
Finding Profitable Startup Ideas - jkuria
https://capitalandgrowth.org/articles/770/how-to-find-profitable-business-ideas.html
======
lettergram
It's interesting that of the many friends I have who started companies (10 -
12), only two of them didn't receive funding. Both businesses built from
scratch and now have a revenue somewhere in the neighborhood of $1m a year
after two years. That's honestly pretty good IMO.

The other eight or so friends who started companies accepted some form of
money. Of those, only two are still in existance. The survival rate of the
other guys are 2/2, the survival rate of the funded startups to-date is
2/(8-10) or <25%.

I think part of that is simple because the people who didn't have funding
didn't have a choice. It was survive or die.

It reminds me of probably the wisest words I've read regarding startups:

> Startups rarely die in mid keystroke. So keep typing!

\- How Not to Die by Paul Graham[1]

The point is, focusing on something practical that doesn't need funding is
like the easiest way to succeed and also find real problems. I've
accidentially stumbled on solutions to problems other people have had and
often those are the greatest little apps that can make you a steady income.

[1] [http://www.paulgraham.com/die.html](http://www.paulgraham.com/die.html)

~~~
kozikow
Maybe the logic is another way around? Companies that have a clear product-
market fit and generate enough revenue to self-fund and don't have competition
closely behind their backs have much less reason to raise.

Maybe you are mistaking "They were so successful, so they didn't need to
raise" with "they didn't raise, so they were successful".

~~~
katzgrau
As a fairly successful bootstrapper, I'd say that it's more likely that taking
money generally leads to a "runway" in that you need to be profitable or raise
another round by the end of that runway. Many don't succeed in either of those
efforts because they tend to take on heavy expenses too early, where a
bootstrapper is much more thrifty and mindful of cash flow.

In the early days of my company, I applied to YCombinator, was a 2x Techstars
finalist, and pitched Fred Wilson at USV's office. Rejected by everyone - but
honestly, if I'd taken their money I probably would have mismanaged it and
brought the company to an early end.

~~~
brucephillips
Great point. This is why I advocate for taking money early on, but only
increasing burn when a profitable business model is found.

This is the best of both worlds.

~~~
kornish
100% agreed, and that's essentially the advice present in Mark Suster's blog
post "Do You Really Even Need VC?" [0]

[0]: [https://bothsidesofthetable.com/do-you-really-even-need-
vc-7...](https://bothsidesofthetable.com/do-you-really-even-need-
vc-72013e985fab)

------
fogzen
There are plenty of profitable business ideas but you can’t get capital for
them because they aren’t going to be billion dollar ventures with 10x returns.
The problem with entrepreneurship in America is lack of micro financing and
support for starting small business - not lack of ideas or lack of people.

How many more entrepreneurs and businesses could we create if financing was
focused on capitalizing new business instead of only seeking the largest
profit for the sake of enriching banks and already wealthy investors.

~~~
gfodor
What you're referring to here are boring old commerical loans. Of course
you're never going to get a bank to lend you money unless they can be sure you
will repay the principal.

If you're throwing money at risky ventures where you may lose your investment
entirely it seems reasonable to expect a large amount of upside.

~~~
fogzen
That’s my point... the financial system is built to reward the wealthy and
does not focus on creating new entrepeneurs. Commercial loans aren’t provided
for startups. Only the SBA engages in that and you have to prove you don’t
have personal funds and/or be a minority to get them (I know I’ve tried.)

~~~
bmelton
Not that I'm suggesting you do or don't do this, or that it's right or fair,
which usually has some form of 'eligibility' for awarding contracts to
business, the usual workaround is to hire a figurehead CEO who is a minority
(or disabled war veteran, or whatever other status the government determines
worth worth investing in).

I say figurehead because that's usually what they are, but there's nothing to
suggest that you couldn't find an eligible co-founder or, to _really_ work the
system, find an eligible co-founder who is politically connected in some way.

~~~
fogzen
Thanks. I wasn’t looking for individual advice I just wanted to point out that
the major barrier to entrepreneurship is not lack of ideas but a lack of
access to capital for new businesses.

~~~
bmelton
FWIW, outside of the bay area, it's not nearly so easy to get access to
capital anyway. Not trying to throw shade on anyone, but it seems far less
likely that "ideas" that have no product, no users, etc. would be funded in
the DC/Baltimore VC markets, but seem fairly routine over there.

Bootstrapping seems pretty much the same everywhere. Pare down your living
costs, build a true MVP in your spare time, start selling in your even sparer
time until you can either show enough traction for a small business loan or
hope to catch lightning in a bottle with virality.

It isn't easy, it takes a lot of talent, persistence, and luck, but it isn't
impossible, and if you _can_ manage to build something people want, it isn't
reserved purely to the capital class. Of course, it will always be easier for
them to take the same idea, reach out to their network for capital, hire a
team to implement it, and all of that increases their chances for success.

------
comstock
The last sentence really stuck home to me (edited for clarity):

While these Red Ocean ideas may not result in creating multibillion dollar
companies they do offer opportunity that can lead to riches and personal
autonomy.

It’s sad that we live in a world where the goal of personal autonomy is so
lofty. We have an over abundance of resources in the West. And yet having the
freedom to work on useful things under our own direction is rare. It’s a shame
that having “autonomy” is such a difficult goal to obtain.

~~~
brucephillips
You're underestimating how expensive that goal is. Providing every adult with
basic income so that they can pursue their dreams would bankrupt the country.

~~~
comstock
I’m not really talking about providing a basic income.

What I’m saying is the barrier to having “personal autonomy” in a society
where providing the essentials of life has to a high degree already been
automated, is too high.

~~~
brucephillips
How would we provide the essentials of life other than through basic income or
a similar welfare program?

~~~
comstock
Work for a year then take two years off? Or retire earlier? Again, I didn’t
say that people wouldn’t work at all. I said that the barrier to obtaining a
personal autonomy is too high in a society where providing the essentials of
life has been largely automated.

We keep people working by making it had to survive otherwise (high rents that
don’t represent the maintainence/construction costs etc).

------
brucephillips
The author doesn't describe the most reliable indicator of new opportunity,
which is economic change. Change can come in the form of shifting
demographics, new tech, or new product adoption. These are the events that
increase demand or decrease cost for a new product opportunity. They should be
where you direct your attention.

~~~
csallen
This is _somewhat_ covered in the "Industry Growth Rates" section:

 _> At any given time, there are dozens of industries operating within new and
underserved markets that are experiencing rapid growth… This almost always
represents a possible entrepreneurial opportunity._

His strategy might benefit from incorporating some of the things you mentioned
— shifting demographics, new tech, etc.

Then again, one of the most common entrepreneurial mistakes is to develop a
solution and go looking for a problem. That rarely works out, because most new
tech doesn't have any business applications. It doesn't fit into the market.

So there's something to be said for a market-based approach, where you look
for new things that _people are actually paying for_ by examining high-growth
industries, rather than simply looking at new tech.

~~~
slinger
> _At any given time, there are dozens of industries operating within new and
> underserved markets that are experiencing rapid growth_

IMO finding a market that is rapid growing is the most difficult part. It
seems that I can never find a good idea worth pursuing.

~~~
brucephillips
What do you mean "worth pursuing"? Do you mean that you can't find an idea
worth investigating further? Or do you mean that you can't find an idea that
survives a month of concentrated market research?

The latter is reasonable. The former isn't. You should be able to come up with
lots of ideas worth following up on.

Let's play a game. Someone give me a product category, and I'll list ideas
that are at least worth more research.

~~~
Zalastax
Furniture is a category or products I have so many problems with (with a
viewpoint from Sweden)... I'll let you write some ideas and then chime in with
the problems I have seen.

~~~
brucephillips
I can't innovate on furniture directly, but maybe on the design,
manufacturing, and distribution processes around it. I have no idea how this
industry is structured, but here are some ideas.

\- Made to order furniture. Let users design their own, or at least mix and
match high level componets at a finer detail than ikea.

\- High end IKEA. Combine the flexibility of Ikea with high end designs and
materials.

\- High level office furnishing service. Companies provide a high level
description of their furnishing problem, rather than choosing specific items.
I'm sure these consultants already exist, but maybe it can be done in a more
automated, scalable way.

\- bid/ask interface for used furniture markets. This would enable sellers to
passively sell items.

\- used marketplace that uses ML to extract features from pics. I think this
may already exist. Not sure.

~~~
Zalastax
Very nice! You hit close to home here! Several ideas that are definitely worth
looking into. My problems, which might not be profitable to fix, are:

Very few pieces are composable, we need more things like
[https://www.prettypegs.com/](https://www.prettypegs.com/) Unless you have the
capability to build a new IKEA, this is to me the best venue for providing
high quality customizability.

Finding furniture is a mess. There's missing information (dimensions, max
load), close to useless search, and a bunch of places that sell the same
things.

------
FLUX-YOU
Are there research firms that do ground work research, focus groups, talk to
people on the street, build real professional networks to extract "problem
stories" for ideas, and do competition research to the same level that e.g.
short sellers might?

Are these just normal market research firms, and are there boutique firms that
have low-volume, high value clients?

~~~
borplk
Can anyone give a decent concrete real example of "extracting problem
stories"?

I see this line of thinking repeated a lot but haven't seen any realistic
examples that could lead to a viable small businesses.

There are obvious ones that you don't need anyone telling you nowadays.

Like "I need a good customer support software.". You don't need someone
telling you that to know that you can make customer support software and make
money with it. It's an existing category with lots of money and competition in
it.

Chances are anything you want to make already fits inside an existing
"category".

In that case it's not that useful to know the problem exists. The hard part is
competing with hundreds of existing companies that have multiple years of
experience advantage over you.

Or you may get specific individual complaints and requests.

Either it's such a specific odd thing that the solution for it is going to be
"use google docs, dropbox, Excel, etc...".

Or it is "missing features" from other stuff like "Zendesk is ok but it
doesn't do ...".

I just don't quite see the "light bulb moment" of this "talk to people and
hear their problems" narrative.

Problems fit into broad categories like file sharing, website creation,
collaboration, productivity tools, word processing, entertainment, and so on.

Whatever you do is going to fall under a category/industry amongst a bunch of
other companies. Then it's a matter of competition and incremental improvement
and everything that comes with it.

I can't imagine what sort of "surprising" problem description one might hear
from people that could give you new substantial knowledge about something you
didn't already know.

~~~
sumedh
> Or it is "missing features" from other stuff like "Zendesk is ok but it
> doesn't do ...".

The guy who started freshdesk said he read lot of comments on HN about how
zendesk sucks so he started freshdesk to solve those problems.

~~~
borplk
Sure but I don't see where the value of such feedback is.

You can find lots of comments anywhere about how any one product sucks. Many
of them will be 10+ year multi-million companies with hundreds or thousands of
employees.

It's not like that's going to empower you to compete with them. Or give you
some advantage.

Not to mention the difficulty of making something that is better (those "it
sucks" comments will be written for your solution too).

~~~
sumedh
Looks like you are a glass half empty kind of guy.

The value of such feedback is that it lets you know there is a problem where
you can potentially offer a better solution.

> Not to mention the difficulty of making something that is better

Creating a brand new market in more difficult than providing a better solution
for an established solution.

~~~
borplk
> The value of such feedback is that it lets you know there is a problem where
> you can potentially offer a better solution.

I agree there are some cases when that may work but my point is that they are
very very rare from what I can see.

The vast majority of cases the complaint or problem statement is already
crystal clear and well known such that finding it out doesn't give you any new
information or anything of particular value because people always want a
better version of what they have anyway.

So you will always get "I want a better Photoshop" or "I want a better
Dropbox" or "we like AWS but it doesn't have this feature" stuff.

If the problem is in some very specific small niche that is unknown to most
people it would be more useful.

Like some obscure small non-tech-savvy niches that are stuck in the past
decades and are so small that no big player bothers with them but perhaps you
could make a good small business out of it if you know that they exist and
what they are.

For large established markets with well known famous multi-million and multi-
billion players saying "$solution sucks" is as useful as saying that the sky
is blue.

If you want to get into the customer support desk software market you don't
need a bunch of people telling you "Zendesk sucks" for you to know that
there's room in that market.

For a category that large there are tons of solutions and between them also
tons of very happy and very unhappy people and everything in between.

In the case of Freshdesk/Zendesk (and other similar categories of the same
size and popularity) the barrier is overwhelmingly something other than simply
knowing that the problem exists.

Everybody knows almost every business needs customer support software. And
whatever it is that they have, they always want it to better.

If someone's capable of coming along and challenging something like Zendesk
it's not like they need the "aha!" moment or encouragement of a bunch of
people saying it sucks.

I'm subscribed to a few sites that send "stated problems" daily/weekly and
basically none of them are actionable.

They read like something along the lines of,

"We use Salesforce (or some other giant tool/company) ... it doesn't do this
(or needs better UI/UX/API/Integration/etc) ... if there was something better
we would consider paying up to $1000."

I just find it difficult to imagine how someone goes from reading that to,

"Aha! I got it. Now I'm going to go and make a better Salesforce."

~~~
sumedh
I am not exactly sure what was the whole point of you rant.

FB was better than Myspace, Google was better than other search engines, Slack
is better than Skype.

>I agree there are some cases when that may work but my point is that they are
very very rare from what I can see.

Do you seriously believe that inventing a new market is less difficult than
fixing/improving existing solutions?

~~~
borplk
I'm talking in the context of small to medium businesses and indie businesses
not multi-billion unicorns like FB and Google.

> Do you seriously believe that inventing a new market is less difficult than
> fixing/improving existing solutions?

Not at all. I didn't mean to imply that.

> not exactly sure what was the whole point of you rant.

The whole point was that I think simplistic and obvious problem statements
like "I like AWS but it doesn't have this feature" or "I want a better
customer support software" are worthless.

~~~
sumedh
> not multi-billion unicorns like FB and Google.

FB and Google were not multi-billion unicorns when they started.

In your previous comment you said it was not entirely worthless but now you
are saying such comments are worthless. Atleast make up your mind.

~~~
borplk
The part that I said wasn't entirely worthless was about those problem
statements that are very specific and niche (I was contrasting that to the
worthless ones).

Basic example, "People want more tasty Pizza", "People want better wine" is
trivial and worthless.

A much more narrow, specific, and niche example could be valuable. Something
like:

"In $area there are lots of migrants living from $country and they love this
$local_type_of_bread that you can't find here at all. If you can bake some
fresh ones you can probably make good money with it. You could sell them via
these local ethnic grocery stores that people there visit often."

Unlike the first example there's some specific and non-trivial information
there.

~~~
sumedh
haha not sure if you are trying to be funny or you just dont get it.

Build something better is a figure of speech looks like you have taken that
literally. If you search for the freshdesk story you will understand there
were specific pain points discussed.

------
lubujackson
I have issue with the "Blue/Red Ocean" concept. Google is supposedly a Blue
Ocean idea. Really? Sure, their approach was novel but the search market was
already saturated by Alta Vista, Lycos, Yahoo, etc. You could say the same
about Facebook with the competition of Friendster and MySpace.

In both cases they took a new angle that let them expand well beyond the
existing market, but the market did exist and was already developed. I would
say that most "Blue Ocean" ideas seem to be more like "Red Ocean, with
potential upside".

~~~
eli
Nobody else was doing AdWords

~~~
georgiecasey
which was stolen from bill gross and goto.

google's innovation was a wayyy better mousetrap. i remember the first time
using it in 1999, those 10 blue links were like a new, far superior version of
the internet

------
judge2020
Cached version:
[https://webcache.googleusercontent.com/search?q=cache:46fLVn...](https://webcache.googleusercontent.com/search?q=cache:46fLVnigoRYJ:https://capitalandgrowth.org/articles/770/how-
to-find-profitable-business-ideas.html+&cd=1&hl=en&ct=clnk&gl=us)

------
paulie_a
Step 1-1000: Find customers

You are a sales person. Not a developer

------
kostarelo
It looks like the article is not complete. There are still comments in there
for missing citations.

> To find out which industries are experiencing rapid growth, its often useful
> to look at secondary research sources. Three great secondary resources to
> gauge industry growth are IBIS Industry Reports, Dunn & Bradstreet and
> SageWorks [insert links for all three]

> Richard White, in The Entrepreneur’s Manual, [insert link to resource]
> creating a decision tree that divides life by time and experiences exactly
> in half. For example, White recommends a person initially divide life
> between work and leisure.

------
ajeet_dhaliwal
I’m currently reading ‘Blue Ocean Strategy’, the book where these red and blue
ocean terms come from and I feel like what he’s describing sort of is blue
ocean strategy even though he says it’s not, the Chipotle example is for sure.

------
bronlund
Finding a good idea is the easy part.

~~~
enraged_camel
I used to think so as well, but over the years, I've realized that execution
is the easy part, at least for me. Finding good ideas, as in ideas that can
lead to profitable businesses, is difficult because it requires deep domain
expertise.

~~~
throwaway0255
Yeah I used to think so too. Now I just think it's a thing people like to say
to emphasize how difficult and important execution is. But execution mattering
doesn't mean ideas are easy.

Ideas are really, really hard. Good ideas are the result of an extraordinary
feat of luck, an extraordinary feat of outworking everyone around you to get
very deep domain expertise, or a combination of both.

~~~
AznHisoka
I’m so glad so many more people are disagreeing with the truism “ideas are
cheap”. Everytime people say that, I have to roll my eyes. Like really?
execution is hard but easier as its operating within known boundaries and
restrictions.

