02. Coming up with an idea for a startup

Estimated Time

• Reading: ~6 minutes
• Video: ~24 minutes
• To Do: ~30 minutes

To-Do:

• Why will you solve this problem?
• Why is now the time for this to work?
• How big is the market?
• How will you make money?

Top Insights

• Most of the great startups of our time were evolutionary, not revolutionary.
• Building on, improving on, and innovating on previous ideas can be a great way to start a company
• Make something 10-20% better
• When coming up with an idea - have answers to the following questions
1. Why will you solve this problem?
2. Why is now the time for this to work?
3. How big is the market?
4. How will you make money?

How do I come up with an idea for a startup?

• There are several ways to come up with an idea
• Conduct user interviews & study customers
• Then back into an idea based on pain points
• A magic, lightbulb moment
• Pivot
• Start with one idea, learn something during the first idea that informs the pivot
• Ideas do not have to come out of thin air

Evolutionary, Not Revolutionary

• Jason's blog from 2015 - "Is inventing something new necessary for startups?"

• There were a dozen search engines before Google
• Improving on search has served Larry Page and Sergey Brin more than okay
• They built something 10x better than what existed at the time
• They had a better business model
• Was Google a better search engine than what was available in the late 90s? Yes
• Was it still just a search engine as far as users were concerned at the time? Yes
• They took an idea and solved the problem in a better, faster, and cheaper way

• There were other players in the social media space when Facebook started
• Facebook was a stable, faster version of MySpace and Friendster
• Facebook focused on growth from the beginning
• There was nothing original about it
• They copied most of their ideas (and still are today)
• Facebook simply executed at a very, very high level
• It is now the fastest company to $1T valuation

• Apple did not invent the mp3 player, or the smartphone, or the tablet, or headphones...
• Those products were in market for years before Apple entered.
• Steve Jobs had the vision, and he said in 1980 that Apple was “building tools that amplify a human ability”
• His focus was building the right tools at the right time
• This vision allowed Apple to revolutionize several fields
• Not only the personal computer industry
• But music, TV/entertainment, health, and others as well

• Tesla was not the first battery-powered car
• Although it was the first serious effort in a long time
• Elon decided to go for the high end of the market first
• Tesla has dozens of innovations that collectively add up to one of the greatest car ever made
• Some of the best products examine the previous solutions deeply and build on them
• So to clarify building on, improving on, and innovating on previous ideas can be great
• Stealing or copying an idea and calling it your own is not!

Making a product 10x better

• Paul Graham said:
• "What matters is not ideas, but the people who have them.
• Good people can fix bad ideas, but good ideas can't save bad people."
• Executing on your idea is the key
• Although you need an idea to start, remember that everyone has ideas
• An idea is not special
• An idea is not a company
• If you stop at the idea phase - you have nothing
• Jason wrote a twitter thread [March 2021] that speaks to this exact point
• Making something 10x better is tough
• As an aspiring founder, ask yourself
• What five things can I make 20% better?
• This can dramatically improve the user experience
• What can I remove that isn't adding value?
• This allows me to focus on core features!
• Small improvements everyday will compound to big results

Skills + Passion = Startup Idea

• Ask yourself a few questions:
• What is the purpose of the startup you want to create?
• Is it a passion?
• Now, "passion" gets thrown around a lot
• By passion we mean, will you do anything to ensure it is successful?
• Is it going to be a hobby to make some money on the side?
• Or are you going to take a side project, quit your job, and tackle this full time?
• What are your current experiences?
• What problems do you experience every day?
• Especially ones that drive you nuts.
• How can you use your expertise in the field to solve it?
• What (if it existed) would make your life better, easier, faster, cheaper?
• What experiences, education, background, knowledge do you have that you can leverage?
• Is there a problem experienced in your current profession that needs a solution?
• Do you have any inside info, based on your expertise?
• Deep dive into what you know best
• Identify challenges within each interest and brainstorm creative solutions
• Is there an Audience/Customer you can help?
• It can sometimes be helpful to identify a specific audience with a problem
• Is there a manual process to improve with technology?
• Warning: creating a startup is hard, hard work!
• You have to want to solve the problem ever day or you'll give up

Market Timing

• Timing is everything!
• What enabled some of the most popular products today?
• What is changing in the world that will enable your idea tomorrow?
• You need to research the space and know your competitors
• This can validate the space and offer insights on how you'll stand out
• What is your differentiator?

Start Building an MVP

• You should build an MVP that solves a real problem
• Get users to try the product and collect data
• Interview users to gather feedback
• At first, these could be friends, family, neighbors, etc
• Identify the problem and solutions that align with your goals and expertise
• The people getting the meetings with investors are building
• Focus on building and focus on delighting customers

Be completely objective with yourself at all times

1. Why will you solve this problem?
• Do you have the expertise and understand the problem well enough to solve it?
• Do you have close acquaintances in the space?
• Who else is solving this problem?
2. Why is now the time for your idea to work?
• Why should this product exist now?
• What changed that will allow it to work this time?
3. How big is the market?
• Is this idea for 10 people or 10 million people?
• Do you have a niche?
• Reverse engineer the total addressable market (TAM)
• Jason provides example on how to reverse engineer the TAM in TWiST Episode 1211
4. And most importantly - how will you make money?
• What is your business model?
• Marketplace?
• SaaS?
• Consumer?
• (We'll go more in depth on these in future modules.)
5. Talk to customers
• What is your ideal customer profile
• Gather feedback
• Conduct user interview and listening labs
• Ask probing questions
• What are your users saying?

Additional Insights

• Learn the vocabulary and speak the industry standards
• Build an MVP and get it in front of potential users as soon as possible!
• Talk to those users as early and frequently as possible
• Focusing on your solution is key to success
• Don't get distracted!
• However, understanding potential problems can also prove valuable
• Think about and list why your idea won't work
• How will competitors beat you?
• Ask friends and family (especially if they are in the space) to be completely honest
• What are the biggest problems in their minds with your idea?
• Identify others who are solving this problem?
• If you know any investors - you should ask for their thoughts
• Not their money at this stage!
• Continue to research - research - research
• In depth competitor analysis
• Look at their websites, their Youtube channels, who they are hiring, what are they building, etc.
• This will help you understand your journey ahead
• Remember this isn't for everyone → 80% of startups will fail
• It is hard work to create a startup
• It is important that you are always doing the work, are ready to pivot, evolve, and lose everything
• If you can't afford to lose everything then you can't afford to start - this is a cut throat business, but it is a lot of fun!

• Why will you solve this problem?
• Why is now the time for this to work?
• How big is the market?
• How will you make money?

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