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How to come up with Ideas?

Updated: Jan 6

So, are you dying to start entrepreneurship, but don't know which idea to work on?


Extract your startup ideas from the below fertile sources, and start conducting small experiments to validate your hypotheses.


Julian Shapiro, has helped 750+ startup founders, and often asks them:


How did you come up with your idea?


The most common answer is "Solve your own problems!"

  • Meaning, live on the edge of technology and see what issues you encounter.

  • Then build a startup to solve it.


The best way to start is by looking at your own problems and needs. Being your own customer helps you define and test hypotheses. Start with the problem and let the customer tests and tell you by which model you can better solve this problem.


However, a good startup idea must offer any/all of the below meaningful benefits:

  1. A big reduction in intense/frequent frustration

  2. A big reduction in the cost of an expensive problem

  3. A big increase in how entertaining/emotional a thing is


Let's call them "3X ideas," the ideas compelling enough to try them.


Experts opine that (new) startups must be "10X better (than existing solutions) in order to succeed."

This can however be misleading. For any app to be 10X better than Uber, it would have to straight up teleport you to your destination.

Hence, 3X appears real and executable.



Some Examples of Real 3X ideas:

  • Dropbox/Box: Cheaply share files without coordination or friction

  • Instacart: Get groceries delivered—without a big cost premium

  • Uber: Get a cab 3X faster, in 3X more locations, and cheaper (that is debatable.)



5 Sources of Startup Ideas

Source: Daniel Gulati


The prime reason that holds people from becoming entrepreneurs is the lack of a suitable idea. Often people crib that they would start a company tomorrow, only if they had an idea worth quitting their job for.


Here are the top 5 sources of startup ideas:


1. Experienced a pain point, and wanted to solve it.

By far the most popular source of ideas among respondents was a frustration that the founder experienced in his/her personal life. Ever wonder how much your own problems might be worth?


2. Met someone talented (as co-founder), and we started a company together.

If you’re interested in starting a company, look at those around you, specifically at your workplace or school. Others have cautioned against starting companies with business school friends as a strategy for eventual success, but the data care to differ.


3. Have a special skill or passion, and turned it into a business.

Spend an hour writing about your skills and passion, and your next idea might be staring back at you.


4. After working in an industry for a long time, saw a customer need that is being unmet.

Use your corporate experience to think hard about your customer’s unmet needs, you might be on the road to riches. The founders in this category worked in or around the industry for many years before starting a company directly related to it.


5. Researched many ideas and eventually narrowed them down to 1.

Savvy individuals are leveraging new sources of information (i.e. Quora, Hacker News) to conduct “top-down” research and use a data-driven process of elimination to arrive at a single business idea. Many also track proven business models and companies, with the goal of applying them to new geographies. Example Ola to Uber.



Where do these 3X ideas come from?


From the creation of new infrastructure (technological/legal) do keep an eye on below:


1. New Technologies

  • Fast mobile processors

  • High-capacity batteries

  • Cryptocurrency architecture

  • AR/VR


2. Changes in the Law

  • Legalization of marijuana

  • Patents expiring


Where could possibilities be?


When new technological/legal infrastructure emerges, startups pounce to productize the new 3X possibilities. Those possibilities fall into categories:


1. Cost Reductions

  • Cheaper broadband enables cloud storage (Dropbox)

  • Cheaper batteries enable electric cars (Tesla)


2. Better Functionality and/or User Experience

  • Smartphones and 3G spawned the mobile era


3. Brand New Categories/Market Segments

  • The legalization of marijuana spawned weed stores and weed delivery apps

As the CEO of Box wrote: “We bet on 4 mega-trends that would shift the power to cloud: faster internet, cheaper compute and storage, mobile, and better browsers. Even so, we underestimated the scale of each tailwind. Always bet on the mega-trends.”


Criteria for Ideas


For those ideas to survive in the market, you also need:

  • Cultural acceptance, i.e. the society has to be ready for you!

Here are startups that became possible through changes in societal behavior.


1. Pop culture making behaviors less cool:

  • Cigarettes go out of style, so we get nicotine and vaping

  • Heavy drinking goes out of style, so we get low-alcohol seltzers


2. Mobile apps making it more normal to trust strangers:

  • The rise of Uber, Airbnb, Tinder, and Couchsurfing better-acclimated society to trusting people they’ve only met over the Internet.


Cultural acceptance results from:

  • New media narratives, and

  • Integration of technology into our lives changes behaviors.

Many startup ideas were already feasible/available for a while, but couldn't flourish until cultural acceptance was possible.



Study changes in infrastructure plus shifts in cultural acceptance to identify what’s newly possible in your market.


For e.g., Uber saw that widespread smartphone adoption with accurate GPS data made it possible to replace taxis with gig workers. Cultural acceptance was needed here because it was unorthodox to step into a stranger's car and entrust them with your safety.


Hims saw that the Propecia hair loss drug's patent was expiring, and capitalized on it by selling it via an online-first brand. Not much cultural acceptance was needed here since people were already buying the drug.



Additional way to find startup ideas


1. Spot Upcoming Infrastructure Changes

  • Subscribe to industry blogs/podcasts, try products, read congressional bills, read the research, and talk to scientists and engineers.


2. Determine if market entry is now possible

  • As you’re scanning the infrastructure, look for emergent 3X benefits that your startup could capture.


3. Explore second-order ideas too

If other startups capture a 3X idea before you do, that may be okay.

  • There may always be room for >1 startup (Uber and Lyft, Google and Bing, Microsoft Teams, and Slack).

  • When another startup captures a 3X benefit, it typically produces many downstream 2X ideas. For e.g., now that millions use Slack, Zoom, Uber, etc., what tools could make them less expensive, more reliable, and more collaborative?

So many downstream ideas emerge. 2X ideas may be smaller in scale but can still be huge startups, and they might be partially pre-validated.


Recap:

  • One way to find startup ideas is to study infrastructure (3X ideas) and observe what emerges from startups that tackle that infrastructure (2X ideas).

  • Consider using the above as a sanity check to assess whether your timing is ideal.

  • Are you going for a 3X/2X?

  • If going after 3X, is cultural acceptance coming soon?

  • If going after 2X, is the 3X truly growing quickly and here to stay?


Takeaways:

  1. Great startups make things easier, cheaper, or more fun.

  2. Spot trends by consuming the latest content from science.

  3. Build in an emerging market, no point in creating something no one wants now.

  4. If others have found success, there may be space for you.

 

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