Money is a by-product of success, and it is a means to achieve success. It’s not a goal.
—Nick Denton, Gawker Media
A few days ago, Paul Graham posted one of his famous essays, How to Get Startup Ideas. You won’t find a better piece of advice on generating your idea for your startup. It is a long essay but worth reading.
Here you have a summary of key seven take-aways:
1. Look for problems that people care
Fixing a problem YOU have, is the best way to ensure that the problem really exists.
Made-Up Startup ideas usually focus on problems nobody actually cares.
At YC we call these “made-up” or “sitcom” startup ideas. Imagine one of the characters on a TV show was starting a startup. The writers would have to invent something for it to do. But coming up with good startup ideas is hard. It’s not something you can do for the asking. So (unless they got amazingly lucky) the writers would come up with an idea that sounded plausible, but was actually bad.
2. Who are the people that really need what you are making?
You have better chances if you focus on something a small number of people want a large amount. In made-up startup ideas usually lots of people are middy interested.
When you have an idea for a startup, ask yourself: who wants this right now? Who wants this so much that they’ll use it even when it’s a crappy version one made by a two-person startup they’ve never heard of? If you can’t answer that, the idea is probably bad.
3. Be at the leading edge of a field — “Live in the future”
A good idea will come as the result of some external stimulus hitting a prepared mind. To have good startup ideas you have to become the sort of person who has them. “If you’re at the leading edge of a field that’s changing fast, when you have a hunch that something is worth doing, you’re more likely to be right.”
The verb you want to be using with respect to startup ideas is not “think up” but “notice.” At YC we call ideas that grow naturally out of the founders’ own experiences “organic” startup ideas. The most successful startups almost all begin this way.
Paul Buchheit says that people at the leading edge of a rapidly changing field “live in the future.”
4. Build what seems interesting
To ‘notice’ a good idea you need to give yourself some time. You have control over the rate at which you become a prepared mind, but you have less control over the stimuli that will spark your idea.
Just as trying to think up startup ideas tends to produce bad ones, working on things that could be dismissed as “toys” often produces good ones. […] if you’re living in the future and you build something cool that users love, it may matter more than outsiders think. Microcomputers seemed like toys when Apple and Microsoft started working on them.
5. Clash of domains is a fruitful source of ideas.
If you are a software expert and start learning about some other field, you’ll probably see problems you can fix programming.
…if you’re a CS major and you want to start a startup, instead of taking a class on entrepreneurship you’re better off taking a class on, say, genetics. Or better still, go work for a biotech company.
6. Better a good idea with competitors than a bad one without.
You don’t need to worry about entering a “crowded market” so long as you have a thesis about what everyone else in it is overlooking.
Because a good idea should seem obvious, when you have one you’ll tend to feel that you’re late […] Worrying that you’re late is one of the signs of a good idea.
7. Don’t discard the unsexy and difficult
There are two filters you ned to turn off when noticing ideas: the unsexy filter and the schlep filter.
The unsexy filter is similar to the schlep filter, except it keeps you from working on problems you despise rather than ones you fear.
The seven points can be summed up in one recipe:
Live in the future and build what seems interesting.
What do you think of Paul Graham’s advice?
A friend asked me about some book recommendations on start-ups, and I just happened to find this fantastic presentation in Steve Blank’s blog. It summarizes two excellent books in a few charts.
Combine that with some reading from Paul Graham’s essays and that is worth more than any single book on entrepreneurship.
A clip from the new documentary film Win in China, by Robert Compton, shows how fast China is changing and how hundred of thousands of entrepreneurs are driving the growth of the second economy of the World.
At the same time, China’s state-own large corporations are buying foreign companies, such as Volvo’s, as the Economist reports this week.
Maybe learning some Chinese is not bad after all…
Any ambitious innovation must target to fix the problems of tomorrow considering the technology environment of tomorrow. Fail to consider the future environment and you might be pouring R&D dollars into the bin.
Innovations that did bet on tomorrow:
Remember when Gmail launched in 2004? It offered 1GB of storage when Hotmail or Yahoo only gave a few MBs. Google was anticipating the increasing volumes of email people would have to deal with in the future, while betting on the exponential reduction of storage costs. Gmail now give more than 7 GB of storage.
YouTube growth also rides on decreasing storage costs, increasing bandwidth and better video compression techniques to make Internet Video go mainstream. Not to mention the habit of a new generation of kids to search with YouTube rather than Google.
GPS navigators vendors should also be careful with Google Maps on new handsets such as Android or iPhone. With Unlimited Data Plans, why have a GPS Navigator when the GPS mobile phone can provide online up-to-date maps with extra real-time information? There are some advantages to run maps from the cloud rather than from a device memory, and Google will leverage on them.
Many anticipated that people would not carry a mobile phone and an mp3 player, when only a single device would do it. For Apple the iPhone was a matter of survival with iPod having the biggest market share by far, and Nokia adding Mp3 players to their phones. Not only did it created a great convergent phone-mp3 player, but also added the multi-touch and the mobile web revolutions.
Innovations that were shortsighted and are soon to die:
ATM (Asynchronous Transfer Mode) aimed to manage the bandwidth of data connections so that different QoS could be handled over the same network. With increasing amounts of bandwidth, driven among others by Gigabit Ethernet, the Internet can perfectly cope today with Voice (and even Video) communications, as Skype demonstrates, without any complex bandwidth management in the network. Why managing the bandwidth when there is plenty, and more is to come?
WAP was designed as a scaled down version of HTML to render web pages in a small screen. With faster microprocessors and larger memory powering-up mobile phones, WAP window is over before it ever delivered on its promise. MMS is a similar case. Why MMS, when you can send an email with a photo from new phones with web/email capabilities, using unlimited data plans. Mobile Internet is become more and more Mobile Internet the Internet way.
Fon and other Wifi Hotspots networks might suffer from the limitations of Wifi (100m-300m of range) as a technology to provide wide area coverage. With WiMAX, HSDPA, EVDO (and LTE coming), wireless broadband is crossing the chasm. Once Wireless broadband is available and affordable, how can a Wifi Hotspots Network spotty coverage compete?
Technology trends can easily be predictable, at least regarding capacity growth, be it Moore’s Law on computing elements or its equivalent on bandwidth growth. Before embarking on an adventure, make sure it is consistent with future trends and its corresponding problems.
Tim O’Reilly interviews Martin Varsavsky during the Web 2.0 Expo Europe last month. Martin is a serial entrepreneur that successfully created Jazztel and Ya.com to compete with Telefonica in fixed telephony and Internet access in Spain in the late 90s. He later IPO’ed Jazztel and sold Ya.com to Deutche Telekom with huge profits.
Martin is a very smart entrepreneur, and you can notice from the interview his clarity of thought.
- “Markets are bipolar, and they over-emphasize good times and bad times. […] Entrepreneurs need to distinguish Price and Value […] (and) steer in the middle of the tremendous swings of the market, which are unreal in both ends. […] There are times when markets want to give entrepreneurs almost absurd amounts of capital, and others where the denial is absurd.”
- His post on Sequoia’s panic is here.
- Anecdote: The same bank that rejected Martin’s application for a $40,000 job, gave him a $12 million loan to start a company.
I am not a believer in Martin’s latest venture, Fon, that aims at creating a global community of Foneros that share their Wifi bandwidth. Although initially a good idea, with broadband prices falling , including 3G unlimited data plans, few people will be compelled to share Wifi, with the security risks involved, even if Martin claims in his blog that “it costs 85% less [to Operators] to send traffic through WiFi than through 3G.”
Whether Fon succeeds or not, Mr. Varsavsky is no doubt a savvy entrepreneur, and I feel proud we have him in Spain.
Highly recommended videos for anyone planning to ask funding from venture capital. Guy Kawasaki is one of the star entrepreneurs and venture capitalists of Silicon Valley, and if you listen to his speech you will understand why.
I extract from the talk the ten slides Guy advises when presenting your idea to a VC:
- Title. Add contact info.
- Problem. What pain you solve.
- Solution. How you solve it.
- Business Model. How you make money.
- Underline Magic. Why you will succeed.
- Marketing & Sales. How you go to market.
- Competition. What you can do they can’t do. What they can do you can’t do.
- Projections. Show the metrics behind.
- Status & Timeline. Where you are.
Guy’s 10-20-30 rule: 10 slides, 20 minutes, 30pt minimum font size
There are plenty of books about how to prepare a business case for a start-up. These ten slides are the best summary I have ever seen.