Startup Ideas Lecture Notes

Introduction

• Aim: To provide tools for thinking about startup ideas in a sophisticated way.
• No one knows which startup ideas will succeed; execution is key.
• Certain ideas are statistically more likely to succeed.

Sources of Advice

• Analysis of top 100 YC companies.
• Reference to Paul Graham's essay "How to Get Startup Ideas."
• Experience with YC companies that pivoted.
• Review of rejected YC applications to identify common mistakes.

Common Mistakes with Startup Ideas

1. Solution in Search of a Problem (CISP)

• Founders often create solutions without identifying real user problems.
• Example: Using AI without a clear problem leads to superficial solutions.
• Advice: Fall in love with a real problem.

2. Tar Pit Ideas

• Common ideas that seem appealing but are structurally difficult to solve.
• Example: Apps for coordinating plans among friends often fail.
• Advice: Research existing attempts and understand why they failed.

3. Jumping on the First Idea or Waiting for Perfection

• Advice: Find a balance; no idea is perfect, but a good starting point helps.

4. Not Considering Business Viability

• Assess ideas for market potential and sustainability.

Evaluating Startup Ideas

10 Key Questions to Assess Startup Ideas

1. Founder Market Fit:
   • Are you the right team for this idea?
   • Example: Tracy and Ralph from PlanGrid had relevant experience.
2. Market Size:
   • Is it a billion-dollar market now or growing?
   • Example: Coinbase entered a small but rapidly growing market.
3. Problem Acuteness:
   • How pressing is the problem?
   • Example: Brex addressed the lack of corporate credit cards for startups.
4. Competition:
   • Competitive landscape can indicate viability.
5. Personal Desire and Demand:
   • Do you want this? Do people you know want it?
6. Recent Changes:
   • Has something changed that creates new opportunities?
   • Example: Checkr for background checks in a changing job market.
7. Proxies:
   • Are there successful companies in similar spaces?
   • Example: Rappi followed successful food delivery models.
8. Long-Term Commitment:
   • Will you want to work on this idea for years?
9. Scalability:
   • Is it a scalable business model?
10. Idea Space Quality:
    • Is the idea space fertile for new startups?
    • Example: Fivetran pivoted within a fertile idea space.

Good and Bad Signs for Ideas

Good Signs Include:

• Ideas that are hard to start (e.g., Stripe).
• Concepts in boring spaces (e.g., Gusto).
• Existing competition (e.g., Dropbox).

Generating Startup Ideas

Best Approaches:

1. Leverage Team Expertise:
   • Focus on areas where your team has developed skills.
2. Solve Personal Problems:
   • Look for problems you’ve encountered personally.
3. Wish List Approach:
   • Consider things you wish existed, but be wary of tar pits.
4. Identify Market Changes:
   • Analyze recent shifts that open new opportunities.
5. Talk to People:
   • Understand their problems in a chosen idea space.
6. Explore Broken Industries:
   • Look at industries that seem ripe for disruption.
7. Co-founder Matching:
   • Find a co-founder with an existing idea.

Final Thoughts

• Difficulty in assessing startup ideas is common.
• Often, the best way to know if your idea is good is to launch it.
• Experimentation is key.