If I had a dime for every startup idea I’ve heard, I’d probably have at least $100. Not too Shabby, can buy myself a nice steak dinner at Peter Luger’s plus change!
There may be one thing though, that connects most of those ideas: they fail to understand the most fundamental (and probably most important) building block in a successful startup. Let me explain:
- The default, almost intuitive predisposition when coming up with startup ideas, comes from a fault, a need or a problem you’re aware of or have encountered.
Let’s say you’re waiting in an endless line to get serviced. you’re thinking: OMG, there has to be an app that monitors the lines and alerts when lines are shorter (and also predicts and such and such). So you see a “need” and you immediately start designing the app in your mind: how it will look like, what it would save you, and so on. BUT, you don’t even stop and think: who is going to pay for my app? the consumers? hmm… getting consumers to provide credit card details (or equivalent) is very tricky and normally entails micro-payments. so, maybe businesses? but what would their incentive be? how difficult would it be to penetrate? enterprise sales could be too long and resource consuming.
- Another common disposition is being exposed to a very cool technology, or realizing that you might have a good technological solution to a problem/issue currently being neglected due to utilizing inferior default technologies. For example, you see that traffic lights are problematic and might create unnecessary congestions, so you come up with your own crazy ideas as to how you can improve and optimize it, based on some awesome video analysis + big data. Again, great, but how do you monetize?
I had a very cool idea once to create predictive driving times, i.e. to be able to know when I should leave the place I’ll be in, so I could reach the place I wanted to drive to on time. An example: let’s say it’s 9am and I’m at home. I need to be somewhere within 30 minutes driving distance at 4pm. If I wait till 3:30pm, I might discover that there’s heavy traffic (that could have been theoretically anticipated) and I should have planned ahead better. sometimes experience dictates those decisions, and sometimes I need a broader source to help me. I had potential access to a huge database of traffic statistics and road maps, and also a professor who’s expertise is in transportation optimization. Alas, I also had 2 “minor” problems:
- It would take a long time to write & calibrate the algorithms, plus, optimize driving times, and there are companies FAR GREATER than my potential startup, who already own and analyze this data: Google, Waze (which was an independent company back then), and surprisingly, many more
- What’s even worse: how could I make anybody pay for this important yet very basic piece of information?
Guess what, 4 years later Google implemented that quite easily and it is now a tiny, yet very cool part of their travel planner on Google maps. They’re not even monetizing on it directly, rather than adding a seemingly negligible feature that makes Google maps richer.
Even tho sometimes very successful startups have started off with one of those dispositions, the crowded tech world we live in dictates that we, as entrepreneurs, should strive to increase our odds of being funded and eventually, being successful (i.e. making tons of $$$).
I reckon that the first thing you need to do, before putting a down payment on your future yacht, is to imagine a viable business model and a go-to-market strategy.
If you can imagine the personas / entities to which you can sell your product, the ways you can sell it and the ballpark costs they would agree to pay (again, all very roughly of course), then you have an excellent starting point, and from there on, you can move forward to tackle the rest of the challenges.
So, after taking part in several ventures and presenting to tons of investors (I’m embarrassed to say how many as it might pull the rug under this post’s credibility, so let’s just say A LOT), here is my ranking of what you need to consider when actually pursuing a new venture, and spending your time, money and hopes on it:
- Biz model / GTM – Never say “that’s ok we have a very cool product/idea, the customers will come or we’ll figure it out later”. The first thing you need to know is who your customer is, why he should buy your product, and for how much. of course, you also need to estimate the market size (tip: never think your market size is 100’s of Billions) and would help if you had an idea of how you could reach out and make them buy whatever it is you’re selling. Selling to consumers or businesses is a critical junction for your enterprise, and you need to make sure that your customer will actually be willing to pay for what you’re offering. having said that, be aware that arbitrary / unpredictable use of your solution is also a party pooper, that’s why investors love subscribable (apparently it’s not a word..) and/or addictive offerings.
- Black-box technology – almost as important. Investors want to know your offering is very hard to reverse-engineer or replicate. Often times when you’re small, large companies are able to quickly implement your product (sometimes faster than you…) and sell them to the critical mass, thus canceling any selling point you have. Having a solid technology will not only help you retain your relative advantage, but would also make you much more appealing for acquisitions.
- An actual pain – If there are people to whom you can sell, it probably means that there’s a pain, but not always. proving that there’s a real pain (and the more painful it is = the likelihood to succeed is higher) is crucial because it mitigates the risk of selling solely on merit.
- A (cool) viable solution/product – Yes. it needs to be cool, no matter what people tell you. Visuals and aesthetics are proven likability enhancers. But, more importantly, your product (based on your tech, of course) needs to show that it can actually meet the need or solve the problem.
There’s one “floating” category: the team. all investors say “We invest in impressive entrepreneurs” and such. it’s true, but to me, it has to go without saying. If you’re not talented or interesting, you have nothing to look for in entrepreneurship. The team is the most un-quantifiable metric there is, because it’s so subjective and basic, it’s on the verge of being a cliche (excluding outliars of course, e.g. serial exit-makers, or vice versa, complete idiots).
In conclusion, always start by imagining HOW, TO WHOM, AND FOR HOW MUCH you sell your product/service. if you can imagine this, you have a promising starting point.