Sam Huleatt
- Introduction
- All great startup ideas solve an acute problem.
- 1. Non-Venture Scale Problems
- 2. Venture Scale Problems
- Founder <> Market Fit
- Idea Space Questions:
- What Are Your ‘Earned Secrets’?
- Characteristics of Great Opportunities
- Ideation Frameworks & Heuristics
- Ideation is a muscle
- ⬇ Big List of Ideation Frameworks
- ⬇ Big List Of Startup Idea Heuristics
- The Role of Markets & Timing
- Evaluating Initial Startup Ideas
- The PR/FAQ
- Avoid Tar Pit Ideas
- The Emotional Roller Coaster of Startup Ideation
- → The Emotional Roller Coaster
- → Taking Calculated Risks
- → The Role Of Luck & Timing
- → The Fallacy Of ‘Ah Ha!’ Moments
- → Avoid Overthinking Things
- Validating Startup Ideas & Signal Testing
- A Case Study on Validating Startup Ideas
- Conclusion: Deciding To Go All In
- Additional Resources
Introduction
Below are my collected resources related to ideation (and validation) of startup ideas. I spent the better part of two years focused on thinking through startup ideas as an EIR soul searching for what to do next. I share my research below in hopes it proves valuable to others (and maybe to myself at a later date). P.S.: Many of ideas below are just as informative for investors as they are for founders.
All great startup ideas solve an acute problem.
Start from first principles.
"The way to get startup ideas is not to try to think of startup ideas. It's to look for problems, preferably problems you have yourself. The very best startup ideas tend to have three things in common: they're something the founders themselves want, that they themselves can build, and that few others realize are worth doing. Microsoft, Apple, Yahoo, Google, and Facebook all began this way.”
→ Paul Graham on How To Get Startup Ideas
→ Steve Jobs on putting problems and customers first
The most important thing in both judging and formulating ideas is the quality of “problem fit”: the intersection of the right person to solve the right problem.
In starting a founder journey it’s also helpful to know whether you bias toward venture scale problems, or non venture scale problems. Choosing the venture path is making an inherent agreement: you are going to the moon, or you are blowing up on the launch pad. The expectation for venture backed founders is to achieve ‘high velocity’ milestones. It’s a life of stress and pressure that is not necessarily wise, or healthy for most founders.
1. Non-Venture Scale Problems
- Applies to most businesses. Most businesses don’t require venture capital. While “Lifestyle” businesses get a bad rap, they are often a better choice and counter intuitively result in MORE successful exits for founders than venture funded businesses.
2. Venture Scale Problems
- A venture scale problem from a founders perspective should feel like a race against time. You should feel that your solution address a hair-on-fire problem for a customer massive customer set. You should also feel that your only path to winning is dominating your market.
→ Important Note: Many founders seek investment because they otherwise can not work full-time solving their problem, or afford to build the solution. This is a trap: 95% of founders needing investment to “validate” a problem will fail. Often they seek investment to validate themselves, or the idea. IMO to have the highest chance for success as a vc-backed founder, only raise capital after you have proven to yourself that you are solving a “hair-on-fire” and your urgency to solve it on a massive scale is imperative to do now.
For the rest of this manual, I will focus on venture-scale problems, though nearly all the concepts also apply to non-venture opportunities (they are just less important to overall success).
Founder <> Market Fit
Before jumping into resources for brainstorming, it’s important to understand the concept of founder-market fit. The reason being that even if you have the greatest idea in the world, most investors will discount it heavily if you do not have the ideal background to execute it. The good news is that typically the best ideas you will have are ideas you are uniquely suited to solve because you have an earned secret. However, I personally find it helpful to remind myself of the importance of solving a problem I am uniquely qualified to solve.
Rather than focusing on lists of individual ideas, it can be helpful to instead focus on what YC calls “idea spaces”, i.e., collections of closely related startup ideas. A good approach is to map your team’s skills and earned secrets to idea spaces where you have unique insights.
Idea Space Questions:
- What are my personal super powers?
- Do I have any earned secrets?
- Do I have any unfair advantages? (often relates to distribution, or access)
- Is there a problem I’m obsessed with solving?
→ The Importance of Founder-Market Fit
What Are Your ‘Earned Secrets’?
Characteristics of Great Opportunities
Here’s a list of attributes that make for a great startup opportunity:
- You have a secret (i..e, you have a non-obvious solution to an obvious problem)
- Your product helps customers self-actualize (help someone make money, help them get laid, etc)
- Your solution is both 10x better — and cheaper (i.e., democratize access to an ‘elite’ product offering)
- Your idea piggybacks off an inflection or change (i.e., there is a very clear ‘why now’)
- Your idea benefits from market tailwinds (see Julian on “market pull”)
- Your solution grants or confers status to customers (→ mimetic desire → network effects)
- You are in a small, but rapidly growing markets. ‘Boring’ markets.
Case Study: Uber
- The secret was that black cars were underutilized assets
- Uber helped drivers self-actualize by earning money and helped riders self actualize by gaining status (being picked up in a black car)
- Ubers was both a 10x experience verses yellow cabs — and was cheaper
- Uber was not possible without the iPhone (apps, payments, GPS)
- Uber induced mimetic desire (”my friend is using black cars → I want that too!”)
Ideation Frameworks & Heuristics
Steve Jobs famously stated:
“Everything in the world was created by people no smarter than you”
And it’s true. You are worthy of finding the next great idea.
But, as Daniel Gross likes to say, you need to start small. Start writing down ideas now.
Also, don’t be afraid of approaches that sound crazy. As Sam Altman states:
“The best ideas are fragile; most people don’t even start talking about them at all because they sound silly”
Ideation is a muscle
You need to practice and allow ample time for ideas to marinate and cross-pollinate.
What follows are frameworks to stimulate ideation.
⬇ Big List of Ideation Frameworks
Idea Space Mapping: For each founder, write down each past jobs (or major life experiences) and list problems you saw that are not widely known (i.e., your earned secrets). What were you in a special position to observe while there? Next write each founders unique skills and start to map intersections of problems and unique skills.
⬇ Big List Of Startup Idea Heuristics
- Great mobile apps should be remote controls for real life: push a button and something amazing happens in the user’s world - Matt Cohler
- What is a big industry that feels broken?
- Steal the key feature of a Series B company. This is a playbook from - TK Kader
- If you have a task that takes you more than 3 minutes to do online then there is an opportunity to start a business. [video] - Kevin Ryan
- What’s a successful company blueprint that you can apply a new variant/angle to?
- Whenever you have a question you want answered and you don’t know the site that will answer it — there is a company idea. [video] - Kevin Ryan
- Find an emerging trend and take it to it's end conclusion (ex: brokerages lowering commissions, Robinhood goes to $0 commission)
- Look for generational shifts (ex: my parents are not my grandparents) or draft on regulatory shifts (ex: GDPR)
- Take a product used by consumers and think how an enterprise might use it: i.e., same old trick, brand new platform
- Find large highly fragmented industry w low NPS; vertically integrate a solution to simplify value product.Build something on top of a growing distribution channel (ex; Paypal built on eBay, D2C on FB) Rabois
- What tech sectors are soon to become “garage ready”? i.e, a founder with very little capital can change the world. Every vertically integrated, capital-intensive sector will eventually become garage ready (Dixon)
- Find a process a Fortune 500 company does over and over again (Elad Gill)...Take a manual and often-repeated Fortune 2000 internal process, create a workflow and API for it, and self-serve to a growing segment of startups (Aashay) find a commonly used spreadsheet (eg cap tables) and turn it into a dashboard (eg Carta). Replace email attachments with workflows. Spreadsheets are the long tail of datasets that don’t have their own SaaS tool yet. (David Sacks)
- Any time you see an area that is $50-$100 billion in purchases and there is not one site where you can figure out what you want to buy — especially in the B2B space — then that is where you want to launch a company. [video] - Kevin Ryan
- Innovate around convenience (OneMedical) or cost (Warby Parker) but goal is both (Uber)
- Find the gap between sci-fi & sci-fact h/t @wolfejosh
- Commoditize your opposite (i.e. what Amazon did to retail)
- What smart people do on the weekend will be a scaled activity in 10 years h/t @chrisdixon
- Build on top of existing protocols to make more accessible (i.e., Openphone built on top of Twilio)
- Democratizing access to X
- Increase liquidity in a previously illiquid market (by an order of magnitude) = huge business
- Chris Dixon: come for the tool, stay for the network
- "let people do x at home" = a good startup idea for surprising values of x (Paul Graham)
- The biggest consumer apps of the next decade will ‘passively’ improve existing consumer habits, or act as co-pilots: Spell check > Grammarly, Online shopping > Honey
- Y-Combinator Startup “Recipes”:
- 13:21 - Recipe #1: Start with what your team is especially good at
- 14:48 - Recipe #2: Think of things you wish someone would build for you
- 15:05 - Recipe #3: What would you be excited to work on for 10 years?
- 15:57 - Recipe #4: Look for things that have changed in the world recently
- 16:29 - Recipe #5: Look for companies that have been successful recently and look for new variants of them
- 17:24 - Recipe #6: Ask people you for problems they want solved
- 17:52 - Recipe #7: Look for industries that seem broken
- → Additional Heuristics To Generate Startup Ideas
The Role of Markets & Timing
A common ideation mistake is prioritizing total addressable market size, or TAM. Founders think “I need to chase a multi billion dollar market to attract VCs!”. I’d argue this is flawed thinking because 1) starting at the market level is a step removed from the customer and his/her problem and 2) many of the best markets are small, but growing rapidly.
A couple related concepts consider:
- Kevin Kelley’s concept of 1,000 true fans.
- Not every idea needs to be venture scale. Even having 1,000 true fans (or customers) can create a thriving business - and possible big exit - for most people.
- You should be less concerned about TAM and more concerned whether or not there are 5-10 customers you know who truly want your solution (and would pay you for it!).
- Starting with you focus on TAM means your less focused on individual people or companies.
Often you'll [create] products that will be used in ways where they're not used now, so they end up growing the market much more significantly
- The best ideas expand TAMs (i.e., seek fast growing niches)
- Many of the best startups grow by dominating a niche and expanding. They may also have a ‘secret’ and be early to a small market, but with an expanding TAM.
- Your solution also may be used in ways not anticipated. Great markets (i.e., customers have a dire problem) will “pull” the solution out of you.
- If you are taking advantage of a inflection, you will create a solution that was not previously possible. As such, you may create an entirely new market.
- Most sufficiently severe problems are indicative of large markets
Resources on Markets:
Evaluating Initial Startup Ideas
Once you have started ideating you need to figure out which ideas merit deeper dives.
This can be tricky due to the allure that a better idea is just around the corner. As such, forcing yourself to develop a system for not only coming up with ideas, but also to rapidly test whether they merit a deeper dive is crucial.
Before running out to validate an idea with customers, you first need to build enough personal conviction to know you’ve found a problem that merits exploration. Here are a couple suggestions for interim steps (before talking to customers) that can help you build confidence in your ideas:
Gaining Conviction In Your Startup Ideas:
- Complete a Business Model Canvas and/or complete this Jobs To Be Done exercise
- Work through your your value prop stories and unique value proposition (templates)
- Draft a short deck, or memo or one-pager
- I like the (very short) deck format PreHype proposes in The Acorn Method
- Create a PR/FAQ.
The PR/FAQ
The PR/FAQ format was pioneered at Amazon and is used by multiple top venture studios. It forces you to think about things in a way that I believe is more impactful than simply writing a detailed one-pager.
Avoid Tar Pit Ideas
One red flag that YC talks about are what they call “tar pit” ideas. These are ideas that sound good initially, but have structural issues making them very difficult to succeed in. As an example, personal CRMs is an idea many founders have failed to pull off. I personally find many ideas that focus on “productivity increases” as the big value-prop to fall into this category.
Remember:
- Solve hair-on-fire problems (do not create products in search of solutions)
- Optimize for problems/solutions where you have founder-fit
More:
The Emotional Roller Coaster of Startup Ideation
I’ve found that during my own periods of ideation that I constantly move back and fourth between states of convergence and divergence. It’s a series of highs and lows.
→ The Emotional Roller Coaster
Ideation journeys are emotional roller coasters. It can also be exacerbated by real or artificial time-boxes. This usually happens when you have limited financial runway, such as when you’re forced to pivot with limited runway. Ideation is inseparable from most other creative endeavors. It’s rare that an artist does her best/most creative work when under the gun of a looming deadline. Therefore the best times to ideate are when the mind is relaxed and not stressed.
Another emotional issue that surfaces, especially for previously successful founders is what Alex Furmansky refers to as the ‘Goldilocks Paradox’. Previously successful founders feel they must top their last act, and then find themselves trapped in a paralysis of what idea could possibly be worthy of their next endeavor:
Any new startup idea [seems] either too difficult or too inconsequential. No idea is perfectly worth diving into.
Another great resource on psychology of creative acts is The War of Art.
The artist committing himself to his calling has volunteered for hell, whether he knows it or not. He will be dining for the duration on a diet of isolation, rejection, self-doubt, despair, ridicule, contempt, and humiliation.
→ Taking Calculated Risks
Wrapped up in ideation is also the psychology of risks. Startup can be viewed as bundles of risk. Founders should know what risks they are best suited for. As an example, first-time founders are often better served going after market risk whereas seasoned founders often prefer to focus on execution risk or focus on distribution as they are more confident in their go-to-market and execution
Both Jerry Neumann and NFX have made the point that in going after a venture-scale problems, non-intuitively most founders would also be wise to take “bigger swings” and pursue “riskier” ideas.
→ The Role Of Luck & Timing
Psychology in entrepreneurship is also challenging because timing and luck certainly play a role in success. However, great business ideas are not simply attributable to “luck”. We know this because many great founder and venture studios are able to repeatedly find venture-scale opportunities — and execute against them.
Atomic, AlleyCorp and Sutter Hill all have incredible hit rates for incubating unicorn companies. All three of these studios 1) follow a clear process involving much rigor of thought 2) draw from years of earned secrets and 3) draw from unfair advantages in networks and connections.
My main takeaway here has been that ideation is a muscle. You need to follow a process and put in the reps/practice.
→ The Fallacy Of ‘Ah Ha!’ Moments
Problems worth solving are all around us. Where your idea comes from should not matter so much as whether you are working on solving the right problem for you.
Just because you (personally) can’t seem to identify the right problem/solution worth pursuing, doesn’t mean you must give up. In my career I have rarely been the one who came up with the initial idea. It’s my belief that “founding stories” and “aha moments” don’t really matter. Growing businesses are fun businesses to run. Many great companies who claim to have some amazing “aha founding moment” have re-written history. It doesn’t matter where your idea comes from. But — the ideas you are most likely to be successful at will come from personal insight or experience.
However, if there is one thing I have learned it is that startup ideas should not be forced. As mentioned previously, coming at things from the perspective of “I have X amount of time to think of my next company idea” is a recipe for disappointment.
Three more points:
- There is nothing wrong with joining an existing company as an early employee. Often your ideation journey will lead you to someone already working on the same problem, but with a big head start, or a more unique approach. Consider joining forces.
- You can explore joining a startup studio, or joining a foundry.
- EIR roles are best suited for second time founders ready to validate ideas in a specific space. EIR roles are not good places for people ideating.
- While I find it unlikely to result in the best idea for you, googling for: “requests for startups” might spark creative juices. RFS100 is an example. YC’s list is another.
→ Avoid Overthinking Things
Often your first idea is your best idea.
→ Reid Hoffman on Why You Should Not Underestimate Your First Idea
Validating Startup Ideas & Signal Testing
I am not going to go into any great depth on the topic of how to validate your ideas. At a high-level, it’s imperative that collect feedback from potential customers. At this stage you should already have what I call a solution-asset: a landing page, deck, or memo you get specific feedback on and ideally use to “sign someone up” for your service or waiting list.
Collecting customer feedback is helpful, but you need to be very wary of confirmation bias (hearing what you want to hear). The best way to avoid this is by getting paying customers. Customer who are not only willing, but happily willing, to part with money for your solution are the best data points that you are really on to something.
Ways you can collect data / perform customer development:
- Surveys - I personally find surveys somewhat overrated. People tend to ask leading questions and to share with networks that lead toward confirmation bias issues. Also who who wants to do another Typeform survey? Nevertheless surveys can be useful
- LOIs (B2B) - Use LOIs to get businesses to pre-commit to paying you once your service is available. If you can get them to pay in advance, even better. LOIs are great, but most VCs will still discount them relative to actual paying customers.
- Paid Acquisition Testing (B2C) - Paid acquisition testing (i.e., spinning up a landing page and running traffic to gage conversion/interest) is a great strategy. It does cost something and requires some homework to setup your ad campaigns, but it will likely provide the most unbiased feedback. Don’t worry too much about ROAS at this point.
- Paid Betas - Similar to LOIs. I have seen this for both consumer and B2B products. You essentially pitch your product, and get someone to pay a heavily discounted, but meaningful amount to participate. This can be done in advance of an MVP, or for a super early product iteration. You can also promise to reimburse customers within 60 days if they don’t love it.
→ One survey framework I like.
Gagan Biyani, co-founder of Maven, proposes a great framework for idea validation in this First Round Review post:
I also like how Matt Mochary approaches things:
A Case Study on Validating Startup Ideas
Conclusion: Deciding To Go All In
Congrats! If you have made it this far you likely honed in on the business you really want to pursue.
My advice is to maniacally focus on your customer feedback and traction until the point where you feel the urgency to make it your full-time thing. At that point you should bootstrap until the point where you feel your product shipping velocity merits the need for outside capital — and you are willing to make the the venture-backed founder agreement.
Final closing thought: When Sam Altman was asked what defined the best startups he stated:
“The number one lesson we try to teach startups is that the degree to which you are successful approximates the degree to which you built a product so good people spontaneously tell their friends about it”.
→ video
It’s both that simple and that hard.
Additional Resources
Courses & Communities:
I generally don’t recommend reading a bunch of books on ideation/entrepreneurship they are unnecessary. Founders should be biased toward action: If you have read even 50% of the posts linked above, you know enough to get going. Just start ideating and validating.
Books:
