industries.
I described what I was working on, what research I did on those industries and that I was looking to better understand the existing problems that might fit what I was interested in.
Some conversations did not lead anywhere, other times I got excellent, tactical, advice. That gave me more information and ideas, until I landed on my current project.
The reason this approach worked for me this time (as opposed to the other times I've tried this) is that I had a direction I was presenting and I did a bunch of research to get educated about some of these industries. I don't mean I studied it for some long time, but reading related subreddits, searching for conferences and looking up sponsor companies from that, learning some terms specific to those industries, etc. helped to have a better conversation.
While YMMV, getting warm intros to smart and successful people for a 15-20 minute phone conversation will expose you to what you don't know yet. This will result in you asking better questions, which can lead to more ideas.
One fairly effective way is to focus on problems, nuisances, frustrations, or pain points. What do people/groups/companies dislike, hate, etc? What can be improved on? What wastes resources that could be made more efficient? Someone will usually pay for something that solves a problem.
You don't necessarily need an original idea, often it's just a matter of doing the same thing others are already doing, but better, or cheaper, or differently. Many people get stuck on coming up with some unique idea, when in reality most businesses are not doing anything particularly unique at all.
PG's advice is not try to think of startup ideas, but start noticing problems around you. It's hard being creative on demand and so that advice makes sense. Like I said below, I am having the problem of noticing problems, not even startup ideas. Maybe we are so used to the status quo? Should I question anything accepted as a common sense in the industry?
If people ever ask you for certain kinds of help or are baffled that you manage to easily do X when X is their worst nightmare, you may have a something to offer. But, it can still be a lot of work to figure out how to turn it into a thriving business.
I have started a number of blogs in response to apparent demand for information I know on various subjects. Even that has been very challenging in terms of trying to figure out how to best serve the needs of other people, turn it into a business model, etc. I have "pivoted" repeatedly in certain problem spaces. I might have a few things that don't completely suck at this point. ;-) But, I am still sorting out how this becomes some kind of meaningful income stream, etc.
These days I think of apps, then try and work backwards into a *startup that could grow out of it (and have the vision for x10 growth).
For example, an app for tracking expenses vs income => business owners tracking expenses => expenses in a business => selling tight integration into a POS (where the income happens) => startup about POS systems that integrate into your slick app (and yeah that exists)
Another aspect besides the field which others gave great insight about, one aspect is costs and access to capital.
When I decided to go the startup route I had a strong idea, validation from potential customers, high barrier to entry for competitors, very small amount of software dev to do, etc.
Only problem I needed between 500k-1M€ of starting capital to get the idea rolling. I only had less than 50k€ in my name. I found potential investors but obviously a very large dilution factor.
I switched to another idea, which required considerable amount of software work that I could do before creating the company but needed about 50k€ of starting capital. I went that route, found cofounders, a team, etc...and so far, 6 years and a few small rounds, we raised about 1M€ and are one of the only players in our field to be profitable, despite competitors having raised significantly more.
Recently I had a look at another problem I could solve in an entirely different field (which I know little about). I estimated startup capital at about 5M€ to reach MVP. Guess what? A few weeks ago a joint venture between major players in this field announced a 3 year R&D programme and 25M€ investment. There is no way I could beat them.
Look at the team first. Ideas usually need experts in their fields, so the teams are usually different. Now imagine you're trapped on an island with cannibals. Who would you take?
Your idea is wrong. The market could be off, the solution is not a good fit, the product night be too expensive, the partners might not be receptive.
What are the consequences of that? It's like trying to shoot a small target at a distance. Your first bullet will miss. That's fine. But how will you hit it?
If you only have one bullet, very limited resources, are you accurate enough to not miss? Do you have a high firing rate? Can you do 3 prototypes/day? What are the odds of hitting other targets in the field even if you don't get yours?
But there's more.. most of your targets will actually be hidden. Now how well do you know your space? If you are building something for millennials, a partner be a millennial. If you build something for city councils, ideally one partner has managed a city council. The more you know your space, the easier it is in everything.
1. scan online forums for common problems if one exists. This is a manual effort, but it can pay off as you will be building something that is already in need.
2. do some customer development, but be very careful about introducing bias into your questions. This would give you bad data if you ask the wrong types of questions. See the book The Mom Test
3. listen to a few podcasts where founders are interviewed. The older YC podcasts are really good. If your going for a two sided market, I would caution you. This is more challenging than other types of ideas.
This year I experimented focusing on partner first - I went through a list of good friends and bug them one by one with a different idea, tried to motivate them, and see which one kept the work going. So far I have 4 projects that survived (meaning are still worth investing time) out of a 10th or more.
I'm not interested in building a new startup now, though, that's why I did this specific experiment.
Experiments aside, in general I think you should focus on problems and how quickly you can get the first $ with your idea/solution.
So you list 10 ideas, you look at the core problem each tries to solve, think if you like to work on that problem/space (not the current solution, because you may change solution down the road), try to figure out who could pay you first, and estimate how quickly you can get something working which is worth your first users to pay for.
I faced this problem, and face it on a regular basis. I get just too many ideas, I used to note them down, and the list grows bigger and bigger.
The only way to resolve the issue is knowing that finding ideas is easy, but execution is king. You need to work out and analyze their potential. You need to sit down, brood over every idea and look at every angle
- problem you are solving
- target market (size, barriers to entry)
- competitors
- do you have a team which can solve this problem efficiently
etc.
etc.
This will definitely prune your list of ideas.
Next, you will need to discuss the chosen few ideas with prospective customers, and see if they "really" need this, are ready for this. You will need to develop prototypes, get some early customers, see how they like it.
The one that I most cannot stop thinking about. I'd rather work passionately on an idea with questionable room for success than less enthusiastically on one that just offers greater commercial viability.
Tell us right now. We'll give you feedback. Don't worry about the competition: anything big enough worth pursuing is not going to be hurt by writing a few sentences online.
for mass/consumer market - the idea must be usable to me before I expect others to use it, making money is not easy thing due to long waiting time. recently hybrid platforms (digital + physical) got good success than purely digital one's. I think, passionately working on by 'watching' what customers do with the product is key to success. Usually people have passion in the idea stage, deciding based on hype is always leads to failure. mass market is a marathon race, luck plays critical role.
for enterprise - may be able to make money earlier than consumer market. I think reading "startup" books provides good insights, process to follow.
for niche: domain knowledge, few early customer are critical for success. may be able to reach customers easily, may not be able to scale.
Generally, speed and assumptions decide fate for any idea. particularly "assumptions" are the #1 enemy of every idea/startup.
I used to have a complex formula, but now that I'm older I realize how much of an investment starting any business is. Now it just boils down to the question of if I want to spend the next 10 years of my life on an "idea".
http://markets.businessinsider.com/news/stocks/Leading-Busin...