
How to pick startup ideas - coffeemug
http://www.defmacro.org/2015/02/25/startup-ideas.html
======
inthewoods
Interesting article - a lot of good stuff in it but I found it a bit to
general to be really useful. As an example, the author states: "So you need to
get to market with a viable product before anyone else does."

That's the type of statement that I question - there are plenty of examples of
companies creating products in saturated markets where they were not the first
mover. In fact, sometime being a first mover can be a disadvantage as you
must, as a startup, spend huge amounts of time and money educating the market.

Now, the author's approach of "look at the trend, get in front of it" is great
- but it's pretty rare that someone can do that. In startups, I've usually
seen that luck plays a bigger role in it than anyone wants to admit - that is,
you start a company, and you happen onto the right market wave at the right
time.

Definitely bookmarking it!

~~~
vinceguidry
I found the article great in forcing me to reconsider my goals in that space.
I'd always had this belief that it was possible, eventually, to find the right
idea and break through and become the next Microsoft / Google / Apple. The
more I actually understand about the broader economic environment, and the
more I read about the people in question who started these companies, the more
it just looks like right-place-right-time luck.

The article puts that neatly in proper perspective. And that changes the
personal self-actualization path calculus for me considerably. Targeting
"building a rocket ship" as a goal doesn't make you any more likely to
actually build a rocket ship than just starting a company in wherever you find
your passion. Where you find your passion is, just due to the way humans are,
more likely to be rocket-ship-worthy than any idea borne out of any rational
brainstorming process aimed at producing one.

~~~
frandroid
> the more it just looks like right-place-right-time luck

That's confirmation bias. There are tons more people than you know of in the
right-place-right-time, but couldn't/wouldn't act on it. You still have to
build the start up and be persistent at it, have the right vision, do the
right adjustments when competition comes around. These are also features
shared by the Microsoft / Google / Apples out there.

~~~
tjradcliffe
It's not an either/or: almost every successful company requires both hard work
and luck. In very rare cases one or the other might be sufficient, but in the
vast majority of cases both are necessary. The amount of luck required can be
reduced by hard work, but it can't be taken to zero.

In the usual case, picking a product that turns out to have high demand is the
biggest area where luck matters.

There are two kinds of high-demand products: the things that everyone wants
but no one knows how to do, and things that no one knows they want but
everyone knows how to do.

Fractal image compression is a good example of the former.

Almost everything else is a good example of the latter: smart phones,
Facebook, Twitter.

There are some things that are both: the Model T ("If I'd asked my customers
what I wanted they would have said a faster horse") and so on.

If you choose one of the former, the odds are you'll fail because if no one
else can do it, you probably won't either.

If you choose one of the latter, the odds are you'll fail because if no one
knows they want it, it's probably a stupid idea--which is often a smart idea
whose time has not yet come.

This is not to say you shouldn't go for it! "The odds are you'll fail" is a
simple statement of fact with regard to starting a business, but only for
certain values of "fail". You'll learn a huge amount, grow in ways you never
knew were possible, and have the adventure of a lifetime. Just be really,
really careful about not getting wedged financially, and especially make sure
you don't let friends or family members over-invest.

~~~
TheOtherHobbes
I'd question whether 'everyone knows' how to do smartphones, or social
networking, or any number of other innovations. The winners in these fields
prove the opposite - hardly anyone knows how to do these things well enough to
keep growing a customer base.

I still find an inexplicable number of startups apparently unaware of the
critical importance of market-building and networking.

A poor product marketed well will _always_ outcompete a better product
marketed badly - or not at all - as long as it has acceptably basic
functionality and isn't completely unfit for purpose.

There are so many examples of this in tech it's baffling that it doesn't seem
to be considered more often.

And I think the article is just plain wrong about innovation, because in fact
there's a constant stream of possible new innovations. The stream comes in
waves, but anyone who isn't thinking about what's going to be possible soon
isn't paying attention.

'If it was possible someone else would have done it by now' is a Dilbert
argument, not one based on evidence.

What doesn't exist is a constant stream of opportunities with instant
Apple/Google/FB/MS earning potential.

But these corps got big in many steps, which included choices about products
and services, marketing and ecosystem building, customer lock-in, brand
management, investor relations, management culture, and worker culture.

They didn't just make a thing and instantly kill the rest of the market
because it was just that awesome.

------
Animats
What he refers to as "technology" companies are not ones innovating in any
technological area. He's really talking about online application business-to-
consumer startups ("appcrap"), for which there's a well-defined assembly line
process. A real technology company is defined by their ability to do something
hard that others have trouble doing.

The first mover has an advantage, but it's not overwhelming. IBM didn't come
out with the first personal computer - Apple and Commodore did. Microsoft
didn't have the first operating system for x86 machines - Digital Research
did. AOL once dominated social networking. Facebook moved into a quite mature
space - Myspace, Geocities, and several others were big companies when
Facebook started.

Luck does indeed play a big part. If Gary Kildall, the author of CP/M, had
been in the office the day IBM was looking for an OS for their new PC, the
history of personal computing could have been very different.

~~~
coffeemug
_> IBM didn't come out with the first personal computer - Apple and Commodore
did._

IBM wasn't a startup -- it had _massive_ distribution resources. When you have
access to an enormous distribution channel and massive marketing budgets, the
rules are obviously different.

 _> Microsoft didn't have the first operating system for x86 machines -
Digital Research did._

Yes, but Microsoft piggybacked off of IBM's distribution channel. That's
_extremely_ rare, and 99.99% of startups can't swing that sort of deal.

 _> AOL once dominated social networking. Facebook moved into a quite mature
space - Myspace, Geocities, and several others were big companies when
Facebook started._

AOL, MySpace, and Geocities effectively committed suicide. It's nice when that
happens, but you can't count on it.

There are no guarantees, it's all a balance of probabilities. The point isn't
that the first mover always wins, it's that if you aren't the first mover the
balance of probabilities is against you.

~~~
GFischer
First movers don't always win.

[http://staffweb.ncnu.edu.tw/clhung/MOT/Mohr02.ppt](http://staffweb.ncnu.edu.tw/clhung/MOT/Mohr02.ppt)
(slide 19 and on)

First movers have an advantage when they can raise entry barriers (economies
of scale, network effects, switching costs).

However, fast followers or late movers have some important advantages, and if
the early movers don't have significant barriers they can pull the rug from
under them if they have a superior product or better business model.

------
ElComradio
Two efficient market theorists are walking down the street. They see a hundred
dollar bill on the sidewalk but keep walking. One turns to the other and says,
"If that was real, somebody would have picked it up already."

------
nostrademons
I like this article. Much of the advice on startups is biased from an investor
perspective, this is something that's very real from a founder's perspective.

If I had to summarize and riff off of the ideas here, I'd phrase it as "Be
very careful about where you're getting your information from." If you got
your startup idea because you heard about something from a news article, you
are _way_ too late. If you got it from an Internet forum, there's a chance
that you might be on to something, but it depends on how niche the forum is
and how close to the bleeding ege. If you got it from a problem that you or a
friend personally had _and you know how to solve it right now_ , you may be on
to something, but you have to carefully consider how many other people are
like your friend and whether that's going to grow in the future. If you're in
a niche community yourself _and that community is growing rapidly_ , there are
probably lots of things you can explore that might be fruitful startup ideas.

~~~
davemel37
"Be very careful about where you're getting your information from."

I would encourage you to apply this nugget of gold to this post as well.

It is a mistake to dismiss an idea just because others are working on it. In
fact, I would argue the opposite. It validates the idea and the market.

------
marcus_holmes
nah, I had to stop reading when it said that First Mover Advantage was the key
to success.

That's been so thoroughly debunked (try and think of a single successful
startup that was First Mover with its business model). The First Mover spends
all its time educating the market, the businesses who follow soon after can
take advantage of that.

Really nice writing though :)

~~~
nvader
I'm not exactly sure about this, and in no way does it detract from your
point, but would Uber count as a first mover?

------
davemel37
This article is built on top of many faulty assumptions... Most notably,"When
you’re second to market with a viable product, your customers will compare you
to the company and product that got to market first."

This assumes that the entire market knows about a solution the moment a first
mover comes to market.

The reality is that building a brand to the point where every prospect you
approach is comparing you to an incumbent takes years.

The first couple years of a new market opportunity, even with dozens of
competitors, there are enough prospects in the market that you can be first to
market with the people you reach and your competitors will be first to market
with a different segment of the market.

That being said, it is ABSOLUTELY CRUCIAL for every company to differentiate
themselves in a way that they can't be compared to a competitor.

There are some nuggets of wisdom sprinkled throughout this post, but It is
clearly built on one subjective individuals perception of things that are
beyond our control to really grasp. (i.e. the surface is successful because of
a massive ad budget. I would argue the surface is a new category by itself.)

~~~
nostrademons
That's true, but you also need a story about how you're going to grow your
reach & influence faster than your competitor does. It can work, for example,
if your main competitor is a hobbyist who doesn't take his product seriously.
Ditto a major corporation for whom this is a sideshow that can't get resources
from execs whose attention is focused elsewhere.

But anybody can spend more money to tell more people about their product. This
is not a competitive differentiator; if you do it, and the company who got to
market first does it, they'll win simply through Gambler's Ruin, since they
start from a bigger base.

~~~
coffeemug
_> This assumes that the entire market knows about a solution the moment a
first mover comes to market._

It doesn't. The first mover will start getting customers before you do, and as
they do their ability to reach customers will grow exponentially. You might
start reaching a segment of the market they aren't reaching, but they'll
trivially be able to lock you out.

~~~
frandroid
Like Altavista locked Google out.

~~~
nostrademons
Altavista falls under the "parent company believes it's an inconvenient
sideshow, a technology demo for the company's main products" clause. The point
of Altavista was to demonstrate the power of DEC's Alpha chips. That made it
politically unfeasible to adopt one of Google's key innovations, using large
quantities of commodity hardware to power innovative new algorithms.

------
hayksaakian
on saturated markets:

many of the companies you've never heard of made their money building an
easier to use X in a saturated market.

If the dominant company in the industry has not made significant changes to
their product in 10 years, then that's an obvious opportunity for a startup,
even if the market is completely saturated.

at least in B2B i've found that many companies solve a problem for their
customer demographic in year X, grow pretty big, and rake in the cash. They
stay stagnant for X+5 to 10 years and they leave their customers frustrated
without any real options.

\-----

Another fallacy I hear from people thinking of ideas has to do with "solved
problems"

A "solved problem" is just a problem with 1 solution. People are different,
customers are different. Is there another way to solve the problem that
obsoletes the previous solution?

ex: transportation; solved by "horse and buggy", and then obsoleted by cars
and public transportation.

~~~
arethuza
Search on the web was a "solved problem" until Google came along and showed
that all of the search engines before then were actually pretty useless.
However, until Google came along we didn't _know_ they weren't very good as
any kind of web-scale search seemed like a miracle at the time.

------
dkarapetyan
Really engaging post. Placed in the context of RethinkDB though it is a bit
contradictory no? RethinkDB does not have first mover advantage and they are
against the likes of Riak, Mongo, Couchbase, Cassandra, etc. All of those I
believe are in a much stronger position according to the criteria in the post.

~~~
coffeemug
RethinkDB won't be in this position for long (and in fact, most lessons in the
article came directly from the mistakes made in the process of building
RethinkDB).

We found a big point of a differentiation
([http://rethinkdb.com/blog/realtime-web/](http://rethinkdb.com/blog/realtime-
web/)), which, depending on one's definition, can be considered discovering a
new market, and we'll be the first open-source scalable database in that
market. The upcoming 2.0 release will reposition the company around realtime
web/push database. A huge part of the reason why we chose this path is the
lessons in the article.

~~~
ntoshev
The shift from spinning hard drives to SSDs is an environmental change like
the ones you describe in the article. What made it hard to exploit? Not enough
improvement, compared to legacy databases on SSD?

~~~
coffeemug
Yes. There were many, many companies that attempted to exploit this trend in
databases and caching, and all of them are now dead, zombies, or pivots.

The reason is that there is no valuable product there one could ship. Putting
an existing database on an SSD gives you all of the benefits and none of the
drawbacks.

------
wooyi
This articles makes sense, but it's hard to step back and be so reflective
without being victim of analysis paralysis. Many times, you build a toy,
something you like, and it turns out big. If you over analyze it, you may not
build it because you can't predict the future no matter how well you think you
can.

In many cases, analyzing your startup idea with such a complex framework will
stop you at your tracks.

I prefer to follow the basic rules PG laid out (there are some overlaps) in
his article on startup ideas.

------
levlandau
I agree with the statement that startups are like biological organisms
evolving in the broth of an economic environment. In @pmarca's words "the
market needs to be fulfilled and the market will be fulfilled". Once we move
on from this fact (that we can't create startups out of thin air without there
being an underlying wave ...without a "why now"), the rest of the actionable
advice here will work better for an investor and/or the entrepreneur who views
herself more as an investor than say a hacker. Alternative advice is to "live
in the future" as PG would say it or to be different as Peter Thiel would
imply. What I think this means is to ask yourself how similar what you do for
fun/ for projects is to what everyone else is doing[similar --> bad]. How
often do you work on that stuff? Do you collaborate with people? I am
convinced ideas emerge as a natural consequence of working on ideas at the
fringe with interesting people. What is hard is a) working on ideas and b)
finding interesting people to work with. Another thing that doesn't help is
committing to a company prematurely. Easier said than done, but i think if we
as entrepreneurs took it a little less serious...we'd net out with more
successful companies.

------
kpennell
It's an interesting argument but I can think of so many counterexamples. A guy
named Michael Wolfe (pipewise founder) wrote an interesting quora answer on
dropbox. Dropbox was way late to the file syncing party.

The answer:

Well, let's take a step back and think about the sync problem and what the
ideal solution for it would do:

There would be a folder. You'd put your stuff in it. It would sync.

They built that.

Why didn't anyone else build that? I have no idea.

"But," you may ask, "so much more you could do! What about task management,
calendaring, customized dashboards, virtual white boarding. More than just
folders and files!"

No, shut up. People don't use that crap. They just want a folder. A folder
that syncs.

"But," you may say, "this is valuable data... certainly users will feel more
comfortable tying their data to Windows Live, Apple's MobileMe, or a name they
already know."

No, shut up. Not a single person on Earth wakes up in the morning worried
about deriving more value from their Windows Live login. People already trust
folders. And Dropbox looks just like a folder. One that syncs.

"But," you may say, "folders are so 1995. Why not leverage the full power of
the web? With HTML5 you can drag and drop files, you can build intergalactic
dashboards of statistics showing how much storage you are using, you can
publish your files as RSS feeds and tweets, and you can add your company
logo!"

No, shut up. Most of the world doesn't sit in front of their browser all day.
If they do, it is Internet Explorer 6 at work that they are not allowed to
upgrade. Browsers suck for these kinds of things. Their stuff is already in
folders. They just want a folder. That syncs.

That is what it does.

~~~
TeMPOraL
This is the best start-up lesson I've seen this year. I wish more people
followed it, though cynic in me thinks it's irrelevant because most of the
time, it's not customers that are the users - it's investors and potential
acquihirers.

------
graphene
Excellent essay. I feel like the emphasis on "the story" reinforces pmarca's
point in his "product market fit" article
([http://web.stanford.edu/class/ee204/ProductMarketFit.html](http://web.stanford.edu/class/ee204/ProductMarketFit.html)):
that more important than the team or the idea is the market (in coffeemug's
words: the environment).

 _You can obviously screw up a great market -- and that has been done, and not
infrequently -- but assuming the team is baseline competent and the product is
fundamentally acceptable, a great market will tend to equal success and a poor
market will tend to equal failure. Market matters most.

And neither a stellar team nor a fantastic product will redeem a bad market._

~~~
coffeemug
The whole essay is really a rip off of pmarca's product/market fit argument,
and Peter Thiel's contrarian but right argument. I just rewrote it through the
lens of my own experience.

The only truly new thing that I discovered was the "story" bit. I haven't
heard that anywhere else before.

------
brandonb
What an excellent post! I don't agree with every point, but this is
thoughtful, clearly articulated, and the thought process reminds me of PG's
best writing.

~~~
swah
It did felt pgish - I don't like this way of trying to structure the world too
much though. I think patio11 would agree with me...

------
shinamee
== Paradoxically, the solution is to stop thinking of startup ideas in terms
of solving problems in the early stages of startup germination, and instead
start thinking in terms of changes in the economic environment and the
opportunities these changes unlock. ==

strong point, exactly what I have been thinking lately while trying to
understand every single products Google acquires. I still think there are
rooms for innovation.

------
jzheng
It's a good article and has some good points. But after some thinking, it
seems that almost none of successful startup ideas come with capturing the
change of environment. Instead, most of successful startup ideas come from
hobby, solving a problem, iteration, improving existing products, etc. Besides
a good idea, building a successful startup requires a lots of other stuff like
great team, good fund raising, great execution, great user growth, etc. I
guess all the other parts are much difficult than finding a good idea. If you
don't have a good idea yet, you can just focus on other parts: building a good
team, or learning to executing well. You can start with small projects with
positive cashflow like consulting, etc. The best way to pickup a startup ideas
is to look at new startups and find the ideas that you like and that you can
improve and execute well. Just as some other posts mentioned, if you are
smart, you can make difference even in mature market. Market is not efficient
at all, especially for new and emerging market.

------
derekp7
Question -- is there any good place to post ideas for startups? Quite often,
I'm looking for a company that provides X, and there is no one that I'm aware
of that does X. However, I can see how X could be a profitable business for
someone, even if I'm not in a position to start X myself.

~~~
hayksaakian
This is an idea me and a friend wanted to try out.

[http://idealist.tips/](http://idealist.tips/)

We promoted it but it didn't get any up-take

(the site is using the opensource lobste.rs code from
[https://github.com/jcs/lobsters](https://github.com/jcs/lobsters) )

There is also a sub-reddit where people post this type of stuff (i'm
unaffiliated with it)

[http://www.reddit.com/r/SomebodyMakeThis/](http://www.reddit.com/r/SomebodyMakeThis/)

------
dshankar
This is excellent. Your intuition, thought process, and writing style remind
me of PG's essays.

------
leroy_masochist
Thought this was a great article and found the Pixar storytelling framework
particularly interesting. Thank you very much for taking the time to put this
to paper. I'll definitely check out RethinkDB!

------
fsloth
"Market efficiency implies that if a problem is valuable and solvable, it’s
overwhelmingly likely that it already would have been solved."

I think it depends on many things, including the size of the market. I'm
willing to bet there are many profitable niches which are served currently
with only sub-optimal products. But to find these one needs domain knowledge
od the niche, and I think these are served best by teams of adventurous
established experts rather than teams without domaim knowledge.

------
nnx
I would love to have Slava's articles in my feeds but can't find any RSS/Atom
link. Anyone?

~~~
misframer
How about
[http://www.defmacro.org/feed.atom](http://www.defmacro.org/feed.atom) ?

~~~
nnx
Oh, so there is. Thanks a bunch!

------
mbolton
Solutions to problems, be those problems you personally experienced or in the
workplace, is what creates a successful product. Without a successful product,
you can't have a successful startup. That being said, a successful product
doesn't guarantee startup success.

------
tracker1
I like the distilled version you get from @FakeGrimlock ... find right
because, make people want.

