I recently embarked down the startup path for the second time. I’m currently in the ideation phase - testing out a few different ideas, looking for an opportunity. I wanted to share my approach for evaluating startup ideas. This structure ties in well with the Lean Methodology I mentioned in an earlier post by setting up clear checkpoints for any particular idea. I tried to distill a lot of the learnings from my time as a product manager, founder at my last startup, and various readings/ lectures on founding a company, but if others out there have additions, let me know - always looking for tips. I’m going through this process right now, so I’ll let you know if it works!
Overview - 4 Components
(Full framework at the bottom)
From what I’ve observed, to make a new idea work, these 4 components must be true:
Problem - Customers must have a real and painful problem that needs solving
Market - The problem (or permutations of the problem) applies (or will apply, over the next few years) to a large number of people
Solution/Product - Your solution (aka your idea) effectively solves this problem
Business - Your solution can (at some point in the future) make a profitiable business. In other words, customers will pay you more to solve the problem than it costs to build your solution
Note: You do not need to make money anytime soon, but you should be able to model out revenue streams and scenarios where you’d be able to eventually monetize your idea
Why I like it...
For many ideas, you can answer 1-4 before writing a single line of code
If any of the 4 components is false, you have a clear indicator that it’s a bad idea
Risks are segmented, giving you a path forward - let’s say you prove #1, customers have a real problem, but #3 is false, you came up with a bad solution - well instead of giving up altogether, you can now just focus on alternate solutions
I included each component plus some tactics to help evaluate each section. This is just an image for now - not sure how to import Powerpoint slides!