The following are my notes from YC startup school session on getting and evaluating ideas to build a startup.
It’s hard to predict whether an idea would succeed or not. But there are some ideas are more likely to succeed than others. This is a guide to find such ideas.
A good resource: How to Get Startup Ideas – Paul Graham
Four most common mistakes with startup ideas
Not solving a real problem
- The idea would be a nice to have, but it wouldn’t be solving a real problem
- Or, it’s solving a problem that people don’t care about
- This is a Solution In Search of a Problem (SISP)
- Example: AI is cool, what could I apply it to?
- Instead, founders should fall in love with a problem and try to solve it rather than falling in love with a solution
Getting stuck on a tarpit idea
- Tarpit ideas are those ideas that have been around forever
- These are widespread problems that lots of potential founders encounter
- Seems like it could be easily solvable with a startup
- Apparently, there’s a structural reason why it’s actually not solvable
- Example: An app to make casual weekend plans with your friends
- Tarpit ideas are not necessarily impossible, but these are common ideas that are surprisingly difficult to build
- Instead, start with Googling the idea, find out who has worked on it, and talk to them to get a perspective
Jumping into an idea without evaluating if it’s a good one
- Think of your idea as a “good starting point”
- It’s like writing a research paper, you have an assumption and you validate it as you go on writing the paper
- 10 questions to ask before proceeding with an idea:
- Do you have founder-market fit?
- Probably the most important criteria
- Are you the right team to work on this idea?
- Instead of picking a good idea, pick a good idea for your team
- How big is the market for this idea? What would it look like in the future?
- Check if the markets are big now
- Check if the markets are small yet growing rapidly
- Note that a market typically needs to be growing 50% or more every year to be growing “explosively”
- Good read – How to Model Total Addressable Market (Template Included) | Visible.vc
- How acute is this problem?
- See if the problem is real and people actually care about it
- If the problem is real, the alternative to your solution should be close to nothing
- Do you have entrenched competition? If so, do you have a novel insight?
- If there is already existing competition, do you have a new novel insight that they don’t know about?
- Do you yourself want this? Do you know people who want this?
- If it’s a no then probably nobody wants this
- Did this only recently become possible or necessary?
- Due to regulation change or change in circumstances such as COVID-19
- If so, then it’s a good idea to try out
- Are there good proxies for this business?
- Proxies are successful companies that do something similar, but not exactly the same thing
- Like food delivery companies are the world
- Looking at DoorDash, Zomato was started in India
- Is this an idea you’d want to work on for years?
- Often, the passion to work on an idea develops overtime
- A good video: Should You Follow Your Passion?
- Can your solution scale?
- Pure software businesses – great
- Pure services businesses – bad
- Is this in a good idea space?
- An idea space is a class of closely related startup ideas
- Example: Idea – Credit card for truck drivers. Idea space – Trucking industry
- Different idea spaces have widely different hit rates
- You would want to pick a good idea space which has a good hit rate and a founder-market fit
- Example: Fivetran a company that started with data analysis pivoted to another idea in their idea space – an easy to use hosted ETL service
- Do you have founder-market fit?
Three things that make startup ideas seem bad, but actually make them good
- Hard to get started. Example: Stripe
- Boring space. Example: Gusto – payroll software
- Side-note – Boring ideas have much higher hit rate than “fun” ideas as most people wouldn’t choose them
- Existing competitors. Example: Dropbox
- Innovation in the space of ease of usage
- Good read: Schlep Blindness by Paul Graham
How to come up with startup ideas
- The best startup ideas are noticed organically
- Ways to put yourself in a position to have organic startup ideas:
- Become an expert on something valuable
- Work at a startup
- Building things you find interesting
Here are 6 recipes for generating startup ideas:
- Start with what your team is especially good at
- This would have the perfect founder-market fit
- Start with a problem you’re personally encountered, ideally one you were in an unusual position to see
- Vanta founder Christina has to go through a security audit to realise that they were painful
- Think of every job + internship + life experiences you’ve had
- What problems did you come across? What did you learn that other people don’t know of?
- Things you personally wish existed
- This can be dangerous and might become a tarpit idea.
- Look for things that have changed in the world recently
- Like how COVID-19 make vaccines and masks very important boosting their sales.
- Go to people and ask about the problems they have
- Talk to potential customers and also founders in that idea space to understand the problems and their solutions
- Look for big industries that seem broken
Remember, the best way to find out if your idea is good is to launch it. Also, 25% of successful YC companies have pivoted from their initial ideas.
There are more chances of finding a good idea if you look in your field of expertise.