Startup Ideas

Coming Up With Startup Ideas

People believe that coming up with ideas for startups is very hard—that it must be very hard—and so they don’t try to do it. They assume ideas are like miracles: they either pop into your head or they don’t. These people overvalue ideas. They think creating a startup is just a matter of implementing some fabulous initial idea. And since a successful startup is worth millions of dollars, a good idea is therefore a million-dollar idea.

Actually, startup ideas are not million-dollar ideas, and here’s an experiment you can try to prove it: just try to sell one. Nothing evolves faster than markets. The fact that there’s no market for startup ideas suggests there’s no demand. Which means, in the narrow sense of the word, that startup ideas are worthless.

The fact is, most startups end up nothing like the initial idea. It would be closer to the truth to say the main value of your initial idea is that, in the process of discovering it’s broken, you’ll come up with your real idea. The initial idea is just a starting point—not a blueprint, but a question. There’s a real difference, because an assertion provokes objections in a way a question doesn’t. If you say: I’

The way to get startup ideas is not to try to think of startup ideas. It’s to look for problems, preferably problems you have yourself. The very best startups tend to have three things in common: they’re something the founders themselves want, that they themselves can build, and that few others realize are worth doing. Microsoft, Apple, Yahoo, Google, and Facebook all began this way.

First all, it is very important to work on a problem you have. This is because—among other things—it ensures the problem really exists. So many founders build things no one wants because they begin by trying to think of startup ideas. That is doubly dangerous: it doesn’t merely yield few good ideas; it yields bad ideas that sound plausible enough to fool you into working on them.

When a startup launches, there have to be at least some users who really need what they’re making. Usually this initial group of users is small, for the simple reason that if there were something that large numbers of people urgently needed and that could be built with the amount of effort a startup usually puts into a version one, it would probably already exist. This means you have to compromise on one dimension: you can either build something a large number of people want a small amount, or something a small number of people want a large amount. Choose the latter. Not all ideas of that type are good startup ideas, but nearly all good startup ideas are of that type.

“Made-up” startup ideas are usually of the first type (i.e. lots of people are mildly interested in a social network for pet owners). However, nearly all good startup ideas are of the second type. For example, there were only a couple thousand Altair owners when Microsoft made Altair Basic, but without this software those owners were programming in machine language. Thirty years later, Facebook had the same shape. Their first site was exclusively for Harvard students, of which there are only a few thousand, but those few thousand users wanted it a lot.

When you have an idea for a startup, ask yourself: who wants this right now? Who wants this so much that they’ll use it even when it’s a crappy version made by a two-person startup they’ve never heard of? If you can’t answer that, the idea is probably bad.

While building something a small number of people want a large amount is almost a necessary condition for a good startup idea, it’s not a sufficient one. You want to have a germ of a giant company and not just a niche product. This is often tough to tell. The founders of Airbnb didn’t realize how big a market they were tapping. Initially they had a much narrower idea. They were going to let hosts rent out space on their floors during conventions. They didn’t foresee the expansion of this idea; it forced itself upon them gradually. All they knew at first is that they were onto something. That’s probably as much as Bill Gates or Mark Zuckerberg knew at first.

Occasionally it’s obvious from the beginning when there’s a path out of the initial niche. But there are limits to how well this can be done, no matter how much experience you have. The most important thing to understand about paths out of the initial idea is the meta-fact that these are hard to see.

So if you can’t predict whether there’s a path out of an idea, how do you choose between ideas? The truth is disappointing but interesting: if you’re the right sort of person, you have the right sort of hunches. If you’re at the leading edge of a field that’s changing fast, when you have a hunch that something is worth doing, you’re more likely to be right.

In Zen and the Art of Motorcycle Maintenance, Robert Persig says: “You want to know how to paint a perfect painting? It’s easy. Make yourself perfect and then just paint naturally.” Empirically, the way to have good startup ideas is to become the sort of person who has them.

Being on the leading edge of a field doesn’t mean you have to be one of the people pushing it forward. You can also be at the leading edge as a user. Paul Buchheit says that people at the leading edge of a rapidly changing field “live in the future.” Combine that with Persig and you get: “Live in the future, then build what’s missing.” That describes the way many, if not most, of the biggest startups got started. Neither Apple nor Yahoo nor Google nor Facebook were even supposed to be companies at first. They grew out of things their founders built because there seemed a gap in the world. If you look at the way successful founders have had their ideas, it’s generally the result of some external stimulus hitting a prepared mind. Bill Gates and Paul Allen hear about the Altair and think “I bet we could write a Basic interpreter for it.” Drew Houston realizes he’s forgotten his USB stick and thinks “I really need to make my files live online.” Lots of people heard about Altair. Lots forgot USB sticks. The reason those stimuli caused those founders to start companies was that their experiences had prepared them to notice the opportunities they represented.

The verb you want to be using with respect to startup ideas is not “think up” but “notice.” The most successful startups almost always grow naturally out of the founders’ own experiences. The key is to have a mind that’s prepared in the right way.

If you’re not on the leading edge of some rapidly changing field, you can get to one. For example, anyone reasonably smart can probably get to an edge of programming (i.e. building mobile apps) in a year. Since a successful startup will consume at least 3-5 years of your life, a year’s preparation would be a reasonable investment. Especially if you’re also looking for a cofounder. You don’t have to learn programming to be at the leading edge of a domain that’s changing fast. Other domains change fast. But while learning to hack is not necessary, it is for the foreseeable future sufficient. As Marc Andreessen put it, software is eating the world, and this trend has decades left to run.

Knowing how to hack also means that when you have ideas, you’ll be able to implement them. That’s not absolutely necessary (Jeff Bezos couldn’t) but it’s an advantage. It’s a big advantage, when you’re considering an idea like putting a college facebook online, if instead of merely thinking “That’s an interesting idea,” you can think instead “That’s an interesting idea. I’ll try building an initial version tonight.” It’s even better when you’re both a programmer and the target user, because then the cycle of generating new versions and testing them on users can happen inside one head. Once you’re living in the future in some respect, the way to notice startup ideas is to look for things that seem to be missing. If you’re really at the leading edge of a rapidly changing field, there will be things that are obviously missing. What won’t be obvious is that they’re startup ideas. So if you want to find startup ideas, don’t merely turn on the filter “What’s missing?” Also turn off every other filter, particularly “Could this be a big company?” There’s plenty of time to apply that test later. But if you’re thinking about that initially, it may not only filter out lots of good ideas, but also cause you to focus on bad ones.

We know that good ideas are out there. It’s impossibly unlikely that this is the exact moment when technological progress stops. You can be sure people are going to build things in the next few years that will make you think “What did I do before x?” And when these problems get solved, they will probably seem flamingly obvious in retrospect. What you need to do is turn off the filters that usually prevent you from seeing them. The most powerful is simply taking the current state of the world for granted. Even the most radically open-minded of us do that.

You couldn’t get from your bed to the front door if you stopped to question everything. But if you’re looking for startup ideas, you can sacrifice some of the efficiency of taking the status quo for granted and start to question things. Why is your inbox overflowing? Because you get a lot of email, or because it’s hard to get email out of your inbox? Why do you get so much email? What problems are people trying to solve by sending you email? Are there better ways to solve them? And why is it hard to get emails out of your inbox? Why do you keep emails around after you’ve read them? Is an inbox the optimal tool for that?

Pay particular attention to things that chafe you. The advantage of taking the status quo for granted is not just that it makes life (locally) more efficient, but also that it makes life more tolerable. If you knew about all the things we’ll get in the next 50 years but don’t have yet, you’d find present day life pretty constraining, just as someone from the present would if they were sent back 50 years in a time machine. When something annoys you, it could be because you’re living in the future.

Since what you need to do here is loosen up your own mind, it may be best not to make too much of a direct frontal attack on the problem (i.e. to sit down and try to think of ideas). The best plan may be just to keep a background process running, looking for things that seem to be missing. Work on hard problems, driven mainly by curiosity, but have a second self watching over your shoulder, taking notes of gaps and anomalies.

Give yourself some time. You have a lot of control over the rate at which you turn yours into a prepared mind, but you have less control over the stimuli that spark ideas when they hit it. What if Bill Gates and Paul Allen had constrained themselves to come up with a startup idea in one month, and what if they’d chosen a month before the Altair appeared?

A good way to trick yourself into noticing ideas is to work on projects that seem like they’d be cool. If you do that, you’ll naturally tend to build things that are missing. It wouldn’t seem as interesting to build something that already existed.

Just as trying to think up startup ideas tends to produce bad ones, working on things that could be dismissed as “toys” often produces good ones. When something is described as a toy, that means it has everything an idea needs except being important. It’s cool; users love it; it just doesn’t matter. But if you’re living in the future and you build something cool that users love, it may matter more than outsiders think. Microcomputers seemed like toys when Apple and Microsoft started working on them. The Facebook was just a way for undergrads to stalk one another.

The clash of domains is a particularly fruitful source of ideas. If you know a lot about programming and you start learning about some other field, you’ll probably see problems that software could solve. In fact, you’re doubly likely to find good problems in another domain: (a) the inhabitants of the domain are not as likely as software people to have already solved their problems with software, and (b) since you come into the new domain totally ignorant, you don’t even know what the status quo is to take it for granted.

If you can afford to take a long view (and arguably you can’t afford not to), you can turn “Live in the future and build what’s missing” into something even better: Live in the future and build what seems interesting.

Because a good idea should seem obvious, when you have one you’ll tend to feel that you’re late. Don’t let that deter you. Worrying that you’re late is one of the signs of a good idea. Ten minutes of searching the web will usually settle the question. Even if you find someone else working on the same thing, you’re probably not too late. It’s exceptionally rare for startups to be killed by competitors—so rare that you can almost discount the possibility. So unless you discover a competitor with the sort of lock-in that would prevent users from choosing you, don’t discard the idea.

If you’re uncertain, ask users. The question of whether you’re too late is subsumed by the question of whether anyone urgently needs what you plan to make. If you have something that no competitor does and that some subset of users urgently need, you have a beachhead. The question is whether that beachhead is big enough.

Err on the side of doing things where you’ll face competitors. Inexperienced founders usually give competitors more credit than they deserve. Whether you succeed depends far more on you than on your competitors. So better a good idea with competitors than a bad one without. You don’t need to worry about entering a “crowded market” so long as you have a thesis about what everyone else in it is overlooking. In fact, that’s a very promising starting point. Google was that type of idea. Your thesis has to be more precise than “we’re going to make an x that doesn’t suck” though. You have to be able to phrase it in terms of something the incumbents are overlooking. Best of all is when you can say that they didn’t have the courage of their convictions and that your plan is what they’d have done if they’d followed through on their own insights. Google was that type of idea too. The search engines that preceded them shied away from the most radical implications of what they were doing—particularly that the better a job they did, the faster users would leave.

A crowded market is actually a good sign, because it means both that there’s demand and that none of the existing solutions are good enough. A startup can’t hope to enter a market that’s obviously big and yet in which they have no competitors. So, any startup that succeeds is either going to be entering a market with existing competitors, but armed with some secret weapon that will get them all the users (like Google), or entering a market that looks small but which will turn out to be big (like Microsoft).

While the best way to discover startup ideas is to become the sort of person who has them and then build whatever interests you, sometimes you don’t have that luxury. Sometimes you need an idea now. For example, if you’re working on a startup and your initial idea turns out to be bad. Although empirically you’re better off using the organic strategy, you could succeed this way. You just have to be more disciplined. You’ll see a lot more ideas, most of them bad, so you need to be able to filter them.

Since the most successful startups generally ride some wave bigger than themselves, it could be a good trick to look for waves and ask how one could benefit from them. The prices of gene sequencing and 3D printing are both experiencing Moore’s Law-like declines. What new things will we be able to do in the new world we’ll have in a few years? What are we unconsciously ruling out as impossible that will soon be possible? But talking about looking explicitly for waves makes it clear that such recipes are plan B for getting startup ideas. Looking for waves is essentially a way to stimulate the organic method. If you’re at the leading edge of some rapidly changing field, you don’t have to look for waves; you are the wave.

Finding startup ideas is a subtle business, and that’s why most people who try fail so miserably. It doesn’t work well simply to try to think of startup ideas. If you do that, you get bad ones that sound dangerously plausible. The best approach is more indirect: if you have the right sort of background, good startup ideas will seem obvious to you. But even then, not immediately. It takes time to come across situations where you notice something missing. And often these gaps won’t seem to be ideas for companies, just things that would be interesting to build. Which is why it’s good to have the time and the inclination to build things just because they’re interesting.

Live in the future and build what seems interesting. Strange as it sounds, that’s the real recipe.

Evaluating Startup Ideas

In evaluating startup ideas, you should always view it from an investor’s point of view: “How can I predict if an investor is going to like my idea?” The answer is easy: it’s a good idea if it can grow very quickly. So you need evidence that your company will be able to grow very quickly. You startup idea is basically a hypothesis about why a company could grow quickly. And your job is to construct your hypothesis (or pitch) to the investor so that they understand how it can grow quickly. Before you start building the company, you need to think about the potential path of the company and the things you need to prove for this company to do well.

The first important aspect of the idea is the problem. What is the setting, or initial conditions, for this company that allows it to grow quickly? The second aspect is the solution—what is the experiment that you’re running in those initial conditions? The third and last aspect is the insight. Why is the thing that you’re going to try going to end up being successful? What’s your unfair advantage? Why are you going to be the fastest one to grow? This insight is necessary for the investor to choose you over anyone else, and it has to be related to growth—you have an unfair advantage that explains why you’re going to grow quickly.

Here are a few tips with respect to evaluating and pitching these three aspects. Good problems are:

  1. Popular (millions of potential users)
  2. Growing (market growing at 20%+)
  3. Urgent (needs to be solved as soon as possible)
  4. Expensive (billion-dollar problems)
  5. Mandatory (this problem has to be solved)
  6. Frequent (people need to use it multiple times per day)

You want a problem that has at least one of these attributes and ideally multiple. If you’re company isn’t growing, it’s probably missing these characteristics. Remember that Behavior = Motivation + Ability + Trigger. These three things need to happen at the same time to change behavior. The motivation is the problem that your customer needs to solve. The ability is your startup. And the trigger is whatever is going to make them realize that they need to solve their problem with your startup. Email notifications, and general ways of getting and staying in front of your customers are super important—you need to trigger their behavior.

And lastly, how do you know if you have an unfair advantage? Well, there are five main types of unfair advantages. Companies do not have all of them, but you need to have at least one, and it’s nice if you have two or three.

  1. Founders (are you 1 in 10 of all the people in the world who could solve this problem?)
  2. Market (is it growing at 20%+ per year?)
  3. Product (is your product 10x better than the competition?)
  4. Acquisition (customer acquisition paths that cost no money and grow by word of mouth)
  5. Monopoly (as your company grows, is it more difficult for you to be beaten by competitors?)
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