Been giving a lot of thought on what constitutes as a killer startup idea. Obviously team and execution are the most important but that's a separate topic. When I'm thinking about ideas, I often find myself going back-n-forth between the stereotypical web2.0 strategy (build big, get traffic, sell and let others figure out how to make money) vs. the 37Signal's build a scalable, sustainable, profitable business that doesn't rely on external financing. (More on this topic in the Jason Calacanis vs. DHH debate:
http://bit.ly/ckHYGW)
Instead of going back and forth between the two camps of thought, I've come to peace with both. Both sides have valid arguments and I'm interested in startups in both categories. So then the question is, how do I evaluate different options/ideas? I came up with the following 3 high level rules; I believe any startup should fit into at least one of the following:
- Clear business model attacking an attractive (i.e. big $$$) market -- there's a clear need in the market for the product/service, anecdotal data that customers will pay, and the addressable market is significant. Examples include 37signals, threadless, ebay, amazon, etc...
- No clear business model, huge fucking addressable market, revolutionary vision. Sometimes the more exciting projects are those that you don't know how to monetize yet but you're confident the product is extremely viral and you have a grand vision to build something revolutionary. These products are likely consumer products and should be built on dead simple concepts, if your grand vision relies on a slew of new features addressing other vertical/horizontal markets, you're likely wrong. The grand vision should be attainable on the fundamentals your v1.0 is based on. Twitter's fundamental building block was 140 character status updates, Mosaic/Netscape just wanted to create a simple GUI to average consumers to browse the internet...
- If the idea doesn't clearly fall into either of the above 2 buckets, then it must solve a huge pain for yourself. Most people are pretty average, and if you have a big enough problem that's a 'need to have', chances are there're many others that share your pain.
That's all for today's incoherent rambling from Beijing...
