Starting any company is hard. Startups are even harder. If you want to start a company but don’t have a business idea, then the first step is figuring out what to build.
The main difference between a small business and a startup is your level of ambition, and how much money you can raise. Paul Graham defines it as “startup = growth”, but (most) startups only grow if they have resources (i.e., people, capital) to do so. The number of companies that start out bootstrapped, have growth, and never need to raise any money is extremely small, like infinitesimal. From a probabilistic perspective you’re better off trying to build things that are easy to fundraise for.
Some truths before you start
Here’s a few things I’ve learned from living startups:
- the founding team needs to be likable (or insanely talented), it will be extremely hard to raise money or hire talent unless people admire you in some way
- at the end of the day, the only thing that matters is execution: you have to make things happen
- fundraising is extremely hard unless you know people who can connect you with people who write big cheques (even better if you know them directly)
- raising a lot of money doesn’t guarantee success: you need to have a product, something people (or companies) will pay for
- great products can fail for a lot of reasons, but the #1 killer is probably lack of capital (if you have a great product you can buy your way out of a lot of problems)
- the skills needed to fundraise are not the same skills needed for building great products or companies
- you need to know when to quit, pivot, or move on entirely
- bad founders kill companies at all stages, and in later stages you can’t fix it by raising more money
A process for generating startup ideas
1. Get an idea
Coming up with startup ideas isn’t difficult, the hardest part is figuring out whether or not it’s worth pursuing. Start with a problem, something you experience every day, something you find frustrating or are passionate about, and something you want to fix. The best products are almost always things people built for themselves.
Startup ideas should meet a few minimum requirements, such as:
- It should be something you can build an MVP of by yourself. If you can’t iterate on the product it will be extremely hard to get things right.
- The market should be sufficiently large. The bigger the market, the bigger the opportunity. Look for problems that afflict nearly everyone everywhere.
- Is this a problem you can actually solve?
- Are you the right person to solve it?
2. Test it out
Testing out a startup idea is tricky, and sometimes good ideas test poorly because the market isn’t ready for the product yet (so maybe you should build it anyway). You should test for different things: customer appetite, and investor appetite. Try to find ideas that people will buy and invest in. If your product is ludicrously profitable and there’s insane customer demand, then perhaps you’ll never need to raise money, but that’s unlikely.
Here’s a few strategies you can use to test ideas:
- Build a simple MVP and get paying customers. The quality of the product doesn’t matter, the only thing that matters is if people are willing to buy it.
- Run an ad campaign with keywords that represent your product, and send people to an email signup landing page to gauge interest. If you can get a huge number of signups without spending much money, that’s a good sign people would be willing to pay for it.
- Look for investors, ask them for their feedback, and ask them specifically “is this something you would invest in?". Again, the only thing that matters is whether or not someone is willing to part with their money to be a part of what you’re offering.
3. Get some buzz
It’s always worth getting buzz if possible. If you can get media attention, or get to the front page of top of Hacker News or Product Hunt, it becomes much easier to start a company. Once your brand, product, or name is in the general consciousness of the startup community, everything gets easier.
Getting buzz without spending money is more of an art than a science. It’s about having the right timing, the right messaging, and offering something people want.
Some buzz is also a great way to validate an idea. If you make it this far, all you need to do is execute.
Don’t get attached
The worst thing you can do for yourself is getting attached to a bad idea, or a bad team. It’s important to know when it’s time to quit.
As part of the YC interview, they sometimes ask “are you going to continue working on this even if we don’t fund you?". The ‘right’ answer is “of course I’m going to continue!", but that’s not always the best thing to do.
If YC doesn’t want to fund you, that may be a signal that you need to think about doing something else, especially if everything else is not working. Keep in mind, however, YC does sometimes fund companies after multiple interviews. In those cases, the companies were usually already somewhat successful, with or without YC.
Ideas are worthless
Lastly, always remember that ideas themselves are worthless (unless you can sell an idea for an amont greater than $0, in which case I stand corrected). Even if you have a great unique special idea, there are probably 1 million other people with the exact same idea.
The only difference between success and failure is execution.