Should you start a startup?

How to get and evaluate startup ideas

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?
    • 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?
    • 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

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.

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