Is there a structured approach to finding a great business idea for a new startup?

Is there a structured approach to finding a great business idea for a new startup?

It’s funny and annoying. There is a tonne of super capable people who simply can’t find a great idea for a startup. There are also a lot of incapable people with ostensibly great ideas!

I get asked by really awesome people all the time ‘how do I find an idea for my startup!?’ And do you know what, I don’t really have a great answer. It’s just really fricking hard if you are not thinking the right way, and looking for insights in the wrong places.

The best ideas come from something you noticed that really sucks and you stop and think ‘why is the world this way? Could it be different?’ then set out to validate the idea.

By the way, if you are wondering how to validate an idea, check out this monster blog on validating startup ideas.

Fundamentally great ideas come from two insights:

  • Behavioural. The way people do things is either inefficient or a better solution doesn’t exist so they are hacking it
  • Technical. Tech changes and you come up with a way to digitalise it or say the move to the ‘cloud’ and you see that trend coming. Blockchain, whatever, sure.

Business founders are more likely to see the former, and techies the later. Ideally, you have both, which requires great timing (A really key factor!).

So, I’m going to mind vomit some ideas to think about on this topic. Sorry, there is no perfect silver bullet here, but it will save you some time if you are stuck in this quandary.

Founder/market fit

The notion of ‘founder/market fit’ is important, so start here.

What are you actually really good at? What do you like? Where do you have a huge network for sales or hiring? Are you from a certain industry?

The goal here is to figure out what you shouldn’t do and what you might do. Removing options helps you focus and serves to kill certain ideas you might have (which saves time in validation).

If you don’t know enterprise, then you prob don’t want to do that. Figure out what kind of model you actually want to do and can be good at (+ ideally have network) then you know what pool you are fishing in. You can kill whole sectors like fashion etc and focus on specific areas. So figure out what you don’t want to do first to aid in better idea triage.

So, for example, do you want to do:

  • Enterprise
  • SME
  • Consumer

You probably will be drawn to one. That’s fab. Go with that.

Next, what sector:

  • Infrastructure
  • Direct to consumer
  • Fintech
  • Adtech
  • etc..

Maybe you are open to just one, maybe 5, but list them. Focus on ideas in those spaces.

Rocket style copy

Copying ideas is really a viable option. It does not guarantee success though. Often, you copy most of the business model, BUT you have to then innovate in the execution, depending on where you transfer the idea to. This really is important especially in Asia, Africa and LATAM where executing is simply harder for so many reasons.

The process is as follows:

  • Read Tech Crunch about companies they write about
  • Subscribe to StrictlyVC etc and look at all the companies funded. This is wildly more effective than reading TC as you see what is working on that basis of VCs funding the ideas. You probably want to stick to series-A and maybe B. Seed doesn’t get covered much though, which is both good and bad
  • Then check them out on Crunchbase etc and triage. Then do startup business model validation till you get something that makes sense

One opportunity in my head, which I haven’t really analysed, is copying proven models in 2nd rate countries like Eastern Europe. So a bit of a Rocket job. Obviously, you don’t do it Rocket style, but the same principals apply. The benefit is you actually can take an analytical approach. List cool models then analyse if there are the op and market size for it through local execution and marketing. If you are an operator, this might work for you… If you don’t know how to scale companies already, maybe less so.

Old industry

I’ve been talking to some people and they have been creating solutions for old industries like cement! Those industries don’t know what a push notification is (no joke). One corporate thought the fact you could use IP to know what country customers were in with live chat was revolutionary… That really is op for disruption.

You could pick some large, old industries and talk to people at the right level. You can find out what sucks. One regional CMO at an insurer told me they would love a sales support tool to help 50k agents to sell more and different products in China. They all sell the same RMB product as they know it. He also was aware that ‘face saving’ was really important. There you go, I talked to someone and he told me a problem.

I think this is a genuine goldmine for ideation. The downside is that you need to have enough connections, or the ability to get meeting with people to figure out what their issues are. It is easier for some and it will be impossible for others (basically, young people).

One tip is to do some homework before you meet them. They will take you more seriously and open up if you have some ‘good chat’ and can engage them, and maybe share interesting insights so they get engaged in the conversation. This is why I mean it will probably be harder for younger founders who don’t have as much experience.

Issue is insight

You make big money often by solving something someone hasn’t solved yet, and that’s because no one has had the insight. You can’t get insights from Google, you have to talk to people that have the problem. People who have problems don’t post them on Medium. Do you know what, they may only grumble about things and not realise that there is in fact an opportunity in the first place!

In order to get the insights, you have to have access to those that have the insights. It’s insight by proxy. You are an agent of change and your audience is an agent of the status quo. If might take a few conversations to really get to the crux of issues. But I can tell you, I’ve talked to people in business operations at major banks and man, if you get them a few pints they’ll chat your fricking ear off with opportunities (read things that stress them out). They just need to like you enough to start sharing.

The only real structured approach would be to pick an industry and start to talk to enough people to glean an insight and think ‘hm, why is it done that way?’ So following on from ‘old industry,’ go fishing there and ask ‘why?’

Business model analysis

Every time you have an idea you need to run an analysis to figure out pricing, margins, market size, execution difficulty, capital intensity, competition etc.

Competition is the first thing to check. I spent a night digging into marketing automation ops for SMEs with my housemate last week, only to call his mum and she said ‘um, doesn’t Sage do that?’ We just started brainstorming without checking the landscape. This isn’t to say there isn’t an op, I just haven’t figured out the value prop yet (aka put in the time). But I can… if I put in the time.

I have found the more I dig into a sector the more I am able to get my own insights and identify opportunities. But it’s a LOOOOT of work! I mean reading everything on the internet and being sick of it, till you finally internalise everything and suddenly gain mastery. Then the dots connect and you see the matrix.

When I wrote the ESOP training course and the ESOP model, I literally read every single article on the internet. I’m not even joking. I got so sick of the topic, but at the end, I started being able to invent new concepts I thought were missing, it was a feeling of flow. The same has happened with my work in virality and cap tables.

Man… I was so sick of reading the same crap, but only when I got really sick of it, did I see the matrix.

So if you are not going to glean insights from experts, you need to put in the work. And trust me, this level of commitment isn’t for everyone.

Get pissed off more

Every time you get annoyed by something. Stop.

Question ‘why do I feel this way and is that an opportunity?’

Run a quick analysis and decide if it’s worth checking out the competitive landscape. Then figure out the high-level numbers.

Scratching your own itch is a great place to start.

Honestly, I get pissed off by pretty much everything. I have this weird OCD for lack of logic, that if I see, for example, people not walking in straight lines on the street optimally, it gnircks me. I used to resent being annoyed all the time by everything, then I thought about this ‘weakness’ and thought ‘how can I turn it into a strength?’

So now I have trained myself to turn ‘annoyance’ into a trigger for ‘what is the implication for the way I am feeling? Is there an opportunity?’

Ok, I know that is a little weird 😉 But Alice told me all the best people are.

I’ll do this at some point, but I hate how hard it is to manage my network well. I personally need a better personal CRM. It has annoyed me for years, so it’s a problem I have and feel others have. I want to solve that. But I’m aware my network management could be better… if there was only a solution.

Talk to strangers

There are so many smart people around if you are looking for them. If you talk to enough you’ll be overcome with potential ideas. You just need to be in the right place.

When I talk to devs, it’s funny. They complain it’s hard to find a business co-founder. How often do you hear business people complain they need a techy 😉

You are only going to meet PLU (people like us) if you talk to PLU.

If you are a business founder and looking for a CTO, you don’t find them at startup events. You only find business founders (extroverts). If you want to find the techies you try Haskell forums on Reddit, Python MeetUps etc. If you are a techy, just throw a rock at a startup drinks and you’ll hit a business founder. lol.

There are people with ideas already, you just need to find them. But you have to look in different ponds than you probably fish in.

Get out of your comfort zone. Go to random ass, niche events you would never thing of attending. Hell, I don’t know, knitting mothers of London. You never know…

Apply a cool business model to something else

In this blog I talk about the fact any successful business model is a combination of a business model and strategy for a new industry/problem. The business models have all been pretty much invented, it’s a matter of combination to the industry niche you have identified.

I was in Home House with another ex-Rocket MD who works for a huge PE firm now, and we were talking about Auto1. It’s just so smart (if you know the details). He said ‘I spend time figuring out what industry I could apply the same idea to.

So you can pick a business model and work methodically through industries and see if that could work. Then you pick the strategy. No, we haven’t figured out something yet.

Tim Draper said to me at the first Web Summit (like 30 people) years ago regarding ideas ‘you can pick a business model like Uber and combine it with something totally unrelated like carrots. Would uber for carrots work?

It wasn’t Uber but you get the point (I forget what company he randomly picked). But the principal is you can combine very random things together and you might find a needle in a haystack that way. I just think that’s ineffectual.

Start and fail forward

The last thing I want to say is that the startup landscape is not just a graveyard, but a Sand Hill dream. There is a tonne of companies that ‘just started,’ built shit and accidentally saw an opportunity. I kid you not. I wrote a 8,000 word blog on the topic last weekend on just this topic. 15 startup pivots to fame.

Let e just give you one… Slack? Yeah, the fastest growing company of all time. They started as a video game, built on top of ICQ and realised after shutting down that other startps might like the tool too, as they would never do another game without it. Yeah, so that was the idea for slack.

I think smart people, like really smart people, can be the worst founders. They know too much and think their time is too valuable to work on anything other than the biggest next thing. Dumber people with less to lose, just do as they don’t have an option. So if you are really smart, I’m talking to you! Do less than you think you are worthy of, you may fail initially, but the act of doing something might help you find that big thing as you become and industry expert and world class operator.

Conclusion

That’s a few ideas. But generally getting a good, viable model is fricking hard!

Sometimes you just need to pick a vague problem and start and fail forward. Once you really focus on a problem you will start to get to the truth, or learn a way not to build a lightbulb.

P.S. Don’t forget that passion is overrated! Startup is all about making a better mousetrap. There’s a blog on that topic.

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